IN FOCUS: OCC V. THE STATES - Stampede Toward State Charters Makes

WASHINGTON - There's no denying it: the Office of the Comptroller of the Currency has been on a long losing streak.

Scores of banks have left the Comptroller's fold to get state charters: 49 in 1992, 74 in 1993, 60 in 1994, and 25 in the first six months of 1995. Even subtracting state banks that have switched to national charters the numbers are substantial: 33 in 1992, 62 in 1993, 49 in 1994, and 14 so far this year.

This is the biggest exodus since the late 1970s, and follows a decade in which the flow of charter conversions favored the Comptroller's office. The net result of all the mergers and charter flips has been a big negative for the Office of the Comptroller.

In 1992, mergers and charter flips drained $21.7 billion in assets from the national bank system. In 1993, that figure fell to $400 million, but last year it was back up to $21.4 billion.

The late-1970s departures from the national bank system were easy to explain - and to halt. High interest rates raised the cost of keeping money at the Federal Reserve - something national banks had to do, but state- chartered banks at the time did not. Congress passed a law requiring all banks to keep reserves with the Fed, and the national charter was suddenly back in vogue.

But this latest wave of charter switches has neither an easy explanation, nor an easy fix.

"The current bump is probably a phenomenon of economic conditions, a phenomenon of banks realigning themselves," said Nancy Wentzler, director of financial and statistical analysis for the Comptroller's office. "Or it could simply be an aberration."

Most banks dumping national charters have offered another reason: The Comptroller's office charges much higher fees than state bank regulators do.

"They've always been higher," said James D. McLaughlin, director of agency relations for the American Bankers Association. "But you look at the climate now where bankers are looking to cut costs, they're looking for cost savings wherever they can find them."

Eugene A. Ludwig, comptroller since 1993, has responded by trimming some of the fees his agency charges, and said he plans to cut more.

But he can't cut much, since those fees pay his salary and those of all his employees. State regulators also are dependent on fee income, but their costs are lower because some state exams are done by the Fed and the Federal Deposit Insurance Corp.

Another explanation for the unpopularity of the national charter has to do with attitude.

"It reflects a reaction of banks to the examinations that they have been going through," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. "It's a judgment that the national banking inspection corps has been perhaps the most unreasonable."

Mr. Ludwig and others at the Comptroller's office publicly play down their rivalries with state regulators, the Fed and the FDIC. But the agency's high-profile campaign to make its regulations more user-friendly clearly has been a response to the recent defections.

"The word we're getting is that Ludwig has turned the OCC around," Mr. Guenther said.

Mr. McLaughlin agreed. For a while, the Comptroller's examiners "really had the reputation for being the toughest," he said. "But I think they've sent them all to charm school."

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