Federal banking agencies unveiled new procedures Tuesday to make it easier for state-chartered banks to merge, open branches, and seek deposit insurance.
Under new Federal Deposit Insurance Corp. rules, the agency will process branching applications within 21 days, merger applications in 45 days, and deposit insurance requests in 60 days. Currently the FDIC tries to process these applications in 30, 60, and 120 days, respectively.
"The revised rule assures banks and thrifts that their applications will be decided in a timely fashion," FDIC Chairman Donna Tanoue said. "It's good for the industry and good for the FDIC to minimize regulatory burden associated with routine business decisions for well-managed institutions."
Separately on Tuesday, the Federal Reserve Board said it will process branch applications within 20 days and decide within 15 days whether a bank may join the Fed.
The FDIC and Fed rules are effective Oct. 1.
To qualify for the streamlined application procedures, FDIC- and Fed- regulated banks must have a safety-and-soundness rating of 1 or 2, a "satisfactory" or better Community Reinvestment Act rating, and a 1 or 2 rating for compliance. They also must well-capitalized and free of enforcement actions.
The FDIC said more than 90% of the 6,000 banks it regulates are expected to qualify, while the Fed said nearly all of the 1,000 banks under its control qualify.
Industry officials applauded the new rules.
Bill McQuillan, president and CEO of $18 million-asset City National Bank, Greeley, Neb., and president of the Independent Bankers Association of America, said "our small banks are very enthused" because the FDIC rule will save money by expediting decisions.
James D. McLaughlin, director of regulatory and trust affairs at the American Bankers Association, agreed. "Time costs money," Mr. McLaughlin said. "By getting applications expedited, it means banks can get on with their business."
The FDIC first proposed its streamlining effort in September. The proposal drew nearly 30 comment letters. Several letter-writers expressed concern that the quicker processing of applications would lead to shorter comment periods. In response, the agency lengthened the revised comment period on deposit insurance applications to 30 days, from 15, and pledged to post the applications on its Internet home page.
In response to another comment letter, the FDIC revised the proposal so a bank acquiring a much smaller institution may use the expedited procedures, even if the institution being acquired has compliance or safety-and-soundness problems. This option is available if the institution being acquired in less than one-tenth the size of the acquiring bank.
The FDIC's accelerated processing procedures also will apply to requests for trust powers, retirement of capital, and brokered deposit waivers.
In the past two years, the Office of the Comptroller of the Currency has revamped application procedures for national banks, while the Fed has reduced processing times for bank holding company applications.
Also at the FDIC on Tuesday, the agency proposed to simplify the deposit insurance rules for joint accounts. Under the plan, the balance of a joint account would be insured up to $100,000 per account holder, not $100,000 total.
For example, under current law, a husband and wife with a $200,000 joint account would be insured for only $100,000-$50,000 for each spouse. Under the FDIC's proposal, the entire $200,000 would be covered.
The cost of the change would be minimal. According to the agency's research division, if the proposed rule were in effect in 1988-a high-water mark in bank failures-it would have cost the insurance fund an additional $12.6 million.