In the face of decisions companies have to make when considering the launch of a “new” bank, an article on JDSupra, a third in a series evaluating the choice between starting from scratch through the de novo chartering process or investing in an existing bank to drive a new business plan, provides fresh insights into the matter.
Since reaching out to this topic initially, there has been marked experience assisting clients in adapting both de novo and de facto de novo banks, even amidst the tumultuous financial markets seen in 2023, according to the law firm Nelson Mullins Riley & Scarborough LLP. As explained, de novo banks are new institutions, while de facto de novo banks are existing institutions obtained primarily to implement a new business plan.
The decision to “build or buy” presents varied challenges and advantages. To carve a new path through a de novo bank allows significant design control from the outset, although it must navigate through the initial regulatory process. Conversely, purchasing an existing platform may bypass certain regulatory hurdles but comes with inherited past business practices and existing systems that will require integration and potentially, restructuring.
The shift in the financial landscape further underscores the importance of these considerations. The volatility experienced as recently as 2023 magnifies the need to assess the risk and potential return involved in each approach, considering variables such as market conditions, prospective customer base, and resources available for regulatory compliance.
Ultimately, whether to build or buy a bank depends on each institution’s conditions and strategic goals, making this a complex but critical decision. This series by Nelson Mullins Riley & Scarborough LLP offers an in-depth exploration of these points, encouraging deliberation on the integral factors in the build or buy dilemma.