How to Write a Charter for a Bank

Like a business plan, a charter for a "de novo" bank---as new banks are sometimes referred to---requires you to consider the bank's mission and vision. Since banking is a highly regulated activity in most states, your application and charter will be scrutinized by the department within your state which regulates financial institutions. That means your initial submission should be forthright and comprehensive when it comes to each proposed bank director's financial history and business practices.

Instructions

1. Get to know the commissioner of banking in the state where the bank will do business. The commissioner will oversee your charter application and review the proposed charter. The Texas State Department of Banking, for example, suggests that anyone preparing to write a bank charter should first meet with the banking commissioner who can provide valuable feedback.

2. Expect that the charter you write will include an application that requires specific information on the corporate name, paid-in capital structure, the bank's agents, the character of your management, market analysis and expected competition. Check out a sample application used in Oklahoma for anyone seeking to engage in banking business. Compare Oklahoma's multi-page application to the one-page application that California's Department of Financial Institutions requires.

3. Prepare a Certificate of Incorporation which may be different in each state. For example, Oklahoma requires the certificate to identify the name of the corporation that will own the bank, where it will operate, the total amount of capital invested in the corporation and owners of the capital stock. You must also identify each owner's voting rights.

4. Prepare your bank's bylaws. This multi-page document requires you to devise a schedule of shareholders' meetings, explain how directors are elected, removed and the powers they possess, describe how officers and employees are chosen and what happens when a position becomes vacant, ownership and transfer of stock certificates, and the indemnification of officers and agents of the bank. See a sample set of bylaws used by the Oklahoma Commissioner of Banking.

5. Draft a financial report. Most states require the report to contain biographical and financial information on any director, officer or major shareholder (usually owner of at least 10 percent stock) in the bank. In fact, Oklahoma requires the biographical and financial information before an individual can even assume one of those positions. The financial information requested must include a detailed scheduled of an individual's assets and liabilities as well as a statement of income.

References

• State Banking Department of Oklahoma
• Texas Department of Banking
• California Department of Financial Institutions

Resources

• California Department of Financial Institutions