OCC’s Noreika Knocks FDIC Pace on New Bank Charters

By Rob Tricchinelli

Acting Comptroller of the Currency Keith A. Noreika has taken another swipe at a fellow financial regulator.

Noreika chastised the Federal Deposit Insurance Corporation for what he perceived as inaction on granting deposit insurance for new banks seeking to set up shop. The OCC approves bank charters, but new banks also must obtain deposit insurance from the FDIC.

“We, ourselves, since 2001 have chartered 14 institutions, and the FDIC hasn’t acted on a single—any of those 14 applications,” Noreika said in a podcast posted Aug. 4 by the Commodity Futures Trading Commission. “They just let it hang out there forever, so that the organizers wasted all their money trying to get insurance, and then they gave up.”

“And to me, that’s unconscionable for a regulatory agency,” he added.

Noreika’s willingness to mix things up with other regulators has been a calling card of his tenure as acting comptroller. He has also tussled with Consumer Financial Protection Bureau Director Richard Cordray over the bureau’s arbitration rule and taken shots at state banking regulators over charters for fintech companies.


Noreika has also called for the OCC to have isolated authority in allowing new small banks to go into business, which would entail largely eliminating a requirement for separate deposit insurance approval from the FDIC.

An FDIC representative pushed back on Noreika’s characterization.

“The statutory provision mandating that the FDIC approve applications for deposit insurance was established in 1991 in the aftermath of the banking and thrift crisis,” Barbara Hagenbaugh told Bloomberg BNA. “A key lesson learned from that experience was that the incentives of chartering agencies often were not the same as those of the FDIC in the protection of the deposit insurance fund.”

FDIC data show that more 250 “de novo” applicants for deposit insurance, out of nearly 1600, have withdrawn their applications since 2001. The agency has approved only nine new applications since the beginning of 2009, but applications ground to a halt during the financial crisis and have still been rare during the recovery. There are five applications pending now with the FDIC.

Mixing it Up

Lawmakers and regulators, particularly Republicans, have pointed to this lack of new bank formation as a reason to deregulate. Requiring new banks to apply to separate agencies is “a significant barrier to entry into the banking business,” Noreika said in prior remarks.

“The FDIC’s role in reviewing and approving applications for deposit insurance—and closely monitoring the condition of new banks as they become established—has been an important safeguard of the safety and soundness of our banking system for more than 25 years,” Hagenbaugh said.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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