Have you ever wondered how to go about creating or establishing a bank? There is a very specific process for creating a bank. We previously considered who regulates banks. The short answer is that, appeasing these regulators is what is required to create or establish a bank. The more detailed answer is that there are several steps one must complete to establish or create a bank.

First, one must form a legal entity for the bank. This involves forming a legal entity under state law. State law prohibits banks from using certain types of legal entities. It also imposes unique requirements for banks. For example, the entity must have at least five members.

Second, the entity must have a prefiling meeting with regulators. This meeting helps clear the way for forming the bank.

Third, the entity must file an application for a bank charter. A number of agencies can charter a financial institution. These agencies include the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), National Credit Union Administration, and state banking regulators.

Fourth, the entity must file an application with the OCC. This includes submitting information to the OCC (such as the articles of incorporation, a notarized organization certificate), waiting for conditional approval, filing an application with the FDIC (and waiting 120 days or so), raising sufficient capital reserves, fulfilling any conditions, and obtaining final approval.

While there are a number of tasks underlying these steps that must be completed, these are the major steps in creating or establishing a bank. Having completed these steps, the bank will usually be authorized to begin transacting business. Next, let’s consider what type of business banks can transact.