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How to Get an U.S. Banking License

How to apply for a banking license in the USA

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Two of our previous posts, Offshore Banking License in Puerto Rico and USA Banking Representation Office For Foreign Banks, show the different options to start a banking operation in the USA. Now we will focus on establishing a banking subsidiary in the USA.

New Bank Charter

If you are a foreign bank, banking license requirements to establish a subsidiary in the USA will depend on the type of application: Federal or State banking license also called a Federal or State Charter.  If you apply for a Federal Charter, the application process will include:

  

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  • Organizing a group of five or more individuals.
  • Application to the Office of the Controller of the Currency (OCC).
  • Business Plan.
  • Detailed biographical and financial information of each organizer, director, officer, and shareholder.
  • Filing of Articles of association and By-laws.
  • Application to the Federal Deposit Insurance Corporation (FDIC).

If you apply for a State Charter the application process will include:

  • Organizing a group of five or more individuals.
  • Application to the State regulator.
  • Business Plan.
  • Detailed biographical and financial information of each organizer, director, officer, and shareholder.
  • Filing of Articles of association and By-laws.
  • Application to the Federal Deposit Insurance Corporation (FDIC).

The capital amount for a new bank application varies by state. In Puerto Rico, the minimum capital requirement is 5 million dollars for establishing an international bank. Click here for more information. In the two types of charters, the directors and officers should show a long track of banking experience in the United States.

Acquiring an existing Bank

The other option to enter the US market if you are a foreign bank is to buy an established bank. The process starts with finding a potential target bank. But you cannot buy any shares unless you receive the approval of the Federal Reserve (Fed) and if the bank is a Publicly Held Company, you will also need the approval of the SEC. This process is lengthy and long due diligence is needed, as well as the approval of the shareholders and directors of the target bank and approval of State banking supervision authorities.

If you are buying an existing bank in the US the process goes like this:

  • Application to the Fed including detailed information of the foreign bank applicant’s finance, business, management and system of home country supervision.
  • Fed will solicit public comments or objections.
  • Fed will evaluate management and financial resources of both the acquirer and the target bank.
  • Fed will evaluate the consolidated AML effectiveness of the applicant.
  • Fed will evaluate the supervision and reporting to which the applicant is subject to its home country.
  • The applicant will provide information to the Fed about any other affiliate office.
  • The applicant will prove to Fed that all Parent, subsidiary to buy and any other affiliate office are well capitalized and well managed. For the subsidiary to buy, the Fed requires, in addition, satisfactory credit ratings.

Buying an existing bank involves additional considerations such as the location of the target bank in relation to the buyer market, especially if the buyer is a foreign bank willing to target Expats living in the US. Additionally, the extensive due diligence and legal advice needed as well as the ability to locate the right target, make the buying of an existing target a little more expensive option than starting a new bank in the USA. Click here to email us and start your project.

 

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Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services.  This article cannot serve as a substitute for such professional services or advice.  Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation.  This article is subject to change at any time and for any reason. 

 

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Fulton Abraham Sanchez, CPA

Fulton Abraham Sánchez, CPA is a Certified Public Accountant, specialized in Tax Planning for Real Estate, Hedge/Equity Funds, Fintech, Crypto, Expats, IRS Debt Resolution and Offshore Strategies. You can email him to fa@fascpaconsultants.com and follow us on Facebook : FAS CPA & Consultants.

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