House Panel to Vote on Interest on Checking
WASHINGTON - The House Banking Committee is scheduled to vote Wednesday on the latest bill that would let banks pay interest on business checking accounts.House Banking Committee Chairman Jim Leach and Rep. Jack Metcalf, R-Wash., late last week introduced legislation that would repeal the prohibition on such payments, one year after the ban's enactment.
To avoid controversy, the authors have separated the measure from a larger package that would let banks earn interest on reserves held at the Federal Reserve. The Clinton administration had opposed the broader legislation, saying payment of interest on Fed reserves would cost too much.
The prospects for the scaled-down bill are uncertain, however.
Officials at the American Bankers Association and the Independent Community Bankers of America are not taking a strong stand either way, because their members are divided on the issue. Some big banks that use so-called sweep accounts to get around the prohibition reportedly want to protect their competitive advantage. Some small bankers see paying interest on commercial accounts as a necessity for competing with these big banks; others complain that doing so would be too costly.
"A strong majority of ICBA members would support what Leach and Metcalf are doing, but there is a vocal minority that doesn't," said Kenneth A. Guenther, the ICBA's executive vice president.
- Dean Anason
Statewide Loan-to-Deposit Ratios Released
WASHINGTON - Federal regulators last week released a list of statewide loan-to-deposit ratios used to ensure that banks are complying with lending requirements.The list is required annually by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which allowed banks to expand geographically but also barred banks from establishing or buying out-of-state branches just to generate deposits.
Under the law, a bank with branches in a different state must maintain a loan-to-deposit ratio of at least half the average for banks based in that state. If this condition is not met, a bank must show that it is "reasonably helping to meet the credit needs of the communities served by the bank's interstate branches."
According to the list, loan-to-deposit ratios range from 62% in Colorado to 115% in Washington State.
- Eric Winig
FDIC Issues Rule on New Activities
WASHINGTON - The Federal Deposit Insurance Corp. issued a rule Friday outlining the requirements a state nonmember bank must meet to engage in new financial activities through a subsidiary.The rule implements the Gramm-Leach-Bliley Act and tracks similar regulations issued by the Federal Reserve Board for holding companies and the Office of the Comptroller of the Currency for national banks.
Well-capitalized state nonmember banks must file a notice with the FDIC 30 days before acquiring an interest in or commencing new financial activities through a subsidiary and have at least a "satisfactory" rating under the Community Reinvestment Act.
The FDIC will accept comments on the rule until May 22.
- Kevin Guerrero