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NBD Bancorp has agreed to buy Summcorp of Fort Wayne, doubling its Indiana presence to 99 offices and $4.7 billion of assets.
December 24
Any proposal as sweeping as the Treasury Department’s plan to revamp the financial services regulatory system stands a high likelihood of drawing sharply mixed reactions and some significant heat.
So it was noteworthy how readily many in the industry accepted the idea that the time had come for alterations to the regulatory system.
Richard Kovacevich, Wells Fargo & Co.’s chairman, said, “I think directionally there is agreement that we need to make changes for how financial institutions are regulated that would be positive for both the customer’s standpoint, from the risk standpoint, and hopefully keeps us competitive” in “worldwide markets.”
Still, though bankers were open to the idea of change in general, some complained about the particulars. Among executives at smaller institutions, enthusiasm ran highest about the idea of added oversight for nonbanks, which has been a sore point for years.
Predictably, the closer the proposal hit to home, the more tempered the response, and support was hardest to find for the idea of eliminating the Office of Thrift Supervision — a subject some executives seemed reluctant to comment on at all — or the creation of a new federal charter. Institutions failing to receive the charter would not receive deposit insurance.
Bill Schenck, the president of the $324 million-asset TriState Capital Bank in Pittsburgh, and the former Pennsylvania banking commissioner, echoed many bankers when he said he welcomed the Treasury Department’s effort to keep a closer watch on securities firms, hedge funds, mortgage lenders, and other nondepository financial firms.
“All of those came together to create the present crisis, and some of those entities are virtually unregulated right now. I do believe, as a result of that, we are where we are,” Mr. Schenck said. “There wasn’t anything in this country that allowed someone from looking outside the industry in to pull any levers and say, ‘Slow down.’ ”
Several bankers wondered if there was enough political will in Washington to push through the changes Treasury is proposing.
Others, meanwhile, said they were concerned that any effort to overhaul the regulatory system, which could take years, could distract policymakers from doing something about the current market turmoil.
“I think we are … in an environment that demands some near-term action given the credit market, the housing market,” said Tom Renyi, executive chairman at Bank of New York Mellon Corp.
Though the Treasury has said that the proposal has been in the works for more than a year and that it is not a direct reaction to the housing crisis, Daniel Forte, the president of the Massachusetts Bankers Association, asked, “Are we attempting change for change’s sake?”
He said that if the plan were implemented, community banks in particular would seem to be left with fewer options when choosing a charter, and that bankers in his state, home to dozens of mutual thrifts, would fight any effort to merge the Office of Thrift Supervision into the Office of the Comptroller of the Currency.
Wayne A. Cottle, the president and chief executive of Dean Bank, a $220 million-asset mutual thrift in Franklin, Mass., and the chairman of the Independent Community Bankers of America’s mutual bank council, said that combining the OTS and the OCC would “weaken the strengths that exist in both types of charters.”
Mr. Cottle said that when broader industry problems arise, community banks often get overburdened by new rules.
“We always seem to end up with all these new layers of bureaucracy and regulations,” he said. “As a community bank we end up paying the price for something that we had no involvement in creating.”
Many industry officials questioned a long-term plan to require all banks and thrifts to be federally chartered. “The Treasury Department’s blueprint eviscerates state banking regulation,” said Camden Fine, president of the Independent Community Bankers of America. “It was written by nonbankers to regulate banks. It was written by a bunch of Wall Street types who don’t understand the banking industry.”
The plan does not call for the elimination of the state charter, but John Ryan, the executive of vice president at the Conference of State Bank Supervisors, said it effectively would do so because few banks would opt to keep a state charter if they were required to have a federal one.
“This is a back-door way to eliminate all state-chartered banks,” Mr. Ryan said. “The very foundation of the dual banking system has been to promote and ensure stability and diversity in our financial system. This plan appears to promote consolidation and concentration of risk to untenable levels.”
John Ducrest, the commissioner of the Louisiana Office of Financial Institutions, talked Monday with Robert Steel, the Department of Treasury undersecretary for domestic finance, in Washington at a meeting sponsored by the Conference of State Bank Supervisors. He said one point he stressed was that after Hurricane Katrina and Hurricane Rita, it was the local banking regulators in Mississippi, Louisiana, and Texas who were at the scene and working with local officials to get financial institutions operating.
“I was on the ground arranging a shared branching structure,” Mr. Ducrest said. “It wasn’t the federal agencies. It was us, the state regulators. If we weren’t there, I don’t know how the federal government would have accomplished what we got accomplished.”
Oklahoma Banking Commissioner Mick Thompson attended the same meeting. He said, “The plan as it is proposed creates more regulatory inefficiencies. At this point it would take states out of financial regulation and federalize all chartering and federal authority. We don’t support it in its current form.”
Richard Donovan, the president and CEO of Stoneham Savings Bank, a $240 million-asset state-chartered thrift in Massachusetts, said he had “significant concerns” about the proposal.
“A lot of us find great benefit and value in our state charters and the flexibility it provides us,” Mr. Donovan said. “Sometimes a state charter allows you to do things that a national thrift wouldn’t allow you to do. In my instance, my bank happens to have a common stock portfolio as part of our investments. If I was governed by the OTS, I’d have to get rid of that portfolio.”
Another proposal on the table is the creation of a federal insurance charter.
The insurance industry is expected to object to that plan, but USAA, a military-focused financial services company in San Antonio, is all for it. USAA has a customer base that is scattered broadly and moves frequently. That means USAA and its members face a hodgepodge of state regulations.
“This can be confusing, time-consuming, and inefficient,” Brian Conklin, USAA’s vice president of federal government relations for USAA, said in a press release. “A single regulator will simplify the insurance process and allow our members to focus on their principal duties of protecting and serving our country.”
