The first step should be creating an opportunity for full public participation in establishing the mission statement of a Public Bank for Santa Fe, because Banking on New Mexico firmly believes that the bank’s mission will be to serve the public (not private investors).
The second step should be to establish a governance process to ensure that the mission or purpose of our public bank is carried out faithfully. The public wants to know that favoritism and political influence will play no role in how the bank invests our community’s funds. Issues pertaining to bank governance are detailed under Governing a Public Bank.
The third step will be to put in place enabling legislation, if needed, to amend existing ordinances to provide for the creation of a public bank or a public vote to establish a Public Bank for Santa Fe.
The fourth step will be for the City of Santa Fe to complete the initial application for a bank charter with the New Mexico Department of Licensing and Regulations, Financial Services Division. The application process can take one to two years to complete and includes multiple requirements and steps.
Applying for a Bank Charter
As a part of the bank charter application, the bank would discuss the kinds of investments /loans that the bank anticipates making. Some loans or investments are riskier than others, and these are taken into account in the lending equation and the evaluation of the business plan.
It is probable that at first, loans will mostly be made to the City for public infrastructure or services, because that is something the City already borrows for. They are low risk loans and clearly something that benefits the public as a whole.
Later as the bank gains more experience with the local market, it may financially back local banks, credit unions and community development fund institutions (CDFI) to help them increase access to credit in our community for affordable housing, small businesses, etc.
As a part of the bank charter application, the bank would demonstrate its anticipated profits and losses. Most new banks expect to take a few years before they turn a profit. This might not be the case for a Public Bank for Santa Fe because sufficient initial deposits from the City will make it possible to make substantial loans to the City.
Presenting a Five Year Business Plan is a required part of the application process. The plan must convince licensing and regulators that the bank has a solid chance of success. It includes:
- Mission Statement
- Governance Process
- Amount of capital that will be invested by the City to establish the bank
- Amount of anticipated deposits – deposits are a part of the lending equation.
- The kinds of investments / loans that the bank anticipates making, as reviewed earlier
- Demonstration of profits or loss anticipated, as reviewed earlier
There are more elements to the Charter application but these are the basic steps.