WASHINGTON The Federal Deposit Insurance Corp. is considering overhauling the way mutual thrifts sell stock for the first time, with a new approach that would give much of the institutions' value to depositors, the government, or charities.
The FDIC plans to propose a rule and call for comment on a new, comprehensive approach to conversions when its board meets this morning, according to FDIC documents and sources. The two changes would amount to adopting a shortterm approach to mutual thrift conversions, while searching for a long-term solution.
First, the board will decide whether to issue a proposed rule that generally incorporates some changes the Office of Thrift Supervision made earlier this month in its rules, but with two exceptions.
Although the FDIC followed the same approach, its rules stop short of barring bank takeovers of healthy mutual thrifts, as the OTS has done. and they would not set regulatory limits on the amount of free stock thrift insiders can give themselves.
Differences Explained
Informed sources say the differences in the proposed rules result from a question over the FDIC's legal authority rather than from policy differences with the OTS.
However, the FDIC proposal does not address a number of procedural and substantive matters the covered by the OTS rule, including how mutual holding companies will be treated, proxy and prospectus disclosure and public notice and comment requirements.
The proposal gives those concerned 30 days to comment and is, "on a fast track," a source said.
Secondly, the FDIC board will consider calling for comment on a plan to overhaul the conversion process, which would differ substantially from the OTS rules. The FDIC's Notice and Request for Comment tackles the issue of how fairly to distribute the value built up over the years in mutual S&Ls.
One of the agency's concerns is that converting thrifts might raise more capital than they can safely deploy, as some New England savings banks did in the mid-1980s, according to FDIC documents.
The FDIC approach would require healthy converting institutions to raise only the portion of the capital they are now allowed to raise, and to give the rest away. That would likely eliminate the need for one kind of conversion called a mutual holding company conversion.
A House Banking Committee staffer said the OTS and FDIC, "should work together and come up with comparable rules." The agencies' year long debate on how to handle mutual conversions has been, "another good argument for regulatory consolidation," the staffer said.
Tough Struggle Seen
The OTS is unlikely to buy off easily on the approach outlined in the FDICs calls for comments, because it differs so greatly from rules the OTS adopted earlier this month, several sources said.
The FDIC's call for comments amounts to "a white paper on the whole subject which requests a bunch of comments," a source said. It will likely result in new rules, policy statements or guidelines, or legislation that would change rules on conversions, informed sources said.
The FDIC has concluded that thrift insiders should not get their institution's built-up value, as sometimes occurred recently, sources said. The FDIC believes the groups with the best claim to it are depositors, the government via deposit insurance funds, and local charities or community groups, sources said.
