WASHINGTON - Federal Reserve Board Governor Lawrence Lindsey dissented from the Fed's approval of an application by Fleet Financial Group Inc.'s Fleet Bank to acquire and assume certain liabilities of 29 branches of Chemical Bank and to establish branch offices at each of the locations.
"The record in this case contains a number of allegations of improper practices by Fleet's nonbanking subsidiaries and criticisms of other practices by Fleet," Mr. Lindsey said in his dissenting statement.
Recent Inspection Noted
"These practices appear to have been possible because of weak controls by management in a number of areas," he said, citing compliance procedures and practices. He noted a recent inspection of Fleet by the Federal Reserve Bank of Boston.
"In my view, the acquisition of 29 branches is a significant expansion that should not be undertaken without a clear record of effective steps to address identified weaknesses of performance," he concluded.
The other Fed governors said they carefully reviewed data from the past couple of years gathered under the Home Mortgage Disclosure Act.
"These data indicate that Fleet Bank and Chemical Bank have extended a significant number and percentage of home mortgages in low- and moderate-income neighborhoods," the statement said. They noted, however, that some of the data showed "disparities" in loan originations and rejection rates for minority applicants.
"The board notes that the most recent examination of Fleet Bank found no evidence of illegal discrimination or of credit practices that were inconsistent with the substantive provisions of antidiscrimination laws and regulations."
The Fed also found Fleet's lending policies and procedures comprehensive" and said that it had made "significant" changes in senior executive management.
Fleet Bank and Chemical Bank, both of New York, are state member banks in the Federal Reserve System. Fleet Bank has total deposits of $10.2 billion and is the seventh largest commercial bank in New York, according to the Fed. Chemical Bank, a unit of Chemical Banking Corp., has total deposits of $50.9 billion and is the largest commercial bank in that state.
Fleet and Chemical compete directly in six banking markets in New York. Yet the Fed concluded that consummation of the proposal would not have a significantly adverse effect on competition or the concentration of banking resources in any relevant banking markets.
The 29 branches involved are all in upstate New York.