This year is shaping up to be a slow one for bank openings as organizing groups wait for the economy to rebound and regulators take more time than usual to approve charter applications.
The Federal Deposit Insurance Corp. says that as of April 30 it had received just 42 applications for deposit insurance this year, compared with 83 in the first four months of last year.
Those still committed to opening banks say that the FDIC is scrutinizing applications more closely to make sure that business plans are sound, that managers have the proper level of experience, and that organizers will have enough capital to keep a bank afloat until economic conditions improve.
"I've had some very recent experience with them, and I can tell you they are getting very picky," said former Comptroller of the Currency Robert Clarke, a senior partner and the founder of the global financial services practice at Bracewell & Giuliani LLP. "They are looking very carefully at proposed management and very carefully at operating expenses for the first few years."
The FDIC is not denying more applications than it has in years past, but Chris Spoth, a senior deputy director for the agency, acknowledged that some new applications are moving more slowly while it assesses the impact of the real estate downturn on financial projections.
Even some older applications are being pressure-tested to take into account the Federal Reserve Board's recent string of interest rate cuts, which could require organizers to raise more capital than initially proposed, he said.
"What we have is changing economic circumstances leading us to look at applications with a fresh look," Mr. Spoth said. "For example, if somebody had an application pending for the past year, we'd take a fresh look at their feasibility studies and ability to raise capital."
By and large, bankers, lawyers, and investment bankers say that, given the state of the economy, they would expect the FDIC to be extra thorough in evaluating charter applications.
The added scrutiny certainly has delayed some organizers' plans. OEB Holdings Inc. had intended to open its One Earth Bank in Austin next month, but it withdrew its application last month to let organizers add more banking experience to a roster that already read like a who's who of Texas business and politics.
"The FDIC wants a very clear picture of the level of bank experience on a de novo's board," said Chip Bray, the president and chief executive officer of OEB.
One Earth Bank intends to target small-business owners, particularly those involved in enviromnentally friendly projects.
In addition to Mr. Bray, who has 26 years of banking experience, the list of organizers includes Rep. Lloyd Doggett, D-Tex.; Ron Kirk, the former mayor of Dallas; William "Bill" McClellan, a founder of the $111 million-asset Treaty Oak Bank in Austin; and the filmmaker Richard Linklater.
OEB plans to resubmit the application near the end of May, Mr. Bray said.
Sanford "Sandy" Brown, the managing partner in the Dallas office of Bracewell & Giuliani, said regulators are looking for more experience on bank boards, regardless of the CEO's experience.
"A year ago they were probably more flexible in their analysis of the application, including the board," he said. "Today I wouldn't take an application in" without experienced outside directors, "because they will require it."
Ben New, a bank consultant in Georgetown, Ken., who works with NuBank Group, a Dallas firm that helps bank start-ups, said at least one bank that has worked with him was asked to raise its minimum capital amount.
In general, he is seeing the FDIC take longer to review applications, he said. "I did a bank application last year, and it took about a month to accept it as complete," but a more recent charter application took three months. "The basic things haven't changed … but they do take longer to do it now."
Mr. Spoth said the best way to ensure a smooth process is to start talking with regulators early, especially if the business model is somewhat unconventional.
One group that took that advice is the one organizing Ventana National Bank in San Diego. Bob Adkins, Ventana's CEO, said it hopes to have approval to start raising capital soon and to open this year.
The organizing group is in the process of updating its financial projections to take into account recent changes in the market and interest rates, Mr. Adkins said.
"Most of the time you do a business plan and submit it, going through a normal process of shocking the balance sheet for changes in interest rates," he said. "In addition to that, what I am seeing is they are asking to see a recessionary scenario."
