Federal bank regulators should embrace new types of bank charters, according to Ray Grace, North Carolina's banking commissioner.
Grace, who has spent more than four decades in various regulatory roles, told attendees at a recent conference hosted by the North Carolina Bankers Association that the banking industry has the potential to be a "laboratory for change."
But regulators need to assist in that transformation, he said.
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Startups, including one in the virtual currency field, have approached the Office of the Comptroller of the Currency about applying for banking charters, the agency's chief counsel said Thursday.
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Rebeca Romero Rainey, incoming chairman of the ICBA, would like to see the financial services industry add new banks and younger bankers in coming years.
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De novo activity has remained at a trickle and the reason is investing in a new bank just isn't attractive as it used to be.
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The Federal Deposit Insurance Corp. recently held meetings with state regulators in which agency officials emphasized that they are open to new applicants, responding to criticism that the standards for granting deposit insurance have been too high.
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California regulators have approved a request from private-equity firm Carpenter & Co. to raise capital for a new state-chartered bank.
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After the financial crisis led to a long nationwide drought in the creation of new banks, the second de novo bank application in less than a year has been submitted in California.
February 25
"Regulators need to shake themselves up," Grace said in response to an audience member's question on the status of bank charters. "I'd like to see new types of innovative banks formed."
Grace pointed to two North Carolina banks as prime examples of pioneering institutions: Square 1 Financial in Durham, which was
Live Oak, which is among the nation's biggest participants in various Small Business Administration loan programs, "has knocked it out of the park," Grace said. (Live Oak, which also created cloud technology firm nCino,
Obtaining new charters has proven difficult since the financial crisis, as the Federal Deposit Insurance Corp. balks at signing off on new banks. Only two banks – Primary Bank in Bedford, N.H., and
Grace acknowledged "caution" on the part of federal banking regulators, adding that "the economic drivers haven't been there" to start a wave of applications. "I'd like to see a stronger economy" before de novo activity accelerates, he said.
Consolidation could be another factor when it comes to creating demand for new banks, Grace said. Since 2010, nearly 40 banks in North Carolina have sold themselves, including seven last year, based on data compiled by Keefe, Bruyette & Woods.
As an aside, Grace noted that assets and loans supervised by his office have increased, but only because of acquisitions by BB&T, BNC Bancorp and First Citizens BancShares and a charter conversion by HomeTrust Bancshares. Otherwise, supervised assets and loans have been flat in recent years.
There has been speculation that there are groups that want to form new banks, but few documented instances in recent years.
A group led by the Gallaher family of Windsor, Calif.,
California regulators
The Office of the Comptroller of the Currency, meanwhile, has received inquiries from fintech companies, including a virtual currency firm, about applying for a banking charter, Chief Counsel Amy Friend
Grace, meanwhile, said he is "already hearing some chatter from folks at least asking questions" about charters in North Carolina. "It's going to come slowly … but I'm beginning to sense we're coming to a pivot point" for new banks, he said.
