Application FAQ

NEW CHARTER APPLICATION PROCESS FAQ

Chartering a new depository institution requires the approval of Utah’s Commissioner of Financial Institutions after the submission and review of an application. 

The following questions are intended to answer frequently asked questions about the process. Most of the processes below apply to all new depositories. However, due to the recent volume of inquiries into industrial bank charters, some specific questions have been included to address questions specific to that charter type. 

Which sections of the Utah Code are specific to Utah’s charter types?

The Department of Financial Institutions regulates all state-chartered depository institutions under Title 7 of the Utah Code. Several chapters of Title 7 are applicable to all institutions. In addition, Chapter 3 applies to banks, Chapter 8 (and Administrative Rule R339) applies to industrial banks, and Chapter 9 applies to credit unions.

New institution organizers should review Utah Code Section 7-1-704, which addresses the new charter application process for all depository types.

What forms are required to apply for a charter?  

To establish a new depository institution, two applications are processed: 

• a charter application submitted to the Department of Financial Institutions, and 
• an application for federal deposit insurance submitted to the FDIC (banks, industrial banks) or the NCUA (credit unions). 

To reduce regulatory burden, improve efficiency and minimize applicant expense, new bank applications are typically worked in tandem by DFI and the respective deposit insurance agency.

Applicants must provide the Commissioner with the application fee, proposed articles of incorporation and bylaws, an acceptable form of application, and any other information deemed necessary. 

Under Utah Code Section 7-1-704(2)(c), application must be made in a form prescribed by the Commissioner. To reduce regulatory burden and improve efficiency, the Commissioner accepts the Interagency Charter and Federal Deposit Insurance Application form as an acceptable form of application for a bank or industrial bank charter application in Utah. 

Interagency Biographical and Financial Reports prepared for submission to the FDIC for proposed directors and executive officers should also be provided to the Department as part of a bank or industrial bank application. 

Organizers seeking to establish a de novo credit union should contact the Supervisor of Credit Unions for guidance on applicable forms. 

What is the application fee?

The application fee is set by Utah Code Section 7-1-401(6) at $2,500. The application fee should be submitted upon filing the application. The application fee covers some of the cost of reviewing the application and is not refundable regardless of an application’s outcome. Applicants also pay all reasonable expenses incurred in processing the application, including any associated travel costs related to a field investigation.

What are the public notice requirements for a new charter application?

Utah Code Section 7-1-704(3) states that the Commissioner shall, at the expense of the applicant, give notice of an application by publishing notice in three consecutive issues of a newspaper of general circulation where the institution is to be established and give notice of the application by publication as required by Utah Code Section 45-1-101. At least one of the three days should include printing in a physical issue of the appropriate newspaper.

In practice, applicants are responsible for making public notice on the Commissioner’s behalf to meet the above requirements. To avoid the potential for costly republication due to incomplete notices, applicants may request the appropriate industry supervisor at the Department review a draft of the notice prior to publication. Any notice should explicitly list the Department as a place where public comments can be directed. Only including the respective federal banking agency as a comment option will result in republication. 

Applicants should also consult FDIC or NCUA rules and regulations regarding publication requirements for deposit insurance applications.

What are the phases of a new charter application review?

New depository institution applications go through five phases:

1. Pre-filing Phase
   • Applicants should schedule a pre-filing meeting with the Department and the federal banking agency prior to submitting any application. A pre-filing meeting allows the agencies to meet applicants, learn about any existing parent company’s operations, understand the bank’s anticipated business plan, and answer any questions prior to an applicant submitting an application.
   • This phase includes the option to submit a draft application for review and feedback. Draft applications provide an opportunity for organizers to gather feedback on their application before formal public submission.
     
2. Assessment Phase
   • The assessment phase begins on the date an application is formally submitted to the Department.
   • The application may be submitted electronically, provided a secure means of delivery is arranged. Applicants should contact the appropriate industry supervisor at the Department to arrange a secure delivery method.
   • Assessment includes supervisor (or designee) review of an application’s thoroughness, and, typically, additional information request correspondence between the applicant and the regulators.
   • To reduce regulatory burden, improve efficiency and reduce applicant expense, the assessment phase is typically worked in tandem with the applicable federal banking agency.
   • Department staff strive to respond to a de novo application within 45 days. A response may announce progression to a field investigation, or, more commonly, deliver an additional information request. Applicants are typically given 30 days to respond to any additional information request, which the Department then reviews for up to 30 days.
   • The Department’s ability to advance an application to a field investigation is highly dependent upon the depth and quality of the organizer’s application package. If the assessment phase concludes an application has significant deficiencies that prevent the Department from processing it in a timely and efficient manner, the application may be returned to the applicant as incomplete.
     
3. Field Investigation Phase
   • In the field investigation phase, an examiner team reviews the application and assesses whether the proposal meets the statutory approval factors in Utah Code Section 7-1-704(7).
   • Topics examined in the field investigation phase include:
     • business plan prospects, 
     • feasibility of forecasts for deposits, lending, capital, and earnings (including and contingencies for variable results under well designed adverse stress scenarios), 
     • capital adequacy analysis (including in light of growth plans, asset quality and concentrations, and building loan loss reserves),
     • quality of management, including experience and suitability of officers and directors (through conducted interviews), 
     • suitability of the institution’s proposed policy framework,
     • ability of any parent company(ies) to serve as a source(s) of financial and managerial strength,
     • affiliate risk management practices (including proposed contracts, key performance indicators, oversight practices, and plans to comply with Sections 23A and 23B of the Federal Reserve Act), 
     • quality of proposed compliance management systems,
     • quality of the proposed AML/CFT program,
     • CRA plan,and
     • adequacy of information systems and information systems risk management plans.
   • To reduce regulatory burden, improve efficiency and reduce applicant expense, the field investigation phase is typically worked in tandem with the applicable federal banking agency.
     
4. Determination Phase 
   • If the field investigation finds favorably on the statutory approval factors, and the Department’s industry supervisor concurs that the application warrants approval:
     • The supervisor briefs the Commissioner on the application’s status.
     • The supervisor designs and reviews any potential approval conditions with the Commissioner and then with the applicant.
   • If the field investigation finds unfavorably on any statutory approval factors, and the Department’s industry supervisor concurs that application does not warrant approval, the supervisor communicates issues with the applicant to determine an appropriate remedy for the unresolved factors. Remedies may include: applicant withdrawal of the application, denial of the application, or amendments to the application.
     
5. Approval Phase
   • Approvable applications are accepted as substantially complete.
   • The Department’s industry supervisor issues Findings and Recommendations to the Commissioner supporting conditional approval. 
   • The Commissioner reviews the Report of Investigation, the Supervisor’s Findings and Recommendations, and proposed approval conditions.
   • The Commissioner decides on application approval, accepts or amends recommended approval conditions, and, if approved, issues a Conditional Approval Order. 

The Department’s goal is to process all regulatory applications in a timely manner.  For new charter applications received after March 1, 2026, the Department strives to complete the determination phase above no later than 210 days after the application submission date, after excluding any time to issue and receive responses to any additional information requests issued during the assessment phase.

What are the statutory factors necessary for approval?

Utah Code Section 7-1-704(7)(a) outlines the statutory approval factors.

What unique expectations apply to industrial bank proposals?

• Local, independent management 

To help promote an industrial bank’s autonomy and independence, the Commissioner generally expects an industrial bank to have a team of senior executive officers who are based in Utah. Reasonable exceptions, supported by a strong strategic business need, may be accommodated on a limited basis. Essentially, the Department expects to be able to perform the work of a bank examination from Utah. 

“Senior executive officer” typically refers to policy influencing roles like: chief executive officer, president, chief financial officer, chief operating officer, chief risk officer, chief compliance officer, chief lending/credit officer(s), chief investment officer, and chief information security officer.

The development, over time, of Utah-based support staff is also encouraged. 

Due to the need for an industrial bank to operate independently of affiliates and to minimize operational complexity, successful industrial bank applications minimize – or eliminate – the use of dual employees with affiliates. Applicants are also encouraged to review restrictions on the use of affiliate employees in Part 354 of the FDIC’s Rules and Regulations.

• Majority Independent Board of Directors

The Commissioner requires that the Board of Directors of an industrial bank be composed of a majority of outside directors that are unaffiliated with the parent company. “Outside director” has the meaning outlined in 12 CFR 363.5(a)(3). 

Organizers should also familiarize themselves with the requirements of Part 354 of the FDIC’s Rules and Regulations.

Additionally, the Commissioner expects that there be some Utah residents on the Board.  The Department encourages an odd number of directors. 

Directors should have a variety of relevant experience for managing the risks of the proposed institution, and directors should prioritize the long-term strength and health of the bank. To achieve a variety of relevant expertise sufficient to manage the risks of a depository institution and staff board committees, industrial bank proposals typically have at least five directors. Seven or more board members is not uncommon, and is often preferred for more complex business plans and larger institutions.

• Independent Audit Committee

The bank’s audit committee is expected to be composed exclusively of outside directors who are independent of management. “Independent of management” has the meaning outlined in 12 CFR 363 Appendix A Section 28.

Independent audit committees help ensure the long-term strength and health of each bank’s internal control environment from a lens that is independent of parent company strategies.

• Strong Capital Adequacy

Successful applications include robust capital analysis. The level of capital required is specific to each proposal and its unique risks and growth trajectory. Organizers demonstrate strong understanding of regulatory capital when their proposal proactively considers the risk associated with monoline or product concentration risk, subprime exposure, secured and unsecured lending, etc. 

Each applicant is required to submit three years of financial projections. Strong proposals include additional forecasts that provide both baseline and stress scenarios relevant to the business model. These projections help inform an applicant’s proposed level of initial capital and its proposed capital limits. 

The Department generally expects that the amount and level of capital injected into the bank at inception is an amount equal to the capital level required to meet capital requirements at the end of the three-year de novo period.

Approval conditions commonly require an elevated level of capital during the de novo period as the bank grows into profitability and business model stability.

• Limited Reliance on Affiliates

The Department expects that arrangements between the bank and affiliates comply with all applicable laws and regulations. Applications should clearly and comprehensively outline the bank’s plans in this area, and include draft policies to manage affiliate transactions. Any agreements with affiliates should be managed to meet the principles in the Interagency Guidance on Third-Party Relationships, including contracts that clearly outline services provided, measurable performance standards, and penalties for non-conformance. Contingency plans should be developed which outline how the bank would function if an affiliate could no longer perform any contracted services. 

Agreements should comply with Sections 23A and 23B of the Federal Reserve Act and its implementing regulation, Regulation W, which identifies covered transactions, imposes limits on the same, and requires that services provided to the bank be on substantially the same, or at least as favorable to the bank, as for comparable transactions with nonaffiliate companies. 

In addition, the Department expects the bank to comply with all regulations around anti-tying and loans to executive officers, directors, and shareholders (Regulation O).

Due to the need for the bank to operate independently of affiliates, successful applications minimize or eliminate the use of dual or shared affiliate employees. Bank employees should have clear reporting lines into the bank leadership team, not affiliates. Bank officers and the board should be able to demonstrate they will control matters of performance and pay for bank employees.  

• Established Sources of Strength 

The Dodd-Frank Act requires that the parent companies of all banks, including industrial banks, serve as sources of both financial and managerial strength to their subsidiary bank. The Department expects industrial bank organizers to be able to demonstrate the sustained ability of the parent company to provide financial and managerial assistance to the bank, particularly in times of stress.

Firms with a history of performance and profitability demonstrate financial strength. While the absence of a history of sustained profitability is not automatically disqualifying, such weakness would need to be mitigated by compensating factors, such as materially higher bank capital and/or liquidity requirements. 

Managerial strength is demonstrated through having leadership with a variety of experiences managing business operations and key risks, and through a history of strong legal and consumer compliance. Unresolved enforcement actions at a parent company or organizer add difficulty to a source of strength analysis and will likely prolong application processing as resolution is pursued and, ideally, achieved. 

What factors add complexity to de novo bank and industrial bank proposals?

Historically, the review of a new bank application can become prolonged when the proposal includes unique attributes that cloud either source of strength obligations or complicate determinations of control (e.g., jurisdictional challenges related to foreign ownership, separate organizers who appear to be acting in concert, etc.). The absence of sustained profitability for organizers who are operating companies also complicates source of strength analysis. 

What jurisdiction does the Department have over bank holding companies and industrial bank parent companies?

The holding companies of both commercial banks and industrial banks are subject to the jurisdiction of the Department under Utah Code Sections 7-1-501, and 7-1-510. All holding companies must register annually with the Department, including industrial bank parent companies under Utah Code Section 7-8-16.  

The bank and its holding company are subject to the control requirements of Utah Code Section 7-1-103.5. Changes in control for the industrial bank, and any holding company, require the prior approval of the Commissioner. 

The Department has authority to inspect all holding companies under Utah Code Section 7-1-510 and conducts holding company inspections on a regular basis. The Department also performs offsite monitoring to assess the parent’s ability to serve as a source of financial and managerial strength to the industrial bank.

Does a Utah industrial bank need to take deposits?

Yes. Utah Code Section 7-8-3(4) says that an industrial bank is authorized to receive and hold deposits and may not conduct business unless the industrial bank obtains insurance from the FDIC. Additionally, Section 7-1-103(2) defines “banking business” to include the offering of deposit accounts. Section 7-1-103(8) defines a “depository institution” (including an industrial bank) as an institution that “holds or receives deposits.” 

What FDIC resources might be helpful?

The FDIC Applications for Deposit Insurance page has links to helpful resources for applying for deposit insurance. The Handbook for Organizers of De Novo Institutions is particularly useful.

On December 15, 2020, the FDIC adopted final rule 12 CFR Part 354 Parent Companies of Industrial Banks and Industrial Loan Companies. The rule outlines the FDIC’s expectations for parent companies of industrial banks, including required agreements and commitments.

If I have additional questions, who should I contact?

If you have questions about banks, industrial banks, or credit unions please contact the appropriate industry supervisor. Contact information is available here.