You cannot start a bank without a charter, capital, and federal approval
Starting a bank is not a business you can launch like a restaurant or consulting firm. The federal government and your state both control who gets to take deposits and make loans. To open a bank, you need a charter — a legal permission slip from either the Office of the Comptroller of the Currency (OCC) if you want a national bank, or your state banking regulator if you want a state bank. You also need millions of dollars in capital before you accept a single deposit, and you must pass a detailed examination of your business plan, management team, and financial projections.
The process takes 18 months to three years from start to finish. Most people who think they want to start a bank actually want to offer financial services — payment processing, lending, or money transfer — without holding deposits themselves. That is a different path entirely, and much faster. This article covers both: what it takes to become an actual bank, and what to do if you want to move money without being one.
Key Takeaways
- A bank charter from the OCC or your state is legally required before you can take deposits or call yourself a bank, and the application process takes 18 months to three years.
- You must have millions of dollars in capital on hand before you open, pass a detailed business examination, and meet ongoing capital and reserve requirements set by federal regulators.
- Most people who want to "start a bank" actually want to offer payment services, lending, or money transfer without holding deposits — which requires a money transmitter license, not a bank charter.
- A money transmitter license is faster and cheaper than a bank charter, but it limits what you can do and requires state-by-state registration in most cases.
- Fintech companies often partner with existing banks to offer services under the bank's charter rather than getting their own.
What a bank charter requires and who grants it
A bank charter is a license from a regulator that says you are allowed to take deposits from the public and make loans. There are two types: a national bank charter from the OCC (part of the U.S. Treasury), or a state bank charter from your state's banking department or financial regulator. National banks are regulated by the OCC and the Federal Reserve. State banks are regulated by your state and also by the Federal Deposit Insurance Corporation (FDIC) if they want deposit insurance, which most do.
The OCC and your state regulator will not grant a charter to a startup with a good idea and a business plan. They want to see a detailed application that includes your management team's banking experience, a three-year financial projection, proof that you have the capital to start, and evidence that your community needs another bank. They will examine your proposed lending practices, your risk management, your technology, and your compliance with anti-money-laundering rules. If they approve you, you still cannot open until you have raised the capital amount you promised and passed a final inspection.
The minimum capital requirement varies by state and by the type of bank you want to open, but it is typically in the millions. A small community bank might need $5 million to $10 million in capital; a larger bank needs more. This capital must come from investors or founders — it is not borrowed money, and it sits in reserve to cover losses and meet regulatory requirements.
The charter application timeline and what happens at each step
The process begins with a pre-application meeting with the OCC or your state regulator. You bring a preliminary business plan and discuss whether they think a charter is realistic for your situation. This meeting is free and non-binding; it helps you understand what the regulator will want to see before you spend money on lawyers and accountants.
If the regulator thinks you are on the right track, you file a formal charter application. This document is typically 50 to 100 pages and includes your business plan, management resumes, financial projections, a market analysis, your proposed bylaws, and proof of capital. You will also need to hire a lawyer who specializes in bank formation — this is not a DIY process. The application fee to the OCC is currently $3,500 for a national bank; state fees vary.
After you submit, the regulator begins a detailed review, which usually takes 6 to 12 months. They may ask for clarifications or additional information. Once they are satisfied, they publish a notice that your application is pending and invite public comment. This period lasts 30 days. If no major objections arise, the regulator schedules an approval meeting with your board. If they approve, you receive a charter and can begin hiring staff and building your systems.
Before you can actually open your doors and take deposits, you must raise all the capital you promised, pass a final examination, and obtain deposit insurance from the FDIC (if you are a state bank). This final phase takes another 6 to 12 months. Total time from pre-application to opening: 18 months to three years.
Capital, reserves, and ongoing regulatory costs
Once you have a charter, you are not done paying. The FDIC charges an insurance premium based on your deposits and your risk profile — typically 0.05% to 0.35% of your deposits per year. You must maintain a capital ratio — a percentage of your assets that must be held in capital rather than loaned out — set by federal regulators. For most banks, this is at least 10% of risk-weighted assets. You must also hold reserves — cash or liquid assets — to cover unexpected losses or withdrawals.
You will hire a compliance officer, a risk manager, and an internal auditor. You will file quarterly reports with your regulator and undergo annual examinations. You will pay for technology to prevent fraud, detect money laundering, and report suspicious activity to the Financial Crimes Enforcement Network (FinCEN). These costs add up to hundreds of thousands of dollars per year, even for a small bank.
If your capital ratio falls below the required level, the regulator can force you to raise more capital or merge with another bank. If you violate anti-money-laundering rules or fail an examination, you can face fines, restrictions on your business, or loss of your charter.
Money transmitter licenses as an alternative to a bank charter
If you want to move money — send payments, issue prepaid cards, offer wire transfers, or run a peer-to-peer payment app — you do not need a bank charter. You need a money transmitter license, also called a money services business license or MSB license. This is much faster and cheaper than a bank charter, but it comes with limits: you cannot take deposits, you cannot make loans, and you must hold customer funds in a trust account or at a partner bank.
Money transmitter licensing is handled by the states, not the federal government. Most states require you to register with their financial regulator and meet capital and bonding requirements. The capital requirement is usually $25,000 to $500,000, depending on the state and the volume of money you plan to move. You also need a surety bond — insurance that protects customers if you fail — which costs 1% to 3% of the bond amount per year.
Some states have reciprocal agreements, so a license in one state is recognized in others. But most states require separate registration. If you want to operate nationwide, you may need to register in 40 to 50 states. This is expensive and time-consuming, but it is still faster than getting a bank charter.
Many fintech companies use this route. They get a money transmitter license, partner with an existing bank to hold customer funds, and offer payment services under their own brand. The bank provides the charter; the fintech provides the technology and customer interface.
Partnership with an existing bank as a faster path
If you have a technology or a service you want to offer but do not want to get your own charter, you can partner with an existing bank. The bank provides the charter and the deposit-taking infrastructure; you provide the product and the customers. This is called a bank partnership or banking-as-a-service (BaaS) arrangement.
In this model, you typically get a money transmitter license or a smaller license specific to your service, and the bank handles deposits, compliance, and regulatory reporting. You pay the bank a fee — usually a percentage of revenue or a per-transaction fee — and you can launch much faster than if you were building a bank from scratch. Many online lenders, payment apps, and neobanks use this model.
The downside is that you are dependent on the bank's infrastructure and compliance. If the bank loses its charter or decides to end the partnership, your business is disrupted. But for most startups, this is a reasonable trade-off for speed and lower cost.
Who actually starts banks, and why it is rare
New bank charters are granted only a few dozen times per year in the entire United States. Most go to community banks in rural areas where existing banks have closed or where there is clear demand. A few go to specialty banks — banks that focus on a particular industry or customer type, like agricultural lending or immigrant banking.
The reason it is rare is that the barrier to entry is high, the regulatory burden is heavy, and the profit margins on deposits are thin. A new bank has to compete with established banks that have brand recognition, lower costs, and existing customer bases. It takes years to build a profitable bank, and many fail.
If you have a genuine banking need that existing banks are not meeting — for example, you want to serve a specific community or industry — and you have millions of dollars and a team with banking experience, a charter is worth pursuing. Otherwise, a money transmitter license or a bank partnership is a more realistic path to offering financial services.
Frequently Asked Questions
Can I start a bank with just an online platform and no physical branches?
Yes. You still need a charter, capital, and regulatory approval, but you do not need a building or tellers. Many online banks operate this way. The regulatory process is the same; the only difference is that your technology and cybersecurity systems will be examined more closely because you have no physical security.
What if I just want to hold money for customers without calling it a bank?
If you hold customer funds, you are taking deposits, and you need either a bank charter or a money transmitter license. The name does not matter; the function does. Regulators care about what you do, not what you call yourself.
How much does it cost to apply for a bank charter?
The OCC application fee is $3,500. State fees vary, typically $500 to $5,000. But the real cost is hiring lawyers, accountants, and consultants to prepare the application and business plan. This usually runs $50,000 to $200,000 depending on the complexity of your proposal.
Can I get a bank charter if I have no banking experience?
It is very difficult. Regulators want to see that your management team has experience in banking, lending, risk management, and compliance. If you do not have this experience, you will need to hire people who do, and that adds cost and time to the process.
What happens if my bank fails after I get a charter?
The FDIC takes over and pays depositors up to $250,000 per account. Your shareholders lose their investment. You may face civil or criminal liability if regulators find that you violated laws or mismanaged the bank. This is why regulators are so strict about who gets a charter.