How Banks Work

How do you start your own bank?

What if you wanted to start your own bank? Do you just rent some space, put out a sign and started taking deposits? Not exactly. Let's look at the steps you have to go through in order to start your own bank. The rules and requirements vary from state to state, so in this article we'll use the requirements from the state of Florida.

The Organizing Group

Just as with any business, you'll first have to make some pre-planning decisions -- like who your partners (called the organizing group) will be. You'll also have to write a business plan. All of these things will be taken into consideration when you apply for a state or federal charter.


A charter is an agreement that governs the manner in which the bank is regulated and operates. It authorizes the organization of the bank by either the state or federal agency. The agency that charters the bank is primarily responsible for protecting the public from unsafe banking practices. It conducts on-site examinations to make sure the bank's financial condition is good and that the bank is complying with banking laws. State charters and federal charters typically do not differ too much in the way the bank conducts business. They do, however, differ in other areas. For example, in Florida, a state bank is not required to be a member of the Federal Reserve System, while federally chartered banks are. Also, state-chartered banks are regulated by state agencies, while federally chartered banks are regulated by federal agencies.