The Federal Deposit Insurance Corp. on Tuesday gave conditional approval for VALT Bank, a fully digital bank led by a group of former U.S. Bank executives, to receive deposit insurance coverage.
The green light marks another hurdle cleared on the Eagle, Idaho-based lender’s journey to opening. The Office of the Comptroller of the Currency conditionally approved the bank’s de novo charter application in March, “120 days on the button” from its application submission.
As part of VALT’s agreement with the FDIC, it must have initial paid-in capital totaling at least $25 million. It must submit a complete shareholder list for both its holding company, VALT Investor Group Inc., and the bank, to the FDIC. VALT must also obtain prior written approval from the FDIC for any proposed changes in management or ownership.
“Relative to some of the other recently published approvals, we were quite pleased with the minimal number of requirements,” proposed CEO Matt Gediman told Banking Dive on Thursday. “They did a really good job to make sure that they didn't duplicate [requirements from] the OCC's approval, so there was good alignment between our regulators in actually generating this document.”
VALT’s counsel and regulatory adviser said it was “one of the cleanest FDIC approvals they've ever seen,” Gediman said.
VALT’s deposit insurance approval letter sets out six conditions, including the $25 million capital requirement, and that it must open within a year of the letter’s date. That’s fewer conditions than any of the other 12 banks conditionally approved for deposit insurance this year.
The bank is in the middle of its capital raise, Gediman said. He plans to open VALT during the fourth quarter.
The newcomer will serve “digitally-demanding” small to midsize businesses with $2 million to $10 million in sales – traditional firms that use technology across their business, that are “looking for the same kind of technological fluency from a bank or financial services provider,” Gediman said in March.
That space is dominated today by the nation’s largest banks operating on decades-old technology, Gediman said at the time.
When it comes time for VALT to acquire customers, it’s on the bank to convey trust and credibility to a digital audience, Gediman said Thursday. While a traditional de novo bank with a brick-and-mortar presence might approach customer acquisition by tapping into sales representatives’ existing relationships within the local market, a fully digital business bank like VALT needs a different approach.
“Trust and credibility are paramount with any bank, and we're sort of in new territory [as a digital business bank],” he said. “VALT, hopefully, will be a leader in how to establish that kind of trust and credibility early on. That's really what we're focused on.”
