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In the USA the first step is to get a large amount of cash. The bank needs money to even start, a lot of money. Then you need lawyers. In addition to general bu

by edoceo 11y ago

In the USA the first step is to get a large amount of cash. The bank needs money to even start, a lot of money. Then you need lawyers. In addition to general business things you must also file state and federal charters. You will need to then connect to many payment networks and the "fed" for funds settlement. Your Risk Officer will make a policy plan for lending and investing assets. Things get crazy based on the type of banking. Commercial vs Consumer, Construction lending, mortgage, auto, escrow and so forth. So pick a narrow place to start (commercial lending) and expand slowly (think years per product). There are many existing software solutions to manage these accounts, building your own is quite expensive. Your business will be audited by the FDIC every 6mo and you'll need plenty of documentation. Hire a firm like PWC in the off quarters to audit as well. Look around for your smaller local banks, small ones can operate with only 400M in assets and still service home lending and consumer checking, savings and CDs. The growth curve for banks is not like a tech-startup at all. Prepare for a multi-decade process.

davismwfl 11y ago
You seem to have knowledge here, I have always had some of these same questions about "new" banks. What is the minimum liquid holdings that is required by the Fed to open a bank, and what is the leverage you can use against those assets (I'd assume it grows with the total liquidity values)? How does it work, is a smaller bank getting loans only from the Fed or from larger banks at "wholesale" rates? How does the Fed evaluate the risk profile of a small bank? Is it based on the leveraged assets or something more? Ironically, I have done work for financial institutions but we worked on front line software and on basic web applications around peoples accounts, never the backend and no one I ran into understood how it really functions behind the scenes. Or maybe they just didn't want to take the time to explain to me.

by edoceo 11y ago

davismwfl 11y ago

You seem to have knowledge here, I have always had some of these same questions about "new" banks. What is the minimum liquid holdings that is required by the Fed to open a bank, and what is the leverage you can use against those assets (I'd assume it grows with the total liquidity values)? How does it work, is a smaller bank getting loans only from the Fed or from larger banks at "wholesale" rates? How does the Fed evaluate the risk profile of a small bank? Is it based on the leveraged assets or something more? Ironically, I have done work for financial institutions but we worked on front line software and on basic web applications around peoples accounts, never the backend and no one I ran into understood how it really functions behind the scenes. Or maybe they just didn't want to take the time to explain to me.