Small banks fill a need in the community for business loans, which can help fuel the local economy, even though they represent a small percentage of national deposits. Opening your own bank means having a lot of capital and putting in a significant amount of time. You must get everything set up from a paperwork perspective, raise funds and get government approval as well as find the right people to help along the way.
Set Up the Foundation
Your first step is to write a business plan and find partners for your endeavor. This sets up a firm foundation for your team to prepare the right application paperwork as well as prepare for any legal complications which may come your way. You will want to decide whether you want to open a public bank or one that has a closed membership, such as union members or local college students and alumni. It is a good idea at this point to know who to retain for an attorney and expert witness banking team if someone were to take legal action against your bank, because that team can help you design your policies and procedures to reduce regulatory violations, unethical actions or accidental damages in the future.
Get Approval From Regulators
Once your foundation is set and the paperwork is in, you must get approval from the state or federal government regulators. If your application is denied, you will be out the costs you have incurred this far in the process, but banks that make it through the regulators usually do well. After getting chartered, your bank will need to get insurance from the Federal Deposit Insurance Commission before opening to the public or to your specified group for loans and accounts.
While it is a lot of hard work and raised capital to open a bank, you can see returns of ten or fifteen percent on your investment in the first year. The better your foundation of business plan and expert advice, the more likely you are to make it through the regulators and succeed as a banking and financial institution.