Bankers generally support a massive Federal Reserve Board proposal to make it easier for holding companies to acquire companies and enter new businesses.
But community activists and small bankers, writing in comment letters, criticized a provision in the Regulation Y proposal that would streamline bank merger rules. Less controversial were initiatives to eliminate anti- tying rules for nonbanks and expand data processing opportunities for affiliates.
"This proposal ... eliminates unnecessary and outmoded provisions, reduces operating cost, and expands investment opportunities for bank holding companies," wrote Robert R. Davis, director of government relations at America's Community Bankers.
Bankers were nearly uniform in supporting a provision to let nonbank affiliates require a customer to buy one product in order to receive a discount on a second service. "This change will help make bank holding companies more competitive with their nonbank competitors and with foreign banks, who are not subject to the restrictions," wrote Richard M. Whiting, general counsel at the Bankers Roundtable.
Mr. Whiting urged the Fed to go even further and add investment advice, swaps, derivatives, and cash management services to the list of core bank products not subject to anti-tying rules.
National City Corp. chairman David A. Daberko praised a provision to let banks earn up to 30% of their data processing revenue from nonfinancial projects. "The board has taken a realistic approach to marketplace forces and understands that banking organizations must be able to provide additional service to meet the needs of current and potential customers," he wrote.
But Signet Banking Corp. senior counsel W. Richard Kay Jr. said the Fed should eliminate the revenue cap altogether and let banks offer any data processing service that enhances a traditional banking service.
Industry officials also endorsed the Fed's plan to expand the list of nonbanking activities permissible for holding companies. They also supported a measure to let a holding company apply once to enter all 14 activities rather than making separate applications as now required.
Many of the 270 letters the Fed received focused on the plan to approve most mergers within 15 days, provided the bank applicant has a Camel 1 or 2 rating and scored at least "satisfactory" on its last Community Reinvestment Act exam. Such a merger also may not cause the bank to grow by more than 35%.
Community groups blasted this section, saying it creates the industry's long-sought safe harbor from CRA protests.
"The Federal Reserve Board is attempting to do what the majority leaders in Congress could not convince their Republican colleagues to do," wrote Rahim Spence, executive director of Cooperative Fiscal Services of Cincinnati. "The proposed modifications to Regulation Y would cut the heart and soul out of CRA enforcement."
Independent Bankers Association of America president Leland M. Stenehjem Jr. wrote that the streamlined merger rule would give big banks an unfair advantage. Large institutions may acquire scores of small banks without increasing their asset size by more than 35%, he said. But almost any merger between two small banks would bump the growth cap, he said.
The Fed should give small banks relief by excluding mergers involving more than $15 billion of assets from the streamlining, he said. It also should raise to $500 million, from $150 million, the cut-off for expedited procedures applied to small bank holding companies.
Big banks, however, praised the merger provisions. "The proposed revisions will make the application process more consistent, efficient, and fairer to financial institutions while continuing to protect the public interest and community concerns," wrote Agnes J. Bundy, senior vice president at Fleet Financial Group.
Chase Manhattan Corp. vice president Ronald C. Mayer endorsed a related measure that would require community groups to file CRA protests on time. He also urged the Fed not to let a single CRA protest knock an application off the expedited schedule.