Regulators and bankers in Connecticut are hoping to avoid a battle with federal officials over stock conversions of state-chartered mutual savings banks after watching a similar row in Massachusetts.

In particular, officials are hoping that new regulations Connecticut has adopted will meet with the same federal approval as similar rules adopted last July by Massachusetts.

The new rules are necessary because both states have unique state- chartered institutions that have their own set of governance regulations: mutual savings banks in Connecticut and Massachusetts and co-operative banks in Massachusetts.

In Massachusetts, the state-federal disparity was highlighted by Falmouth Co-operative Bank, which is awaiting final word from the Federal Deposit Insurance Corp. about whether it can proceed with its mutual-to- stock conversion, despite lingering conflicts between state and federal regulations.

"It's been a little bit of a learning curve at both the state and the federal level," said Dan Forte, executive vice president of the Massachusetts Bankers Association. "Our concern all along has been that depositor voting has never really proven an efficient or a clean mechanism by which these deals can be approved."

Last month, after a Herculean advertising effort by Falmouth, 8.1% of the bank's depositors overwhelmingly approved the state-chartered cooperative bank's plans to convert to stock form. About 84% of the 399 depositors present at a special meeting in Falmouth voted in favor of the plan. And 93% of the affirmative votes were cast by noninsiders.

Thrift officials hope that will satisfy the FDIC, which implemented conversion regulations last year requiring approval by a majority of a mutual's depositors, whether by proxy vote or in person. The new rules conflicted with Massachusetts law because the state bars proxy voting and state regulators wouldn't let Falmouth violate the law.

The FDIC board must decide, and may do so as early Tuesday, whether the voting results sufficiently satisfy concerns about insider abuse to justify granting Falmouth a waiver of its regulations. Falmouth is the first cooperative to test the new FDIC rules, but there are 78 other cooperative banks in the state.

"We believe that the explicit standards for a waiver ... are met given the circumstances under which the bank obtained its depositor vote under state law," wrote Falmouth attorney Richard A. Schaberg in a letter to the FDIC.

The thrift has 4,943 depositors, but usually only has about 25 to 30 present at meetings, including directors and employees, according to Mr. Schaberg's letter. About one-fourth of the depositors don't reside in Cape Cod, including those in 34 states other than Massachusetts.

As a result, the attendance at this meeting, which represented 8.1% of all depositors, was "a dramatic increase in depositor participation," Mr. Schaberg wrote.

"Notwithstanding the extraordinary efforts by the bank, it is a practical impossibility to have a majority of depositors present and voting at a single meeting," he wrote.

Meanwhile, in an effort to head off a similar conflict in their state, Connecticut officials have adopted special regulations governing conversions by state-chartered savings banks, because state law doesn't allow depositors of those institutions to vote.

Under laws in both Connecticut and Massachusetts, savings banks are governed by "boards of corporators," consisting of at least 25 prominent community leaders, who oversee the boards of directors.

The new Connecticut regulations, based on similar rules adopted by Massachusetts, require that a savings bank conversion must be approved by both a majority of all corporators and by a majority of all independent corporators. Independent corporators, who must constitute at least 60% of the total, are those not affiliated with the bank. The state also bars proxy voting on conversions.

So far, the rules have passed muster in Massachusetts, where Westfield Savings Bank converted to a mutual holding company Jan. 1. The FDIC has approved similar applications by Benjamin Franklin Savings Bank and Berkshire County Savings Bank.

The first test in Connecticut, involving Savings Bank of Rockville, is now pending, with others expected shortly, according to state banking commissioner John Burke. Connecticut has 29 mutual savings banks; Massachusetts has 76.

"A depositor vote is a waste of time and I think the FDIC finally reached that conclusion," said Gerald M. Noonan, president and chief executive of the Connecticut Bankers Association. "These regulations should allow the FDIC to get off this issue."

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