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Now they tell us.
In a recent letter sent to thousands of banks and lending institutions nationwide, the Federal Deposit Insurance Corp. states that de novo banks nationwide “pose an elevated risk to the Deposit Insurance Fund, particularly during an economic downturn.”
Sounds pretty obvious to Coffee Talk. Still, the FDIC is extending the de novo supervisory period from three to seven years. The office, in saying that banks younger than seven years old are “over represented” on the roster of 2008-09 failed banks, is also rewriting some of the rules used to supervise de novos, industry lingo for start-up institutions.
For starters, the supervisory period for de novos could include more examinations and higher capital requirements. Some other changes the FDIC plans to impose, according to the Aug. 28 letter: A limited-scope examination in the first six months; a 12-month cycle of exams through each of the first seven years; and a requirement for all de novos to submit a business plan and financial projections for years four through seven by the end of the year three.
And that final rule isn't idle chatter, according to the FDIC. Its letter also stated that it could impose civil penalties on a de novo bank that changes its business plan without prior approval from the federal office. In government-speak, that means that if you run a bank that looks to increase profits in another area, one not in the original business plan, good luck getting that going.
It's not like rafts of regulations did much to prevent last fall's near collapse of the financial markets, but regulators regulate, that's their solution to a problem.
So much for free markets.
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