Durbin Rule Makes TCF's Cooper Reweigh Economies of Scale

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TCF Financial Corp.'s William Cooper is rethinking his long-held belief that economies of scale do not matter in banking.

The overhead costs necessitated by new regulations clearly will be easier for large banks to absorb, and "unlike most things in banking," there will be nothing that smaller institutions can do from an execution or customer service standpoint to level the playing field, the chairman and chief executive of TCF said. He spoke Sunday at American Banker's annual Best Practices in Retail Financial Services Symposium.

Coping with rule changes has been top of mind these days for Cooper and for TCF, the Wayzata, Minn., company that is suing the Federal Reserve Board over its plan to limit debit interchange fees under the Durbin amendment to the Dodd-Frank Act. In his keynote address at the start of the two-day symposium in Miami, Cooper said that "there's a very good chance we'll win our lawsuit." He puts similar odds on Congress reviewing the Durbin amendment and either revising it or delaying its implementation.

In the meantime, the court challenge has not hurt TCF's relationship with examiners in the field, Cooper said.

"The good news for us is the Federal Reserve is not our primary regulator," he said. But either way, he added, the $18.5 billion-asset company has not "felt any regulatory impact one way or the other since we filed, and that's my honest opinion."

Cooper also said he suspects that the Durbin amendment has not won unanimous support from within the Fed.

"They're economists over there; they understand what a healthy credit market means to the country," said Cooper, who argued that the restriction on debit interchange fees could sap the banking industry of $10 billion of annual revenue.

A joint amicus brief supporting TCF's lawsuit was filed Friday by several banking trade groups, including the National Association of Federal Credit Unions, the American Bankers Association, the Financial Services Roundtable and the Independent Community Bankers of America.

"This is the most unified I've ever seen the banking industry in all my career," Cooper said.

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