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How Tribes Can Avoid Banks Connected to DAPL: Start a Bank

Tribes seeking an alternative to banking with institutions helping to fund DAPL can look into starting their own banks or credit unions.
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Tribes seeking an alternative to banking with institutions helping to fund the Dakota Access Pipeline can look into starting their own banks or credit unions to hold their deposits.

Indian country could use more financial institutions even beyond the DAPL disinvestment effort. Previous articles in this disinvestment series identified about three dozen commercial banks and credit unions owned by tribes or individual American Indians tribes could patronize to move their money away from DAPL banks. With more than 500 tribes and 200 tribal homelands, there is clearly room to grow.

Federally-regulated banks and credit unions are not captive institutions. Rules have to be followed, for instance against lending to insiders. But the positives in a tribe owning its own bank are undeniable, both in keeping deposits local and in lending powers.


Consider mortgage lending in Indian country. Twenty years ago the Government Accountability Office did a survey of mortgage lending on homelands, or more accurately the lack of mortgage lending. GAO found only 91 mortgages extended to those living on reservations between 1992 and 1996. But the takeaway from that was the two tribes that did have some mortgage finance—the Tulalip Tribe in Washington and the Oneida Tribe of Wisconsin—had ownership interests in local banks.

Credit unions, which are nonprofits, may be a good philosophical match for tribes because of their cooperative structure. Like tribes (and unlike banks), credit unions have members, who collectively own the credit union. Credit unions have fields of membership that limit membership to groups like employees of companies, or members of the military. An Indian tribe is a very good match for a field of membership.

However, banks are better known and generally more substantial financial institutions than credit unions are (though many tribal banks are quite small in size). A good place for tribes to start looking into this isA Guide to Tribal Ownership of a National Bank, a white paper put out a few years back by the Office of the Comptroller of the Currency.

The guide advises “A tribal government that decides to charter or acquire a national bank should contact the OCC’s Licensing staff to obtain guidance and technical assistance before beginning the licensing process.”

Tribes will need to know which kind of a charter they want to obtain, state or federal. Considering the often-contentious relationships between many tribes and states, a national charter may be the way to go. Savings banks are a third kind of depository tribes may consider in addition to banks and credit unions.

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In the case of a national bank, there are four ways a tribe can proceed. They can establish a new bank, acquire an existing one through a merger, buy a publicly owned one through stock purchases, or modify an existing institution like a state bank into a national bank. (Indian country has other kinds of financial institutions. An increasingly common one is a community development financial institution. However, these do not accept deposits.)

An organizing group, which can include a tribe but must include five or more individuals, has to raise enough capital to put the new bank on a sound financial basis until it starts generating profits through operations. The guidance is: “An organizing group must raise a sufficient amount of capital to pay all organization costs, compete effectively in the market area, and support planned operations adequately. Initial capitalization must also be sufficient to maintain adequate capital levels, until the bank achieves profitable operations.”

The guide also outlines licensing processes, details supervisory provisions and lists permitted activities.

Next, this series will consider how tribes can start their own credit unions.

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