Should the FDIC permit a state bank organized as an LLC to obtain federal deposit insurance?
Yes. The critical inquiry for the FDIC should be whether the states’ banking laws offer a choice to incorporators in the state between the more traditional “corporate” form of ownership and the limited liability company form or, in the case of Texas, the LBA charter. The operative state law should provide the criteria for the bank charter. If these criteria meet underlying objectives of safety and soundness to the banking system and other objectives of the Federal Deposit Insurance Act, then the fact that the charter is an LLC or LBA should be irrelevant to a determination as to whether the entity is eligible for deposit insurance. If so, should the FDIC interpret the term “incorporated” utilizing some, all, or none of the traditional four corporate attributes? Answer: Not necessarily. In fact, IBAT would point out that the attributes identified in the proposal are not necessarily “traditional” for state bank charters. In fact, in Texas, banks do not obtain a corporate charter from the
