Advantages of State Charter

There are many advantages of becoming a California state-chartered financial institution:

Greater Access to the Regulator

The California Department of Financial Protection and Innovation (“Department”) has an “open door” policy with regard to all financial institutions. Representatives of any financial institution may call staff members or the Commissioner with questions or concerns and get a personal audience quickly. We encourage officers, directors and employees of financial institutions to stay in close contact with us; no problem or question is deemed unimportant.

California state-chartered financial institutions have closer geographical proximity to their primary regulator; therefore, communication is more direct, timelier, and more effective. Furthermore, the Department’s familiarity with the unique competitive environment that California financial institutions face, allows for informed decision making and understanding of “local” issues.

The Department has offices located in Sacramento, San Francisco, Los Angeles and San Diego. The Department’s examiners work from the various office locations and are familiar with the local community and the market area in which they work. This provides a better and more feasible working environment for the examiner and the financial institution. In addition, if needed, a one on one audience can easily be arranged.

The Department prides itself on maintaining experienced staff members. The office staff, legal staff, and examining staff have multiple years of experience in handling examination and application related issues.

We invite every financial institution to visit our Department at any time, to ask questions and/or provide suggestions. We welcome and appreciate comments on how we can provide a better and more efficient regulatory environment.

Commitment to Quality

The philosophy of the Department is that all financial institutions deserve firm, fair, and consistent regulation and supervision. Furthermore, the Department is committed to the provision of quality constituent services by its office staff. This commitment includes an out-reach to the financial institutions we supervise (PESS Survey), encouraging their input for improvements in our examination processes and procedures. We are actively involved in strategic planning at all levels of the organization and trust that our commitment to quality translates into better service to the financial institutions that we regulate.

Lower Fees and Assessments

Generally, the fees charged by the Department are lower (e.g. application fees, assessments) than those charged by federal regulators. Check out our assessment calculators.

State Law Parity Statutes

State-chartered financial institutions have comparable powers to federal institutions in all areas of operation. In the case of legal lending limits, state-chartered banks have a greater authority for secured lending due to the broader definition of what constitutes a secured loan. Further, the California Financial Code contains a parity provision allowing the Commissioner to issue regulations to authorize a state-chartered financial institution to conduct an activity allowed for a federal institution unless such activity is expressly prohibited by state law. Therefore, should you discover a situation where you feel a state-chartered financial institution is disadvantaged versus a federally-chartered institution, you could petition the Department to use the parity provision to authorize the activity for a state-chartered financial institution. Additionally, state banks can conduct activities not authorized for national banks, provided such activities are authorized under state law and approved by the Federal Deposit Insurance Corporation (FDIC) under Section 24 of the FDI Act. For these reasons, state banks can have the same advantages and the same competitive edge that a national bank would have.


The Department has cooperative examination agreements with both the FDIC and the Federal Reserve Bank (FRB), whereby examinations are conducted on an alternating basis. We make every effort to have minimal disruption on bank operations. The use of cooperative examination agreements between state banking supervisors and the FDIC and FRB essentially assures that a state bank will have only one regulatory examination on either a 12- or 18-month cycle since each agency relies on the alternating examination agreement.

Our alternating examination program with the federal regulators minimizes the intrusion of examiners into institutions that are well-managed and well-capitalized, freeing up staff to concentrate on financial institutions in need of closer supervision.

Working Relationship with Federal Regulators

The Department enjoys a good working relationship with the FDIC, FRB and NCUA. We interact well with other regulatory agencies both state and federal on those occasions when our regulatory paths cross, providing mutual assistance when possible and necessary.

Generally, federal regulators will consult with the state banking supervisor as to an appropriate remedy for problem issues involving state-chartered financial institutions, since the state supervisor is the chartering agent for the financial institution. This state/federal consultation process often results in greater overall flexibility on the part of the regulators.

The new financial institution application and/or conversion process is a joint effort between the state and federal regulator which minimizes investigation and turnaround time. In some instances, the Department will accept a copy of the federal application filing so that regulatory burden on the applicant is reduced.

Working Relationships with Trade Associations

The Department endeavors to maintain a good working relationship with various trade associations. We share ideas and honest assessments, work together on legislation, continuing education and other areas that affect state-chartered financial institutions. Together we strive to make financial services a more profitable enterprise in California.

Relationship with the Conference of State Bank Supervisors (CSBS)

The Department is active in the CSBS and has worked with our counterparts nationally to affect a seamless regulatory system for financial institutions doing business on an interstate basis. The Department is a party to the nationwide agreement providing a single regulatory point of contact at both state and federal levels for multi-state, state-chartered banks. The home state regulator of a state-chartered bank is the primary regulator and the single point of contact for the bank. Through the Commissioner and senior staff, on-going efforts are being made to assure banks can compete on an interstate basis.

Training of Examiners

The Department endeavors to provide up-to-date training for its examination staff and other professional staff in order to better assist with the difficult issues that face financial institutions in this competitive environment. The Department is nationally accredited through the Conference of State Bank Supervisors and the National Association of State Credit Union Supervisors.

Director Training

The Department participates in a FDIC training program for directors. The training session, typically, is a one-day session conducted at different locations throughout California. The training session was formulated to give directors hands on experience and provide information as to expectations as to their role as a director of a bank. In addition, the session provides opportunity for the Directors to meet with Department staff, to ask questions and to discuss, face to face, any concerns, issues or suggestions they may have.


We believe that the combination of access, low fees, favorable state laws, and expertise and experience of the Department’s staff, make the state charter the charter of choice for California financial institutions. We welcome your interest and would encourage you to contact us if you need additional information or if we may offer assistance to you.

State supervisors are not only regulators ensuring financial institutions under our supervision operate in a safe and sound manner; we support the dual banking system and encourage the formation and prosperity of all financial institutions under our supervision. The Department tries to create a positive environment and operate in a manner that encourages the formation of new financial institutions, the conversion of existing financial institutions into state-chartered financial institutions, and state financial institutions to remain state-chartered.

If you would like to start a new state-chartered financial institution or convert an existing federally licensed institution to state charter, we encourage you to begin by reviewing the relevant laws and regulations. Also available on the Department’s website are resources to start a new bank applicationorganize a state credit union, and convert an existing federally licensed institution to state charter that provide the pertinent sections of the law, regulations and forms you need to get started. Questions? Contact Patrick Carroll in the Licensing Section at 1-866-275-2677 or by email at

We look forward to working with you during the application process and appreciate your confidence in the Department and its staff.

Thank you for helping us make the California state charter the charter of choice.

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Last updated: Feb 26, 2024 @ 11:34 am