AUSTIN, Tex. - Catherine Ghiglieri was completely unknown in Texas banking circles when she was appointed Texas banking commissioner three years ago.

But Ms. Ghiglieri, whose only other employer in a 21-year career was the Office of the Comptroller of the Currency, has caught dual banking system religion and become one of the most high-profile state regulators in the country.

Though she never picked a fight, she's loath to back away from one. And that, along with her single-minded advocacy of the safety of the banks she regulates, has gained her respect.

Just last week, she said she would likely fight a decision by her former employer that allows a Texas national bank to cross the border into Arkansas using the 30-mile loophole, over her objections and those of the Arkansas bank commissioner.

"What bothers me is the content of the decision," she said. "It's a clear fault of the law, because it defeats the state's ability to decide for itself what kind of branching structure it wants."

"She's a tough regulator, very formidable," said John Heasley, general counsel to the Texas Bankers Association, who's tussled with the commissioner in the past. "But she's a good regulator, and for that reason we're very supportive of her."

Regulating 500 banks with $47 billion of assets, the Texas Department of Banking is one of the largest such offices in the country, second only to Illinois in the number of banks. Ms. Ghiglieri also regulates Texas funeral homes and perpetual care cemeteries, all 750 of them.

In a state where relations between state-chartered banks and their regulator have always been one of complete cooperation, even chumminess, Ms. Ghiglieri has fearlessly tackled situations that could have her relations with the banks she regulates at risk.

Chief among these was the rewriting of the Texas banking code, a multivolume document that hadn't been modernized in 40 years. But rewriting an entire banking code, even under the best of circumstances, can be politically tricky.

Nonetheless - after a series of meetings with bankers around the state, a page-by-page rewrite done by her staff and industry lawyers, and a crash course in how a Texas bill becomes law - the legislature will act on the new banking code this year virtually without protest.

"The code isn't perfect for me and it isn't perfect for them," said Ms. Ghiglieri (pronounced Galeery).

On the other hand, she's not afraid of taking on any interest that threatens her ability to do her job, as her actions with the OCC show. One of the things she set out to do as bank commissioner was to write policies on different practices, instead of acting on a case-by-case basis.

That led to the mortgage warehousing fiasco. A small group of banks, niche players in mortgage warehousing, objected to her writing rules on what safety and soundness measures banks should take when they go into the business. Since national banks don't have such rules, the Texas Bankers Association threatened to file suit against her over the state's national bank-state bank parity law. Ms. Ghiglieri "expressed her extreme displeasure," according to one association member. The issue eventually ended in compromise, and both sides are eager to put the issue behind them.

Yet, for that, it's difficult to find a single banker who doesn't like the commissioner.

"We don't agree on everything," said Flatonia State Bank chief executive Edwin Zapalac. "But I don't think you could find anyone who thinks she's not doing a good job."

At industry conferences, she can usually be seen talking and laughing with bankers. At the 1994 Independent Bankers Association of America convention, she gave an impassioned speech in defense of the dual banking system, and was the only regulator there to experience a spontaneous standing ovation.

"There's nothing I like better about the job than talking to bankers," Ms. Ghiglieri said. "The best part is getting to know different bankers, different banks, talking to them about their business or about their farms."

Indeed, Ms. Ghiglieri, 42, is from a banking family. A native of Toluca, Ill., her father and brother run the Citizens National Bank of Toluca in a small farming town of 1,400. She worked at the bank from the time she was 14 until she went to the University of Notre Dame as its first female student.

She spent the next 18 years with the OCC, rising to become director of the Atlanta field office.

An individual who knows Ms. Ghiglieri well had this to say about her going to the Texas Banking Department: "I think that when she went down there she expected it to be manned by a bunch of hicks. The fact that what she did find was such a great department, staffed with such professional people, turned her into a big-time dual-banking system convert."

Some Texas bankers were admittedly worried that a newcomer to Texas would be slow on the uptake.

"Whenever you have someone new come into Texas with little knowledge of state law or the nuances and history of banking, it could result in a slow policy pipeline," said Christopher Williston, president of the Independent Bankers Association of Texas. "But what you see now is that she's hit her stride big time, much faster than anyone expected. She's done a magnificent job."

She's also changed perceptions. In the lobby of Ms. Ghiglieri's office is a display of photos of all 27 bank commissioners in Texas history. Row after row of black-and-white photos of serious-looking men peer back. On the bottom-right of the display is a splash of color: a picture of a very pregnant Catherine Ghiglieri in a blue dress and a million-dollar smile.

"I've been taken aback sometimes by bankers' reaction to me," she said, laughing at the memory of one banker she met at an industry conference.

"He stood back, looked me up and down and said, 'Nope, not what I expected.' "

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.