A Minnesota trade group is opposing Norwest Corp.'s most recent proposed acquisition in the Twin Cities to protest big-bank dominance in the state's electronic banking market.

The Independent Community Bankers of Minnesota said this week that it will oppose Norwest's proposed deal for $167 million-asset Ameribank, Bloomington, announced last week. The group plans to file comment letters with regulatory agencies, contesting the mergers on antitrust grounds.

The merger would eliminate the last community bank based in that Minneapolis suburb, which is home to the giant Mall of America and is the state's third-largest city.

"We are concerned with the traditional issue, which is incremental market concentration," said Allen I. Olson, the trade group's president. "We are more alarmed by and concerned with the electronic banking concentration. We believe it is time for the Fed and the U.S. Department of Justice to address that and related issues."

The Twin Cities three largest institutions, $71 billion-asset Norwest, $33 billion-asset First Bank System Inc., and $7 billion-asset TCF Financial Corp., all with significant assets in the metropolitan area, control 98% of the state's electronic banking market, he said.

"We will probably raise the electronic banking issue in every acquisition or merger from now on where the merger involves anyone of the Big Three players and their subsidiaries," Mr. Olson said.

ATM competitiveness has been on community bankers' minds for a while. Attorney General Janet Reno told those attending an Independent Bankers Association of America conference in 1994 that the Justice Department would look into anticompetitive behavior in the ATM business.

The Justice Department has since determined that Electronic Payment Services, a regional ATM network, had to open the network to allow members to use independent data processors without pricing discrimination after questions were raised about high-priced ATM processing.

"They're hard issues," said Steve Sunshine, a partner in the law firm of Shearman & Sterling in Washington, D.C., who previously headed the Justice Department's antitrust division. It's difficult to tell if it's better for consumers to have many companies providing ATMs or to have one big more accessible network, he said.

Mr. Olson said that Shazam, a network of independent bank automated teller machines, has tried to negotiate links with the big banks' systems but that the cost has been too high.

In addition, small banks don't want to be left out of future national programs for the electronic transfer of government entitlements.

"The payment system is in transition from paper to electronic," Mr. Olson said. "With the resources that First (Bank System) and Norwest have, it's hard for us (community banks) to be players in the new world of electronic banking."

Ben B. Crabtree, a bank analyst at Dain Bosworth Inc., Minneapolis, agrees, but said community banks may not be able to do anything about it.

"One would have to argue here that the small banks are trying to hold back the tides," he said. "I don't quite understand how having or not having Ameribank would change the fact that those three banks already own 98% of the ATMs."

Although Mr. Crabtree is not optimistic about small banks' ability to compete in retail banking, he said they still can play a successful role on the commercial side. "Banks focused on small business can continue to do very well," he said.

However, Mr. Olson says the electronic banking dominance is an antitrust issue that he believes community banks can fight.

The Independent Community Bankers of Minnesota is forging relationships with other state associations and the Independent Community Bankers Association of America, he said, hoping to press the issue in state legislatures, Congress, and the courts if necessary.

Mr. Olson concedes that the catalyst for the initial opposition, the Ameribank deal, is small, but, "It's incremental," he said. "This acquisition simply came up at a point where we absolutely felt we had to do something about" the electronic banking issue.

A Norwest spokeswoman would not comment on the specifics of the community bank group's protest, but said: "There's a lot of competition in the Twin Cities among financial services companies for ATMs." She said Norwest "is very confident (the proposed acquisition) is going to provide good opportunities for Ameribank's customers, and their management feels the same."

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