WASHINGTON - National banks should find it easier to lease out closed branches and other unused bank property under a rule proposed Friday by the Comptroller's office.
Regulations meant to keep banks from speculating in real estate now permit banks to dispose of leased property only through "coterminous subleases."
That is, if a bank enters into a 30-year lease for a branch office, then closes the branch, it must sublease the office for the full duration of the original lease.
Under the proposed new rule, a bank could sublet the former branch for a shorter period without getting in trouble with regulators.
"Many national banks hold long-term leases and are unable to either assign them or to find a coterminous sublessee, notwithstanding the bank's best efforts to do so," according to the Comptroller's proposal. "As industry consolidation and technological advances further reduce the need for branch office space, this problem likely will become more severe."
Ironically, even through banks do not own branches that are leased, this property is classified as "other real estate owned."
For the duration of any sublease the proposed change would suspend the five-year divestiture period that is required for other real estate owned. The Comptroller's office would reserve the right to revoke this provision if a bank appeared to be speculating in real estate.
The comment period on the new regulation, which also includes technical changes meant to simplify real estate lending rules, ends Sept. 5.