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I got suggested to buy a bank once. Nothing shady about it, the fact that it's a bank means they've got an insured deposit base, which is great for number of in

I got suggested to buy a bank once. Nothing shady about it, the fact that it's a bank means they've got an insured deposit base, which is great for number of investment purposes. Why it would be easier to buy a bank than to get a license I never got an answer to. Surely the authorities would not leave a loophole? But I don't know.

mcculley 4y ago
There are many situations where buying an existing business is cheaper and faster than dealing with the regulatory regimes for opening a new business (e.g., gas stations, restaurants, liquor licenses). I don’t see why banks would have less of an advantage there.
beefield 4y ago
I don't think there are any loopholes in that sense. I can easily imagine you preferring to buy a ready team with existing infrastructure for regulatory reporting than building one from scratch. Especially if your financial background is from prop trading and you despise - while having zero clue about - how banks actually manage their risk and communicate with regulators.
bombcar 4y ago
It’s faster mainly. Bank charters take time, buying a bank takes money.
1123581321 4y ago
Part of it is that both regulators and competitors simply don’t want many more bank licenses in the US. So they won’t make the issue process easy even though analysis and background check capabilities have improved so significantly. An analogy might be the old taxi medallion regulation in New York that had limiting the number of taxis as a goal in addition to qualifying cab owners and drivers. It’s a frustrating situation because an organization unworthy of a license like FTX can just buy one anywhere in the country, but a worthy organization working locally can’t start a new bank, because they’d likely have to buy one too far away. Anyone who believes there should be more small banks is just out of luck.

mcculley 4y ago

There are many situations where buying an existing business is cheaper and faster than dealing with the regulatory regimes for opening a new business (e.g., gas stations, restaurants, liquor licenses). I don’t see why banks would have less of an advantage there.

beefield 4y ago

I don't think there are any loopholes in that sense. I can easily imagine you preferring to buy a ready team with existing infrastructure for regulatory reporting than building one from scratch. Especially if your financial background is from prop trading and you despise - while having zero clue about - how banks actually manage their risk and communicate with regulators.

bombcar 4y ago

It’s faster mainly. Bank charters take time, buying a bank takes money.

1123581321 4y ago

Part of it is that both regulators and competitors simply don’t want many more bank licenses in the US. So they won’t make the issue process easy even though analysis and background check capabilities have improved so significantly. An analogy might be the old taxi medallion regulation in New York that had limiting the number of taxis as a goal in addition to qualifying cab owners and drivers. It’s a frustrating situation because an organization unworthy of a license like FTX can just buy one anywhere in the country, but a worthy organization working locally can’t start a new bank, because they’d likely have to buy one too far away. Anyone who believes there should be more small banks is just out of luck.