"Forum-shopping" is a common practice among lawyers. When filing lawsuits, they try to get their cases in the most favorable court and before the most favorable judge. In today's financial environment, national banks need to think about "forum shopping" themselves.
Would a national bank be better off if it became a state chartered bank? Yes. National banks can find a better "forum" under the Federal Deposit Insurance Corp. and state regulators, for five compelling reasons:
* Banking regulators are champions of their state's banks.
State banking supervisors wear two hats. One is the "regulator" hat to assure that banks under their supervision operate in a safe and sound manner and comply with banking laws and regulations. The other hat is that of cheerleader.
State supervisors are champions of the dual banking system, and they encourage the formation and prosperity of all banks under their supervision.
Through consolidation in the industry, many state banking departments have witnessed a dramatic decrease in their funding - which is derived largely from fees charged to state banks. Therefore, state banking supervisors are creating a positive environment to encourage the formation of new state banks and the conversion of existing national banks and savings and loans into state banks.
* State banking supervisors and the FDIC are more inclined to compromise.
Recent banking legislation has given federal regulators more weapons to use against banks under their supervision that get in trouble. When proceeding with an enforcement action against a state bank, the FDIC typically will consult with the state banking supervisor - the chartering agent for the bank - as to an appropriate remedy.
This often results in more of a willingness on the part of the FDIC to be flexible with the state bank since the state banking supervisor typically will want to be more reasonable with a bank under his supervision, except in the most egregious circumstances.
A national bank has no such regulatory champion on its side since the chartering and enforcement authorities are the same.
* Less draconian filing fees.
National banks, regardless of size, face excessive and unduly burdensome filing fees for the simplest of applications - such as $15,000 for a change in bank control filing, $13,100 for merger with another bank, $9,700 for an interim bank merger, and $1,900 for a branch application.
The FDIC does not impose filing fees on any applications. State banking supervisors do have filing fees but they are usually at fractions of what the Office of the Comptroller of the Currency charges. In particular, community banks that operate as national banks should consider this as a compelling factor for converting to a state bank charter.
* State parity statutes.
Admittedly, the OCC has been very aggressive in its efforts to allow national banks to engage in a number of activities beyond traditional banking. However, most states have so-called parity statutes on their books that allow state banks to engage in any activity a national bank may engage in. For that reason, state banks can ride on the coattails of national banks and the OCC with regard to expanded powers.
* Growing use of examination compacts.
Recent federal banking legislation allows the FDIC to enter into compacts with selected state banking regulators to allow these agencies to rely on each other's examinations. The compacts assure that a state bank, unless it is seriously troubled, will have no more than one regulatory examination a year.
The OCC often cites having "only one regulator" as an advantage for national banks. However, the use of these compacts between state banking supervisors and the FDIC essentially assures that a state bank will have only one regulatory examination each year.
Converting from a national to a state bank charter is not overly complex. Many state laws provide for such conversions, and normally all that is required is an application with the state banking supervisor and a notice to the OCC.
In states that do not explicitly allow for charter conversions, a national bank that wishes to convert can file a character application with the state bank supervisor and then merge the national bank charter into this new state bank. Because the new state bank charter will survive, no application need to filed with the OCC.