Tech-focused Erebor Bank wins conditional approval in US

A new US bank backed by Silicon Valley billionaires has been granted conditional approval by regulators.

Erebor Bank, launched by Palmer Luckey, the 33-year-old co-founder of the defence technology firm Anduril, aims to serve technology businesses in areas such as artificial intelligence, cryptocurrencies, defence and manufacturing.

It also expects customers to include the individuals who work at those companies or invest in them, according to the bank’s charter application.

Backers of the new bank include Joe Lonsdale, 43, the billionaire co-founder of Palantir Technologies who runs venture capital firm 8VC, and Founders Fund, the Silicon Valley venture capital firm co-founded by Peter Thiel, 58.

Erebor was granted conditional approval on Wednesday by the Office of the Comptroller of the Currency (OCC), the US national bank regulator.

The bank derives its name from JRR Tolkien’s The Lord of the Rings series. In the books, Erebor is the “Lonely Mountain”, a fortress whose treasures are reclaimed from the dragon Smaug.

It aims to fill a void left by the collapse of Silicon Valley Bank in 2023. SVB had long been a major primary banking channel for early-stage technology firms and venture capitalists that are sometimes considered too risky by traditional banks.

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In March 2023, SVB and a host of US regional banks went bust over their bets on US government bonds, whose prices have slumped in an era of tight monetary policy. SVB also suffered from mass withdrawals by its customers, who were concentrated in the West Coast tech sector.

Jonathan Gould, comptroller of the OCC, said the decision to conditionally approve the bank was “proof that the OCC under my leadership does not impose blanket barriers to banks that want to engage in digital asset activities”.

He said: “Permissible digital asset activities, like any other legally permissible banking activity, have a place in the federal banking system if conducted in a safe and sound manner.

“The OCC will continue to provide a path for innovative approaches to financial services to ensure a strong, diverse financial system that remains relevant over time.”

The bank must meet a number of requirements, including submitting a complete description of its information systems and operations architecture, as well as an information systems risk assessment, before it can officially open.