The Bancorp Bank has switched lead regulators to the Office of the Comptroller of the Currency, abandoning its Delaware charter to become a national bank.
The $7.1 billion-asset bank also said it intends to file an application to relocate its headquarters from Wilmington to Sioux Falls, South Dakota, which it said is closer to its payments and other operations as well as many fintech-related entities and their regulators. The new headquarters, which the bank anticipates moving into around September 2023, is currently under construction near downtown Sioux Falls.
The bank says it plans to retain a presence in Delaware.
Bancorp Bank, which specializes in payments and lending services to nonbank partners and is a wholly-owned subsidiary of The Bancorp, Inc., is heavily invested in the banking-as-a-service model.
The charter switch comes as the OCC and other federal banking regulators have signaled that they're going to put more scrutiny on bank-fintech partnerships.
"We are delighted to have a new regulatory partner to further the development of the financial services industry," Damian Kozlowski, the bank's president and CEO, said in a news release Monday announcing the OCC's approval of the new charter.
"As a national platform that enables many of the most innovative companies, The Bancorp will continue to focus on safe and sound innovation and greater access to banking services," Kozlowski said.
The operational melding of highly regulated banks and less-regulated fintechs led acting Comptroller of the Currency Michael Hsu to warn of the potential for another financial crisis.
Earlier this month, acting Comptroller of the Currency Michael Hsu said he's concerned about the increasingly complex business models that facilitate things like mobile payments, online lending and deposit-taking activities.
"The 'de-integration' of banking services that is taking place now has its roots in technology, data, operations," Hsu said. "It is affecting all banks, not just the large money-center banks. My strong sense is that this process, left to its own devices, is likely to accelerate and expand until there is a severe problem, or even a crisis."
Bancorp said in its application to the OCC that a national charter will help it expand across the country.
"The charter change to an OCC-supervised institution will align with the bank's growth strategy and allow it to pursue national initiatives in the areas of specialized lending and strategic fintech partnerships in the future," Bancorp said in its application.
"Having a national charter will provide for more ease of transition into new markets and allow the bank to operate more effectively across state lines under uniform federal laws and regulations as well as offer uniform products across state lines more efficiently and effectively," according to the application. "The ability to operate across state lines in a consistent manner is critical to the applicant's ability to scale profitably in the future."
While the public portion of the bank's application doesn't discuss the regulatory risks associated with the banking-as-a-service business model, it does reference "regulatory restrictions," although it notes that's a common risk among banking institutions.
"As it currently stands, the largest risks to the bank's capital plan are regulatory restrictions, financial technology solutions and reputational risk," the bank said in its application. "With regard to regulatory restrictions, there are no restrictions currently imposed on the bank; however, risk of such restrictions is generally high within the banking industry."
