WASHINGTON — The Federal Deposit Insurance Corp. defended its authority to approve prospective new banks in response to suggestions by acting Comptroller of the Currency Keith Noreika that his agency should be able to approve applications on its own.

“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,” FDIC spokeswoman Barbara Hagenbaugh said in a statement Friday.

During a podcast interview Friday with a Commodity Futures Trading Commission official, Noreika repeated accusations he had previously lobbed at the FDIC about how it handles deposit insurance applications.

Instead of responding yes or no to applications, Noreika said, FDIC officials “just let it hang out there forever, so that the organizers wasted all their money trying to get insurance, and then they gave up."

Keith Noreika, acting Comptroller of the Currency
Acting Comptroller of the Currency Keith Noreika claims that the FDIC lets de novo applications "hang out there forever" until organizers give up. Bloomberg News

Noreika added that the OCC had proposed a bill that would take away the FDIC’s role in approving newly chartered entities for deposit insurance. But Hagenbaugh noted that the role was given to the FDIC by Congress in 1991 following the savings and loan crisis.

“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,” Hagenbaugh said.

Additionally, Noreika repeated accusations that since 2001, 14 financial institutions whose charters had been approved by the OCC had been left in limbo by the FDIC, until they withdrew their application.

The FDIC has approved nine applications for deposit insurance since 2011 and said it currently has five pending applications on its roster. The oldest one of those applications was filed in early June.

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Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.