SmartBiz Loans, a fintech firm for small-business loans, received regulatory approval to acquire CenTrust Bank and its bank charter on Monday. The announcement indicates softening regulatory attitudes toward fintech and bank acquisition deals, which could open the door to additional approvals.
The Office of the Comptroller of the Currency approved SmartBiz Loans's application to acquire Northbrook, Illinois-based CenTrust Bank. CenTrust Bank was
"A safe, sound and fair fintech business model has a place in today's federal banking system," said acting Comptroller of the Currency Rodney Hood in a statement. "This conditional approval demonstrates the OCC's commitment to a regulatory framework that supports innovations in banking that expand access to financial services for consumers and communities across the country."
Paul Davis, chief executive officer of the consulting firm Bank Slate, believes that the statement from Hood signals a shift in regulatory stances on fintechs acquiring banks.
"There's a difference in the language and the approach," Davis told American Banker. "With the previous regulators, Michael Hsu and those folks, there was a hesitancy to those types of situations. The messaging from acting Comptroller Hood is trying to have a much more accommodating stance on these types of deals."
Small banks looking to sell or consolidate may now have a wider variety of
"Compliance costs, revenue challenges and pressure to upgrade tech offerings may lead more small banks to view a sale as the best path forward," Davis said. "Signals from the White House suggest a potential easing of regulatory headwinds, which could clear the way for more nontraditional bank deals."
OakNorth Bank, a U.K.-based digital bank with offices in New York, also announced a deal to
"My take is that you'll see more of these types of deals being announced, because there's this view that the regulatory regime is going to be more open and more accommodating than it has been in a long time," Davis said.
Klaros Group partner Michele Alt, who advised SmartBiz through the process of acquiring a bank charter through its purchase of CenTrust Bank, said that SmartBiz submitted its OCC application to acquire the community bank and its charter back in October 2023.
"Credit where credit is due, this application was well underway over a year ago during the Biden administration," Alt told American Banker. "It is indeed a much more favorable regulatory environment right now for bank charter applications and acquisitions, but SmartBiz should not be understood as something that just rolled in during the Trump administration and the approval tap was turned on. The regulators at the OCC were working on this previously."
Alt said that she had previously spoken with OCC acting Comptroller Hood and believes that the office is opening up to additional applications and deals.
"The approval, and acting Comptroller Hood's statement on it, should be definitely read to mean that the agency is open for business from new entrants," Alt said. "That's a really exciting development. In fact I had a conversation with Rodney, and he said, 'Just because I'm acting Comptroller doesn't mean I'm inactive.' As long as he's there, we will see continued receptivity to new bank entrants. I think that's consistent with the new administration's priorities."
Tom Collins, a senior partner with the consulting firm West Monroe, said that the previous presidential administration was open to bank M&A deals but took a different approach.
"Their posture around it was very conservative and very careful," Collins said. "If you listen to some of the commentary from bankers who were trying to get deals done in the last several years, it was taking a lot longer and the process was more deliberate. I wouldn't say I was surprised that it [the SmartBiz application] didn't get shut down by the previous administration. They were probably just being a little more careful."
Collins believes that the results of the SmartBiz deal can also give regulators information on how to approach future fintech/bank acquisition applications.
"With the changeover in January, this was one of those deals that the regulators could approve and keep an eye on," Collins said. "I think they'll use it as a use case, see how this performs and make sure that it's having the desired effect, which is that it's making it easier for small businesses to gain access to credit, but it's also being done in a way where risk is being managed and capital is not put at risk."
