Commercial Bank: Information and Procedure

The purpose of the outline below is to give prospective incorporators an idea of the scope of subjects to be considered in evaluating the merits of a proposal to charter a commercial bank. Among the areas which must be addressed by the organizing group are the following:

Name of Institution

A suitable name should be selected.


Number, names, occupations, business interests, approximate financial worth, standing in the community, character and fitness to serve on the Board of Directors and its various committees. Incorporators should be aware that they:

  • will be subject to an investigation
  • will be asked to submit a questionnaire, a financial report, a litigation affidavit, an investigative report, and fingerprints;
  • may be asked to attend a conference with Department representatives; and
  • will be required to assume legal and other responsibilities upon becoming directors.


Description of the community or trading territory to be served by the proposed institution, some idea of its size and characteristics, estimated residential population, traffic conditions, shopping centers; and

Reasons for failure of existing facilities to serve the market.

Public Convenience and Advantage

The manner in which the establishment of the bank would enhance public convenience and advantage.

Competitive Impact

The likely impact of the proposed bank on the financial institutions located in the target market area.

Bank Site

Where the institution will be located to serve the public most conveniently and the reason for such choice;


Advantages of purchasing or leasing the site

Cost of developing the site as a banking office; cost of improvements, furniture, fixtures and equipment; the relation of these costs to the proposed capital funds; and

Whether any incorporator, director, or major shareholder has any interest in the proposed site.

Capital Funds

The Department expects capital for a de novo bank to remain at or above the well capitalized level for the first seven years; the bank should maintain a ratio of Tier I capital to total assets of not less than 8% for the first seven years.

While the adequacy of initial capital will be evaluated on a case-by-case basis, Department experience indicates that minimum capital needs of new banks in the New York Metropolitan area range upward from $50 million, net of pre-opening expenses. New banks in upstate New York typically require less initial capital.


The initial level of capital should be sufficient to support the proposed business plan and the bank’s risk profile. Initial capital should cover operating losses before the bank attains sustained profitable operations, as well as provide a cushion against unexpected losses. Capital for the new bank is also expected to finance and support future growth prospects, such as the establishment of branches. Realistic plans should be developed to access additional capital if needed. The prevailing economic environment should also be considered. Moreover, lending limitations on new banks, based on total capital funds, are more restrictive than limitations imposed by statute or regulation.

Shares and Distribution

The number of shares, their par value and subscription price, the adequacy of surplus to absorb pre-opening costs and operating losses in the initial years, and the amount of stock to be purchased by the incorporators and directors and any known large investors.

Management Team

Candidate for the Chief Executive Officer of the institution; resume of his/her education, banking experience and general knowledge of the type of business contemplated; probable salary; stock participation; etc. For this position, the Department will only accept an experienced banker with demonstrated business judgement acquired over an extended banking career. As a general rule, this person should have at least fifteen years of banking experience that evidences growth in levels of responsibility. Hands-on performance in positions involving credit analysis and approval, bank and personnel administration, direction and control of operations and the application of routine control and audit functions is desirable. Additionally, he/she should be available for an interview with the Department.

Top management personnel should have substantial and satisfactory experience in fiduciary operations if trust powers are contemplated.

Insurance of Deposits

The organizers should understand that the approval of an application, if forthcoming, will be conditioned upon receipt of assurances from the Federal Deposit Insurance Corporation that it will insure the deposits of the proposed bank.

Name of Representative

The organizers must select an individual who will be responsible for submitting all material to the Department, and will have authority to discuss all aspects of the submission in detail (including, but not limited to, personal questionnaires, litigation affidavits, financial statements, and investigative reports) and respond to requests for additional information.

Before the formal application process begins, a meeting with the appropriate Department staff may be held to discuss the proposal.

If the organizers decide to proceed with the formation of the institution, it is recommended that the group’s representative gather and develop all economic and financial data outlined in the form of a Certificate of Merit.

Under New York State Law , some of the applicable sections of the Banking Law are Sections 23, 24, 25, 106, 1003, 4001, 4003, 4004, 4005, 7001 and 7015.

Steps Involved in Organizing a bank or Trust Company

  1. Execution by the incorporators of an Organization Certificate, in duplicate (Section 4001).
  2. Submission to the Superintendent of the Organization Certificate, executed in duplicate (Section 4003), accompanied by the following documents:
  • Certificate of Merit (in quadruplicate) including personal data on each incorporator, director, and major shareholder (owner of 5% or more of the proposed bank's capital stock);
  • Investigation fee of [please refer to the Department's Application Fee Schedule] by check made payable to the Superintendent of Financial Services;
  • Certificate of Compliance with Section 296-a of the Executive Law of the State of New York;
  • Copy of lease or option on the proposed site.
  1. Filing of Organization Certificate for examination by the Superintendent (Section 23).
  2. Investigation of incorporators/directors and major shareholders by the Superintendent; refusal of Organization Certificate, or presentation of Organization Certificate to the Superintendent for approval (Section 23).
  3. Conditional approval by the Superintendent.
  4. Commencement of solicitation of subscriptions for shares of stock of the proposed bank, via an Offering Circular or Private Placement Memorandum.
  5. Filing by the Superintendent of the Organization Certificate when relevant conditions have been satisfied (Section 24).
  6. Beginning of corporate existence, but entity is not yet a bank (Section 4004).
  7. Meeting of the incorporators and adoption of by-laws (Section 4005); first meeting of the Board of Directors; submission of certified copies of the minutes of these meetings.
  8. Designation of banking depositaries by the Superintendent (Section 106) upon receipt and processing of proper application (Supervisory Procedure CB 109).
  9. Filing of Affidavit of Payment of Capital Stock in the office of the Superintendent (Section 4004).
  10. Filing of Verified List of Stockholders in the office of the Superintendent (Section 4004).
  11. Filing of Oaths of Directors in the office of the Superintendent (Section 7015).
  12. Upon receipt and clearance of the above and other required items, issuance of an Authorization Certificate by the Superintendent and the filing of duplicate originals.

Conditions on New Banks

  1. Newly chartered banks must maintain a ratio of Tier I capital to total assets of not less than eight percent for a period of seven years from the date on which the bank commences business.
  2. A newly chartered bank must obtain prior approval from the Superintendent of Financial Services for any proposed material change or deviation in the business plan for a period of seven years from the date on which the bank commences business.  The request for a material change in a business plan should adequately support the business reason for the proposed change. Proposed material changes to business plans will be evaluated to determine if the institution has sufficient capital, management expertise, and internal controls in place to adequately manage the risks.
  3. Before the end of the third year after a bank commences business, the de novo bank must submit to the Superintendent of Financial Services updated financial statements and business plan for years 4 through 7.
  4. No changes may be made in the composition of the Board of Directors or senior management of a newly chartered bank without the prior approval of the Superintendent of Financial Services for a period of five years from the date on which the bank commences business.
  5. No change in the beneficial ownership of ten percent or more of a bank's capital stock shall take place without the prior approval of the Superintendent of Financial Services, pursuant to Section 143-b of the Banking Law; the foregoing notwithstanding, no change in the beneficial ownership of five percent or more of a newly chartered bank's capital stock shall take place without the prior approval of the Superintendent of Financial Services for a period of three years from the date on which the bank commences business.