Looking over someone’s shoulder does not need to mean copying someone else’s handiwork, but it can be helpful to look at what other banks have done to generate ideas to find your own niche banking activities.
Banks are restricted in the activities that they can take on. Banks generally cannot engage in general commercial activities. Instead, banks are limited to the business of banking, financial activities, and certain closely related activities.
Interpretive Letters
Over the years, many banks have seen opportunities in activities that are financial or closely related to banking but may not be making a loan or taking a deposit. To get clear authorization to engage in a new activity in the gray area of closely related activities, banks can approach their appropriate banking regulator for a letter of interpretation or other formal approval for the bank to engage in a new activity. These formal opinions are public and are often published by the regulator that issued the opinion.
This means that any bank or bank attorney can peruse these opinions for ideas and opportunities that have been approved at least once before. These letters and approvals are not too hard to find. In some cases, is possible to find summaries of approvable activities for banks. Not all opinions of this nature have precedential value, but they certainly give an idea of what a regulator sees as an appropriate activity for a bank.
OCC Approved Activities
Click here for a list of activities that the OCC has considered to be permissible for national banks. This list is not comprehensive and comes as a comparison of activities that are permissible for national banks versus federal savings associations. A few of the interesting things at a national bank can do are:
- Provide a collections system for a public authority
- Invest in a data interchange service (payment network framework) Banks can offer and invest in payments services and the supporting infrastructure.
- Produce, market and sell software to assist with the performance of authorized banking functions (core banking, bookkeeping, file management, etc.)
- Solicit and offer “affinity” relationships or special services under a specific trade name
FDIC Approved Activities
A list of activities insured state-bank activities recognized by the FDIC is here. There is a good chance that if a national bank can take on an activity, so can a state bank. State bank and national bank parity laws deserve a more thorough discussion than this article can provide. Not all state and federal regulators see eye to eye on activities that are permissible for a bank, so the list of authorized activities for a national bank is a good place to start for a state bank but should not end the inquiry. Many states have a similar formal approval process for new bank activities.
FRB Approved Activities
Click here for a list of activities they have been approved for subsidiaries of bank holding companies. In many cases a sister company to bank may engage in activities that the bank itself could not. A few interesting activities in this list are:
- Acquiring debt that is in default at the time of acquisition
- Private placement services for securities
- Management consulting services
- Equity investments in community development activities
If you are looking for inspiration on what the next step for your bank might be, sometimes looking over the shoulders of other banks can provide a spark of imagination. Another great thing about these lists is they also give you an idea of what other activities a bank regulator may consider to be acceptable.