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Requirements For Buying A Bank


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Some investors ask, ‘How does one purchase a bank?’. To buy a bank, capital is probably the least important consideration. Regulatory requirements in the jurisdiction you want to operate are more difficult to meet. There are many Requirements For Buying A Bank. For how to buy a bank see the following.

The executive team will need extensive banking and finance experience. And most authorities will require some or all of the following:
  • Masters in a financial discipline. Either a higher degree in finance or an equivalent
  • More than 20 years banking experience. Either in an established bank or financial institution
  • Extensive knowledge of anti-money laundering procedures.
  • Be up-to-date with the relevant regulations of the International Banking Sector. These include those defined in FACTA (Foreign Account Tax Compliance) and CRS (Common Reporting Standard). Also, know about those applying to know your customer. And know your representative requirements, among others.
  • Possess substantial experience in managing Risk Assessment and Management
  • Have experience with relevant financial supervisory bodies in a senior financial role
  • Own liquid capital. It must also be at least twice the starting capital of the proposed bank
Capital as a requirement

As an investor and owner in a bank, you will require the capital to start the bank. Regulatory bodies will allow control. But only where you can demonstrate that you have qualified staff to provide appropriate corporate governance. Also have engaged a corporate team with the relevant qualifications. They must be able to perform the transaction that establishes the bank.

License as a requirement

You will need to be granted a license for buying a bank or taking over an existing bank. The candidates will undergo a due diligence process. The authorities will conduct this process to assess their good character and financial status. A good financial licensing adviser will manage this process. He will also submit a business plan that complies with the licensing requirements of the jurisdiction. The bank will operate according to these limits which are imposed on new licenses. While you will be in control of the bank, you will be limited in the actions you can take. These limitations are based on the legal and financial requirements set down by the regulator.

Skilled staff as a requirement

Any staff that are employed by the bank will also have to meet some requirements. These will be set out in the banking license. Thus it will always make sense to incorporate managing. It will also help in acquiring relevantly qualified and experienced staff strategically in your long term view of the business. An expert on licensing will be able to help to structure the bank in a proper way. That way it will be compliant with applicable regulatory framework and still able to achieve your financial goals.

You may also want to consider the following advice. These are all from an experienced mergers and acquisitions adviser in the banking area:

Banks are typically sold, not bought – a takeover will not work unless the management and board agree

  • Local market sure is more important than national exposure. This is because customers usually sign up at local branch level
  • The earnings of the bank are the most important determinant of its price; investors want dividends
  • Excess capital when undertaking a purchase does not give you advantage in a bank for sale
  • Credit quality problems or issues that come up. Also, financing the buyout will cause the process to be more difficult
  • Faster growth in specific geographical and business areas will be more attractive

If you are looking to buy or invest in a bank get advice from experts in the area. Do keep in mind all the requirements for buying a bank mentioned above. At MergersCorp™ M&A International (mergerscorp.com) we provide Consulting Services on the sale of public and privately held banking institutions. We strive to achieve a successful conclusion and satisfaction for all stakeholders in the transaction.

Robert G. Cotitta
Robert G. Cotitta
Robert G. Cotitta
Robert G. Cotitta, President of Bancorp I, Inc. has over 40 years of experience in the banking industry in ownership, management, and consulting positions.

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