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Self Charter

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Shelf Charter

A Shelf Charter is a specialized, conditionally pre-approved charter which will remain “on the shelf” until such time as it is needed to complete a purchase under the FDIC’s Modified Bidder Qualification Process. 

The purpose of the DFS Shelf Charter is to enable parties that currently do not have a bank charter to participate in bidding for failed or failing banks that are being sold by the FDIC.

Prior to the preparation of a formal application, an outline of the proposed business plan should be submitted to the Department of Financial Services. At minimum, the outline should include the rationale for organizing the proposed institution, the market segment it expects to serve, the names and occupations of the incorporators, the name and experience of the candidate for the position of Chief Executive Officer and the proposed capitalization. If available, financial projections should also be included. Upon review of the plan, a Department representative will contact you to arrange a mutually convenient time to discuss the proposal.

Organization of a Shelf Charter under New York Banking Law

This type of charter is available primarily to applicants who are pursuing qualification to bid on assets and deposits of failing depository institutions through the FDIC’s Modified Bidder Qualification Process.

A Shelf Charter, as the name implies, is a specialized conditionally pre-approved charter which will remain “on the shelf” until such time as it is needed to complete a purchase under the FDIC’s Program.

The Program, announced by FDIC in late 2008, is designed to expand the pool of qualified bidders for failing depository institutions and will potentially bring new capital to the banking system. To qualify for this Program, among other things, investors must have conditional approval for a bank charter from a state or federal regulatory agency. The Department is prepared to work with qualified investors in helping them obtain conditional approval of a Shelf Charter.

Statutory requirements for the organization of a bank are contained in Article XV of the Banking Law. To assist you in meeting these requirements, we provide the procedures to be followed and the information which incorporators should provide in a "Certificate of Merit" supporting an application.

Approval of a Shelf Charter will provide a necessary pre-approval required by the FDIC. However, the charter will not be activated until such time as the applicant is declared a successful bidder for an institution by the FDIC and all other conditions and requirements are fulfilled. 

Chartering a bank requires substantial expenditures of time and money, and we encourage potential applicants to contact the FDIC to discuss qualifications for participation in the Program before making a decision to apply to the Department for a Shelf Charter. 

The Department will grant a Shelf Charter only to a management team and board of directors with strong backgrounds and the related experience necessary to operate a bank successfully. Therefore, it is critically important that the organizers identify, at the beginning of the process, an available management team and board of directors.

Organizers will need to identify the sources and amount of capital that would be available to acquire and recapitalize a potential target in the FDIC auction process. The amount available will be a critical factor in determining the size of the institution for which the applicant will be able to bid.

Instructions

Applicants interested in applying for a Shelf Charter generally should follow the instructions for the Organization of a Commercial Bank under New York Banking Law and Brochure of Economic and Financial Data in Support of an Application to Establish a Bank (Certificate of Merit). However, timing of certain submissions will vary in the case of an application for a Shelf Charter.  All information specified in these documents will be required to be submitted at some point during the various phases of the application process as explained below.

The following is a breakdown of when the Department would expect to receive specific information and documentation:

Phase I

(Submission necessary prior to application being submitted to the Department for approval of Shelf Charter)

  1. Organization Certificate – executed, including proposed capital stock
  2. Investigation fee - $12,500
  3. Fingerprints
  4. Name of proposed bank – give reasons for selection of name
  5. Discussion of rationale for establishment of the proposed bank
  6. Business plan : Although a detailed business plan will not be possible until after the conclusion of a successful bid, it is expected that the organizers will provide a discussion of why they wish to enter the banking business, their ideas of what they want to do and the types of business in which they anticipate engaging.
  7. Market Analysis: Applicant will discuss, to the extent possible, the geographic area(s) it is interested in serving and the economic characteristics of target area(s).
  8. Public Convenience and Advantage: Applicant will furnish an explanation, such as: Approval of a Shelf Charter will allow applicants to participate in the FDIC bidding process, which will aid in the resolution of failing banks and will help maintain services for existing customers of failed institutions.
  9. Competitive Impact: For Phase I of the Shelf Charter application process, the applicant may request a waiver of this requirement. However, a discussion of the competitive impact should be submitted in Phase III.
  10. Bank Premises: For Phase I of the Shelf Charter application process, the applicant may request a waiver of this requirement. However, a detailed description of building, furnishing of copy of conditional lease and summary of rental terms and renewal options must be submitted once the applicant is chosen by the FDIC as the winning bidder.
  11. Amount of Capital Contribution: Although it is impossible to establish the exact required capital levels until target institution is identified, applicant will furnish a range of capital it can provide within a short period of time. Applicant will deposit earnest funds in an escrow account in an amount to be determined. Applicant will provide a statement from shareholders committing to contribution(s) of $xxx upon completion of the bidding process and declaration of applicant as the winner. Applicant shall supply evidence that funds are readily available and that applicant has the wherewithal to support commitments. A discussion of sources of funds shall be included along with a discussion of the proposed capital structure.
  12. Incorporators, Directors and Major Shareholders, Management: Applicants will furnish all required information as outlined in the Procedure for the Organization of a Commercial Bank. The Department will grant a Shelf Charter only to a management team and board of directors with strong backgrounds and related experience necessary to operate a bank successfully. Therefore, it is critically important that the organizers identify, at the beginning of the process, the proposed management team and board of directors. It behooves applicant(s) to provide as much detailed information as possible. Applicants must make a convincing case supporting their belief that they can successfully run a bank. The information supplied will weigh heavily on the Department’s decision to seek the Superintendent's approval of the Shelf Charter. Particular attention should be given to the “Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” - Section VIII. - Incorporators, Directors and Major Shareholders.
  13. Chief Executive Officer and Official Staff: Provide as much information as possible. Provide detailed resumes highlighting banking and related experience. Particular attention should be given to requirements of the “Brochure of Economic and Financial Data in Support of an Application to Establish a Bank”- Section IX- Chief Executive Officer and Official Staff; and “Information and Procedure – an Overview” – Section 8 - Management Team.
  14. Staff: Although actual staffing needs may not become known until there has been a successful bid for an institution, the applicant should discuss any anticipated plans for recruiting staff.
  15. Organization Chart: For Phase I of the Shelf Charter application process, the applicant may request a waiver of this requirement. However, submission of an organization chart will be required in Phase III.
  16. Fidelity Insurance: To be provided in Phase IV.
  17. Internal Audit and Control: Identify prospective consultants/vendors (if any) that applicant may hire to conduct a review of/improve this function. If possible, provide name and resume of individual being considered to oversee this area. A detailed discussion will be required in Phase III.
  18. Compliance with Bank Secrecy Act Anti-Money Laundering Programs: Identify prospective consultants/vendors (if any) that applicant may hire to conduct a review of/improve this function. If possible, provide name and resume of individual being considered to oversee this area. A detailed discussion will be required in Phase III.
  19. Electronic Data Processing Service: Identify prospective consultants/vendors (if any) that applicant may hire to conduct a review of/improve this function. If possible, provide name and resume of individual being considered to oversee this area. A detailed discussion will be required in Phase III.
  20. Counsel for the Proposed Bank: Provide name and address. Will counsel receive a retainer?
  21. Organizational Fees and Expenses: Best estimates should be provided.
  22. Estimated Assets and Liabilities, Income and Expenses: Applicant will provide this information after a successful bid.
  23. Community Reinvestment Act and Fair Lending Requirements: Identify prospective consultants/vendors (if any) that applicant may hire to conduct a review of/improve these functions. If possible, provide name and resume of individual being considered to oversee these areas. A detailed discussion will be required in Phase III.
  24. Federal Application(s): Provide copies of correspondence and applications filed with other regulators.

Applicants shall inform the Department immediately of any material changes to the information included in the application.

At the end of Phase I, upon recommendation of the Superintendent, the Organization Certificate will be presented for conditional approval.

Phase II

(Identification of the Target Institution)

Once the applicant determines the name of the institution that it intends to bid for, it is incumbent upon the applicant to notify the Department of the name of the target institution and submit the following to the extent this information is available and known to the applicant. The applicant must receive Department approval prior to actually submitting the bid.

  1. Information regarding the institution’s size, location, business lines and composition, the terms on which the FDIC is offering the institution, the type of bid the applicant is contemplating making, and the timing of the FDIC’s bid process
  2. The amount of capital the applicant plans to have in the target if it succeeds in acquiring the institution; indication of anticipated capital structure
  3. The applicant’s assessment of management of the target institution, in particular identifying whether any senior executive officers will be retained, and whether additional persons will be needed to fill senior officer positions
  4. The applicant’s assessment of (i) the acquired institution’s control structures, risk management function, policies and procedures, technology infrastructure, and vendor relationships, (ii) the degree to which the items in (i) would need to be developed and improved, and (iii) what the applicant would put in place to achieve that improvement in items in (i)
  5. The applicant’s assessment of the quality of assets and business lines that would be acquired
  6. The applicant’s plans for future operations, including which business lines of the target institution it would continue and which it would not (provide timing if activities will be phased out), and what the projected size of each business line would be; and a pro forma balance sheet of the Bank as of the first day after acquisition and financial projections for a three-year period

The applicants shall inform the Department immediately of any material changes to the information included in the application.

Immediately after the winning bid is accepted by the FDIC, the Superintendent will file the Organization Certificate pursuant to Section 24 of the Banking Law.

Phase III

(Submissions necessary after a winning bid is accepted by the FDIC)

  1. A copy of the applicant’s bid to the FDIC
  2. Copy of Purchase and Assumption Agreement
  3. Detailed Business Plan
  4. Evidence of granting of FDIC deposit insurance
  5. Certificate of Amendment of the Organization Certificate reflecting capital stock of bank and name of bank
  6. Application for Superintendent’s approval to change location of principal office if change is planned
  7. Application for Superintendent’s approval of branch offices for locations, other than the principal office, at which the bank is to conduct business
  8. Bank Premises – provide information as outlined in ”Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section VI, Bank Premises
  9. Capital - provide all information as described in ”Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section VII
  10. Copy of the Chief Executive Officer’s proposed employment contract, if any
  11. Resumes, questionnaires, litigation affidavits and employment contracts, if any, for the remainder of the proposed management team
  12. Organization Chart showing how the bank will be organized and operating. Also, provide an organization chart showing all direct reporting lines to all board committees including audit, compliance and Bank Secrecy Act
  13. Fidelity Insurance – provide information discussed in “Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section XII. Fidelity Insurance
  14. n - Internal Audit and Control – plans for safeguarding assets and operations, i.e. development of adequate internal controls, full time auditor, periodic C.P.A. audits, etc.
  15. Electronic Data Processing Service- provide information as outlined in ”Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section XV. Electronic Data Processing Service
  16. Estimated Assets and Liabilities, Income and Expenses – Furnish pro forma income and expense statements, balance sheets, and cash flow statements. The data should reflect the volume and type of business to be conducted during the first three years of operations
  17. Community Reinvestment Act and Fair Lending Requirements- Describe how the bank intends to comply with the requirements of the Community Reinvestment Act and Fair Lending. A Fair Lending Plan should be submitted
  18. Copy of the application(s) and all follow-up material submitted to the appropriate federal regulatory authorities
  19. Compliance with Bank Secrecy Act/Anti-Money Laundering programs – Discuss how bank will comply. See “Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section XIV. Compliance with the Bank Secrecy Act Anti-Money Laundering Program; and
  20. Competitive Impact - Provide information as discussed in “Brochure of Economic and Financial Data in Support of an Application to Establish a Bank” – Section V - Competitive Impact of Proposed Institution

Phase IV

(Matters to be completed prior to the issuance of an Authorization Certificate and consummation of Purchase & Assumption)

(NOTE: Drafts of items 1 and 3 below should be submitted to the Department for clearance prior to the respective meetings.  Drafts of other documents may be submitted for prior clearance, as well.  All drafts should be submitted in duplicate.)

  1. Meeting of incorporators should be held for the purpose of adopting bylaws and electing directors.  A certified copy of the minutes, including a copy of the adopted by-laws, should be submitted in triplicate to the Department
  2. Oaths of Directors should be executed and submitted*
  3. First meeting of the Board of Directors should be held.  A certified copy of the minutes, with all attachments, should be submitted in triplicate to the Department.  Actions taken at the meeting should include, but not be limited to, the following:
  • Election of officers
  • Ratification of the actions taken by the incorporators
  • Approval of the forms of seal and stock certificate
  • Designation of depositary institution(s)
  • Acceptance of lease, purchase agreement, etc., for the proposed quarters
  • Authorization of the acceptance of subscriptions for capital stock, indicating the par value and subscription price
  • Allocation of specific amounts of capital funds to capital stock, surplus fund, and reserves for contingencies, if any
  • Adoption of a resolution regarding compliance with Section 296-a of the Executive Law, and
  • Adoption of a resolution specifying the number of directors which shall constitute the entire Board, if a specific number is not indicated in the by-laws or Organization Certificate
  1. Stated capital must be fully paid in cash and deposited with designated depositary in the name of the proposed institution, or in an escrow account, as circumstances dictate
  2. Affidavit of Payment of Capital Stock and Verified List of Stockholders should be submitted in duplicate originals for filing by the Superintendent*
  3. An opinion of counsel that all directors are qualified to serve should be submitted
  4. Satisfactory evidence of fidelity insurance (i.e., Financial Institutions Bond) should be submitted
  5. The designated depositary must submit a letter stating that funds of $________ are on deposit in the name of the proposed institution or in an escrow account, and that said funds are free of any liens or encumbrances
  6. If the use of an off-premises servicer is contemplated, an agreement granting the Department access to all records at the servicer, as well as copies of other agreements, should be provided
  7. Directors' Affiliations Cards should be submitted
  8. Federal Taxpayer ID Form should be submitted
  9. The name(s) and telephone number(s) of one or more bank officials who may be contacted after hours in case of emergency should be provided. (This information will receive confidential treatment)
  10. Applicant will certify that all materials submitted as part of the application are current as of the date of this certification