WASHINGTON - The American Bankers Association launched its campaign Thursday to stop thrifts from getting new commercial bank charters to evade the industry's high deposit insurance rates.

In a letter to Rep. Marge Roukema, chairwoman of a key House Banking subcommittee, the ABA promised to battle applications through the regulatory process and in the courts if necessary.

The ABA said it plans to argue that the applications represent a violation of the moratorium on insurance fund switches established in 1989 and extended in 1991. In those laws, Congress decreed that thrifts could not leave their insurance fund until it was fully recapitalized.

The trade group's president, Howard L. McMillan Jr., urged Ms. Roukema in the letter to bring pressure upon the regulatory agencies to reject the charter applications.

Great Western Bank, the nation's second-largest thrift and one of the institutions attacked in the ABA letter, expressed confidence Thursday that its application to charter a commercial bank would be approved.

"We as a matter of course meet with each regulator that we have to make a filing with," said James F. Montgomery, the thrift's chairman. "I can only say we don't file applications we expect to be turned down."

Mr. Montgomery called the charter application "totally proper and within the law," but still urged Congress to solve the premium disparity problem.

Six thrifts have announced they will apply for commercial bank or savings bank charters in order to avoid facing a competitive disadvantage later this year, when banks' deposit insurance rates are expected to fall.

Edward L. Yingling, ABA's executive director of government relations, said his group would soon formally file with the Comptroller of the Currency an objection to Great Western's deal. "We will be filing objections at each step," he said.

In addition to barring the thrift deals, the ABA advocates allowing the deposit premiums of "Oakar" and "Sasser" banks to be paid towards bonds that the Financing Corp., or Fico bonds sold to finance the savings and loan cleanup.

Oakar and Sasser institutions are thrifts purchased by commercial banks and converted to banks. Although they pay insurance premiums into the Savings Association Insurance Fund, the Federal Deposit Insurance Corp. has ruled that their premiums cannot be used to pay the cleanup bonds.

So far, federal regulators have expressed support or remained mum on the charter applications by Great Western and the other thrifts.

Deputy Treasury Secretary Frank Newman said earlier this month that Congress should not try to block thrifts from chartering commercial banks, and Ricki Helfer, chairman of the Federal Deposit Insurance Corp., said in a speech that she agrees.

Washington bank consultant Karen Shaw predicted the Comptroller of the Currency would approve Great Western's application while the FDIC will turn it down. Asked how that squares with regulators' past remarks, Ms. Shaw, who is president of ISD/Shaw Inc., said, "Things change, and the firestorm of protest over this may be something of a surprise" to regulators.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.