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Applying for a Bank Charter The proposed bank must first receive approval for a federal or state banking charter. Before granting a charter, the chartering regulator must determine that the applicant bank has a reasonable chance for success and will operate in a safe and sound manner.

The Dual Banking System This means that state banks and national banks are chartered and supervised at different levels. National banks are chartered and regulated under federal laws and are supervised by a central agency. State banks are chartered and regulated under state laws and are supervised by a state agency.

A chartered bank is a financial institution governed by a state or national charter that provides monetary transactions such as distributing loans or protecting deposits. Chartered banks can be issued by the state or federal government.

The Supreme Court, however, decided that the chartering of a bank was an implied power of the Constitution, under the “elastic clause,” which granted Congress the authority to “make all laws which shall be necessary and proper for carrying into execution” the work of the Federal Government.

The bank charter will allow SoFi to hold deposits and use them to fund loans. It will also add regulatory clarity and set up a better framework for holding loans on the balance sheet.

Applying for a Bank Charter Before granting a charter, the chartering regulator must determine that the applicant bank has a reasonable chance for success and will operate in a safe and sound manner. Next, the proposed bank must obtain approval for deposit insurance from the Federal Deposit Insurance Corporation.

Impact of Dodd-Frank Historically, a key benefit of a national bank charter was the widespread claim that federal laws took precedence over state laws by their charter. This was advantageous for banks with operations in multiple states, as the federal laws preempted the differences in state laws.