Lorum, a dedicated correspondent banking service for financial institutions worldwide, has submitted an application to the US Office of the Comptroller of the Currency (OCC) for a national trust bank charter.
Per Lorum’s statement, this application is pending regulatory review and approval. Established in 2023, Lorum operates under a 100% reserve model, ensuring that all client funds are fully backed by cash and cash equivalents without any lending activities. The company focuses on providing clearing, custody, cash management, and wholesale foreign exchange services as core fiduciary functions.
Market Context for Correspondent Banking
Lorum highlights the challenges within the correspondent banking sector, where major global banks have reduced their involvement in mid-market correspondent relationships. Financial institutions, including payment service providers, trading platforms, payroll operators, and marketplaces, have thus shifted towards regional and fintech-focused banks.
According to Lorum, this shift has led to the misalignment of incentives, as these institutions use client deposits to fund loan portfolios. This practice can impede efficient movement of funds, favoring the institution’s balance sheet over smooth operations.
Statistical data from BIS CPMI indicates that active correspondent banking relationships have decreased by more than 20% across the Americas in the past decade, leaving many institutions reliant on intermediary chains with reduced visibility and uncertain continuance.
Lorum’s operational framework is centered around Named Account Custody, a model that establishes direct legal and operational links between account holders and the custody system. This approach aims to minimize opacity and reduce chain-related risks inherent in nested clearing systems. If approved, this national trust bank charter would place Lorum under OCC supervision and grant it access to the core US dollar clearing infrastructure.
George Davis, Co-Founder and CEO of Lorum, emphasized that the current market issue is structural rather than technological. He highlighted Named Account Custody as a pivotal solution designed to address these underlying challenges.
