New Bank Approvals Are Surging. What’s Behind the Boom.

The hot European fintech Revolut was granted a conditional U.S. bank charter this month. (Chris Ratcliffe/Bloomberg)

Forget about artificial intelligence and data centers for a moment. Bank start-ups are hot too.

While not a 100-year flood, applications for new, or “de novo,” bank charters have risen to levels not seen since George W. Bush graced the Oval Office. Over the past 18 months, 40 wannabe bankers have filed for charters with the Office of the Comptroller of the Currency, nearly as many as the 48 the agency received over the past 13 years.

Just don’t look for a new crop of bricks-and-mortar branches of Bailey Bros. Building & Loan (as seen in Jimmy Stewart’s It’s a Wonderful Life.) That’s because 50% of these new banks are in crypto or fintechs and for the most part are digital-only.

The bank boomlet reflects economic conditions—this week’s interest-rate hike, and higher rates in general, are positive for banks—and shifts in government policy. But in this era of neo-banks and stablecoins, it also raises the question: What the heck is a bank, anyway?

That is top of mind for Comptroller Jonathan Gould, who recently spoke at the Wyoming Blockchain Symposium at the Four Seasons Resort in Jackson Hole, Wyo., co-sponsored by Anthony Scaramucci’s SALT forum, featuring a Cowboy Jamboree at the Mangy Moose. (Try the bison carpaccio and elk stroganoff.) “We define the business of banking in this country,” Gould said. “Crypto is part of the business of banking.”

Here’s some context. First, banks can be chartered at the state level, but only the OCC can grant a national bank charter. (Generally, a bank also needs FDIC insurance to accept deposits.) In the late 1990s, de novo banks were hot, peaking in 1998 when bankers filed 138 applications, of which the OCC approved 116. (This was before the days of crypto, and fintech granddaddy PayPal Holdings was just being formed.) So why all those bank start-ups?

The 1994 Riegle-Neal Interstate Banking Act enabled aggressive bankers like Hugh McColl, Sandy Weill, and Walter Shipley to gobble up other banks, reducing the number of local banks and creating “banking deserts.” Meanwhile, mergers rendered some bank executives jobless, and they proceeded to…start banks. The then-regulation-light economy was red hot.

This fertile environment soon ended, starting with the dot.com crash of 2000. But fallout from the 2008-09 financial crisis was the real killer, along with, perhaps, subsequent regulation like the 2010 Dodd-Frank Act. Then came the era of “free money,” with the federal-funds rate falling below 1% in October 2008, where it stayed for nearly a decade. That was bad for banks. From 2011 to 2017, the OCC fielded just seven bank applications.

Meanwhile, fintech and crypto businesses were inching into banking. Rather than start de novo banks, though, upstarts like Stripe, Coinbase Global , and Affirm Holdings partnered with existing banks. Others acquired banks, like SoFi Technologies , which bought Golden Pacific in 2022, and Chime Financial, which just bought Stride Bank.

Flash forward to Trump Part Deux, which matches up nicely with the spike in charter applications. “For more than a decade, regulators signaled those seeking a federal bank charter need not apply,” Comptroller Gould said recently. “America and the OCC are once again open for business.”

Rhetoric aside, Gould might be on to something. Rip Van Winkle−like, pencil-pushers at the OCC have awoken as finance entrepreneurs heed Gould’s call. The question is, what are we getting ourselves into?

Late last year, the OCC conditionally approved bank charters for five crypto companies, including Ripple and Fidelity Digital Assets, owned by FMR. Last month, the OCC granted conditional charter approval to crypto business World Liberty Trust, 38% owned by an entity affiliated with President Donald Trump and family members. The Trump family’s canoodling in crypto is in part what induced the Senate to block passage this week of the Clarity Act, which would have added regulatory framing for crypto assets.

This month, the hot European fintech Revolut was granted a conditional U.S. bank charter. On Tuesday, The Wall Street Journal reported the neo-bank voluntarily gave out hundreds of customers’ data to someone impersonating a government agency. Revolut is “facing extortion threats from a shadowy hacker who claims to be behind the breach,” the Journal reported. Revolut says it blocked the scammer and alerted the authorities and that its systems and customer funds are unaffected.

An OCC official told me applications aren’t being greenlit willy-nilly, noting of those 40 applications filed recently, 21 have been approved and others are under review. Two applications have been rejected, which we know about because in June the OCC started publishing denial letters. “The OCC now wants applications in good shape on day one,” says Bryant Moravek of CPA firm Kaufman Rossin. “It doesn’t want to play consultant.”

Wise National, controlled by a British fintech firm, was one of the two denied. The OCC’s letter notes that “Wise U.S. became subject to a public Multistate Consent Order relating to deficiencies in its Bank Secrecy Act, Anti-Money Laundering and Countering the Financing of Terrorism program. Wise U.S. agreed to pay an administrative penalty of $4.2 million.”

The OCC also rejected Bunq (“bank of the free”), owned by a Dutch fintech company, perhaps finding its application to be, well, bunk. The agency says Bunq is inadequately capitalized, its management inexperienced, and its road to profitability undemonstrated.

Question: Why are these banks described with the Latin phrase “de novo” versus just “new”? It seems the term was adopted in the mid-20th century because it carries a precise legal definition: a financial institution built from scratch, rather than formed by buying or reorganizing existing assets. And maybe because it sounds impressive.

Here’s hoping these de novo banks won’t yield too many “de failures.”

Write to Andy Serwer at andy.serwer@barrons.com. Follow him on X and subscribe to his At Barron’s podcast.

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