In Blow to OCC, N.Y. Megabank Decides to Go With State Charter

The architects of the Chase Manhattan-Chemical merger have decided that the nation's next No. 1 bank will use a state charter, a move that will cost the Office of the Comptroller of the Currency prestige and more than $8 million a year in fees.

The new Chase Manhattan Bank Corp. will keep Chemical Bank's New York State charter, Chemical and Chase said Wednesday. The bank will be regulated by the New York State Banking Department and the Federal Reserve Bank of New York.

The decision will cut the total assets supervised by the Comptroller's office by 4.3%, or $97.8 billion - the assets held by Chase's lead bank.

But another big merger announced Monday will add assets to the Comptroller's fold: $15 billion-asset Integra Financial Corp.'s banks will be converted from Pennsylvania to national charters by their new owners at National City Corp.

Most of the summer's other high-profile mergers have joined pairs of national banks. The biggest exception is First Chicago/NBD, which for the time being will retain a national charter for First National Bank of Chicago and a Michigan state charter for NBD Bank.

The Chase-Chemical combination dwarfs these deals, but one prominent observer cautioned against reading too much into the banks' charter choice.

"I'm sure the Comptroller's office will be very displeased with the decision, but I don't think it's some sort of revolution going on," said former Federal Reserve governor John P. LaWare, now vice chairman of Secura Group, a bank consulting firm. "Since Chemical is apparently the dominant partner, it may just be they decided to go with the state charter, (Chemical CEO) Walt Shipley being more comfortable with the Fed and state banking authorities."

Chase and Chemical did not announce the reasoning behind their choice of a state charter. The Comptroller's office also wasn't talking. "We haven't received an application, so there's no comment we can make," said agency spokeswoman Naomi Salus.

State regulators were not so reticent.

"This is a terrific thing," said New York State Banking Superintendent Neil D. Levin.

"It's really an endorsement of state supervision," said James Watt, president and CEO of the Conference of State Banking Supervisors.

It's also an endorsement of the Federal Reserve, said industry consultant Karen Shaw Petrou, who was hired last year by the Comptroller's office to survey bankers' attitudes toward their regulators.

"Bankers believe the Fed is less political and a more stable regulator than the OCC," she said. "Banks would rather apply to the OCC, but be examined by the Fed," Ms. Petrou said.

Also important is the bottom line. State regulators - and New York is no exception - generally charge banks lower fees than the Comptroller's office.

"I'm sure cost was a major factor in their decision to keep a state charter," said Mr. Levin, the New York regulator.

The loss of Chase will cost the Comptroller's office about $8.3 million in annual assessment fees - out of a budget of $380.5 million. The agency also will have to lay off or find new jobs for the examiners - it won't say how many - now assigned to Chase.

Not yet clear is whether any charter changes are in store for the smaller subsidiary banks of the Chase and Chemical holding companies. Both companies own both state and national banks.

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