WASHINGTON – Acting Comptroller of the Currency Keith Noreika has intensified his complaints that the Federal Deposit Insurance Corp. is hindering the formation of banks, questioning the sincerity of recent FDIC overtures toward organizers of de novos.

The FDIC is sending a welcoming message, Noreika said in a recent sit-down interview with American Banker, “but you're talking about people's livelihoods here.”

Since the crisis, the agency has approved just a trickle of applications for deposit insurance, which new banks must obtain in addition to their charter.

Keith Noreika, acting Comptroller of the Currency
Interagency tension
Acting Comptroller Keith Noreika is casting doubt on whether the FDIC has become more amenable to de novos. “Who wants to spend all their money to find out that they say something, but really the process is still the way it is?” Bloomberg News

But recently, the FDIC has sought to encourage new applicants, starting with a reduction of the heightened-scrutiny period for new banks to three years from the traditional seven years.

“From the FDIC's standpoint, we would like to do everything we can to encourage the formation of de novo institutions,” Martin Gruenberg said during a Q&A with reporters on Tuesday. “The FDIC has now approved six deposit insurance applications over the last 10 months. We've seen a pickup in interest."

But Noreika said the change could be a superficial one, suggesting the FDIC could be in effect extending the scrutiny period by delaying the moment when an application is formally approved.

“We talk about shorter time frames, but there's often the small print," he said. “This isn't specific to the FDIC, but agencies play games about when they 'accept' the application. It could be years.”

The heightened-scrutiny period for new institutions begins when a bank opens its doors, according to FDIC rules.

Reminiscing on his experience as a bank lawyer, Noreika, who was appointed acting comptroller in May, said investors are still concerned about the FDIC’s reluctance to grant deposit insurance to new banks.

“There's a lot of chilling effect even today, because people say they've changed, but have they?” Noreika said. “Who wants to spend all their money to find out that they say something, but really the process is still the way it is?”

Noreika has advocated for removing the FDIC from the de novo process by automatically granting deposit insurance to financial institutions once their charters have been approved by the OCC. In this scenario, the FDIC would still have veto power over any application.

“We have perhaps the most expensive, time-consuming, byzantine process,” he said. “We're trying to have a more streamlined process that addresses both the regulatory burden as well as the potential open-ended time frame.”

The FDIC has shot back that the agency's role in the application process, established in 1991, is essential to protecting the economy.

“We think having the FDIC approve deposit insurance applications is a pretty important protection for the deposit insurance fund,” Gruenberg said. During the 1980s thrift and banking crisis, he said, “We did have chartering agencies also approving deposit insurance. And frankly that experience proved problematic.”

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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.