Existing financial businesses seeking to acquire or expand a banking charter face substantial regulatory challenges, as do investors seeking to acquire or expand a banking charter, as well as investors seeking to start or acquire a new banking enterprise. These challenges include obtaining regulatory approval of banking proposals, overhauling existing businesses to conform to regulatory expectations, and planning and executing the migration of existing businesses into a bank legal entity.
Promontory has assisted a broad range of financial businesses and investors in planning, obtaining approval for, and executing new banking strategies. Promontory clients in this area include banks, finance companies, investment banks, asset managers, and private investors. Each engagement is tailored to meet the particular client’s needs and involves close collaboration among Promontory and the client’s management, legal counsel, and other advisors. Services generally include one or more of the following:
Regulatory Strategy. A successful banking initiative begins with a realistic and viable strategy. Promontory helps clients ensure that their overall business strategy is likely to meet regulatory approval and withstand ongoing bank regulatory supervision. Promontory also advises clients about structural issues such as choice of charter/license, corporate organization, mode of entry (acquisition vs. de novo), and acquisition strategy.
Regulatory Relations. The unique dynamic of the bank regulatory relationship has undermined the banking strategies of many nonbank companies and investors. Promontory helps bridge the gap by facilitating communications between clients and relevant governmental authorities, including licensing, supervisory, and policy decision makers. This includes assistance in structuring the general approach to the regulators, preparing or reviewing presentations and submissions, attending meetings, and participating in discussions.
Regulatory Submissions. Acquiring a bank or materially changing a bank’s business requires an extensive regulatory approval or non-objection process involving submission of various business and operational documents. Promontory helps clients prepare these submissions, which generally must include a comprehensive business plan addressing business strategy, marketing, governance, controls, capital, and risk management, as well as policies and procedures covering a broad range of financial, operational, and compliance issues.
Regulatory Gap Analysis. Companies that implement new banking strategies must conform any existing operations to the new regulatory regime. For some, this involves minor adjustments arising from conversion from one banking charter to another. For others, it can entail the significant overhaul of a complex organization that will now be regulated as a bank holding company. Promontory performs gap analysis reviews to define the gaps among clients’ governance, risk, and control processes and bank regulatory requirements and expectations. Promontory then works with the client to plan and implement short-term and long-term remediation programs that reflect the concerns and priorities of the organization’s new regulators.
Bank Migration. Moving existing businesses into a bank legal entity involves complex organizational, financial, regulatory, and risk management challenges. Promontory helps clients plan and execute “bank migrations” in a manner that meets regulatory expectations and creates the infrastructure for the successful ongoing operation of the bank.
Due Diligence. Many companies’ banking strategies involve the acquisition of existing insured depository institutions. Promontory is regularly engaged by both strategic and financial acquirers of banking institutions to perform due diligence on the loan portfolios, regulatory records, management, and balance sheets of potential acquisition targets.