How to Start a Bank: Key Steps and Considerations for Aspiring Bankers

Step-by-step guide on how to start a bank in 2024. From creating a strong business plan and raising capital to navigating regulations and building your core banking system.

From obtaining the necessary funds to being legally suitable for all it will entail, the process of opening a bank is usually lengthy and rigorous. However, for those who can assemble a good team, offer a sound strategy, and secure adequate funding, it can be worthwhile. Let me walk you through the key steps you’ll need to take to start your own bank in 2024.

Below is a breakdown of the most important steps for you to undertake in order to establish your own bank.

Step 1: Creating a Strong Business Plan

A solid business plan is your foundation. It convinces regulators that your bank is a viable and secure business. It should answer key questions. 

• What type of bank will it be? 
• How will it operate daily? 
• Who is your target market?

Also, keep the focus on long-term projections. To illustrate why it's important, let me provide a few examples. If you are targeting retail banking, you need to show how your bank will process everyday customers' financial needs. On the other hand, if you aim to focus on business clients, your plan must outline strategies for handling large loans and managing risk.

Step 2: Understanding Regulations

Starting a bank sounds great, but then you run into a huge challenge – regulations. Every country has them, and they all hold banks to high standards. You’ve got to protect customer data, prevent fraud, and follow a list of rules.

In the U.S., it starts with getting approved by either a state or federal regulator. Then, you need FDIC insurance before you can open. And even after you’ve launched, you’ll still need to comply with ongoing rules, like anti-money laundering laws and keeping data secure.

Most founders get help from experts. Partnering with firms that have expertise in online banking solutions can help lighten this burden. They understand how regulations work and can guide you through the tricky legal processes.

Step 3: Raising Capital

The capital required for one to start a bank is not a small sum. In general, you will need approximately 10-30 million USD to get started. This capital also aids in providing assurances to regulators that your bank is capable of managing adversities as well as other incidents.

You don’t need all the money at once, you simply need a plan set in place. It is a continuous process, so whenever investors see that you are serious about it—either through getting approval from the regulatory authority or getting a banking license then people are more inclined to give their money out.

Step 4: Building Your Core Banking System

Ever wonder what makes your bank work behind the scenes? It’s all about the core banking system. This software handles everything – deposits, withdrawals, and keeping track of customer accounts. It is common for banks to opt for white-label solutions, and this saves money, although there are certain dangers. For more control, the best option is to have self-built systems developed by expert-led teams like S-PRO, which are more expensive and require more time to implement.

Step 5: Assembling the Right Team

Your team must consist of experienced professionals. Regulators want to see a group of people who understand how the banking world works. This includes experts in risk management, IT systems, and compliance.

Investors also prefer experienced leadership. They want to trust that the people running the bank know what they’re doing. That trust makes it easier to secure funding and grow your bank.

(Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)