Incorporation, Chartering, and Registration Requirements for Commercial Banks Opening a Bank Owners must get permission to open and close a bank. Before opening, the owners must get two charters and demonstrate to the banking authorities that the introduction of their bank at the proposed site will not harm competitors in the same area. Incorporation Before commencing operation, the owners of a commercial bank must obtain a charter of incorporation. A corporation is a legal person, created by statute, that can contract and assume debt in its own name. Incorporation limits the liability of the shareholders to their initial investment in the company.
Limited liability encourages risk-taking activities.
Commercial banks by their very nature are risky businesses. Therefore, they must be incorporated. Ordinarily, a corporation is formed at the state level. However, commercial banks may be incorporated either at the state level or at the national level. State banks are incorporated by a State's Banking Department.