---
title: "Bank Charter"
url: "https://mahouse.world/glossary/bank-charter"
type: "glossary term"
topic: "Regulation"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-09-09"
---

# Bank Charter

A bank charter is the licence that lets a company take deposits, lend against them and hold them under deposit insurance, granted by a banking regulator after a review of its capital, owners, management and business plan. Fintechs get one by applying for it, by buying a bank that has one, or by renting one from a partner bank.

**Also known as:** Banking licence, Bank license, Banking authorisation

## Key facts

- **Used at:** the point a fintech's deposits, lending or payments volume outgrows what a partner bank will sponsor
- **Binding:** yes — a charter carries capital minimums, supervision, examinations and restrictions on what the group may own
- **Typical timeframe:** 12–24 months for a de novo application in the US or UK; 3–9 months to close the purchase of a small bank, plus the regulator's change-of-control approval
- **Typical cost:** tens of millions in capital and compliance build before the first deposit; Varo's national charter (2020) took three years and a reported $100m
- **Parties:** the applicant, the chartering authority (OCC or a state in the US, the PRA and FCA in the UK, the ECB via the national authority in the euro area) and the deposit insurer

## How a bank charter works in practice

There are three routes, and the choice is a deal decision. The de novo route means applying: a business plan, three years of projections, capital of at least the regulator's minimum plus a buffer, a board and senior managers the regulator approves individually, and a compliance programme built before it is used. Varo took this route and became the first US consumer fintech with a national charter, in 2020.

The acquisition route means buying a bank that already has one. LendingClub paid $185m for Radius Bank in 2021 to stop being a marketplace that sold loans to others and start funding them with its own deposits; SoFi bought Golden Pacific Bancorp for about $22m the same year and became a national bank the next. The price buys the charter, the regulator's confidence and the bank's deposits; the regulator's approval of the change of control is the condition everything else waits on, and it is where a buyer's ownership, capital and business plan get the same review a de novo would.

The third route is not to own one. Banking-as-a-service lets a fintech offer accounts and cards on a partner bank's charter for a fee, which is how most neobanks start. It is fast and cheap until the volume, the regulator's attention or the sponsor's risk appetite changes — the 2024 collapse of the middleware provider Synapse froze the accounts of fintech customers at several sponsor banks.

## Example

A lending fintech funds £400m of loans through a warehouse line at 7.5% and a forward-flow sale to a bank that keeps most of the margin. With a charter it could fund the same book with deposits paying 3.5%: £16m a year of interest saved on the line, plus the margin it currently gives away. Against that: £60m of regulatory capital tied up at a 15% ratio on the book, £8m a year of compliance and supervision cost, and 18 months of application. Buying a small bank with £150m of deposits for £30m, at 1.2× its tangible book value, would cut the wait to nine months — and put the change-of-control approval, not the price, on the critical path.

## Common mistakes

- Underestimating the capital the regulator will require on day one, which is usually the plan's year-three figure, held from year one.
- Buying a bank for its charter and discovering that the regulator's approval of the buyer is the harder application.
- Treating the sponsor-bank route as permanent; the sponsor can end it, and its regulator can end it for them.
- A plan that assumes the charter's freedoms without its restrictions — on the group's other activities, on affiliate dealings, on dividends.
- Forgetting that a charter does not travel: a UK licence is not an EU passport after 2020, and a state charter is not a national one.

## Related terms

- [BaaS](https://mahouse.world/glossary/baas.md)
- [Sponsor-Bank Fees](https://mahouse.world/glossary/sponsor-bank-fees.md)
- [Regulatory Capital](https://mahouse.world/glossary/regulatory-capital.md)
- [Neobank](https://mahouse.world/glossary/neobank.md)
- [E-Money](https://mahouse.world/glossary/e-money.md)
- [Sandbox](https://mahouse.world/glossary/sandbox.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov