Texas officials are trying to derail a plan by NationsBank Corp. to merge its Texas bank with the North Carolina-based company's flagship institution in Charlotte.
The Texas banking commissioner, joined by several state lawmakers and the Independent Bankers Association of Texas, have asked the Office of the Comptroller of the Currency to forbid the merger on grounds that Texas has "opted out" of the federal law permitting interstate mergers by national banks.
"I do not believe that federal law authorizes the merger," Texas Banking Commissioner Catherine A. Ghiglieri wrote in a Nov. 18 letter.
Using an escape provision included in the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act, Texas lawmakers voted to outlaw interstate mergers until 1999.
But NationsBank argues it can ignore the restriction because its branches in Texas are all operated by its Santa Teresa, N.M.-based subsidiary, Sun World NA.
"The Riegle-Neal Act's provisions do not govern the Texas merger," wrote NationsBank's attorneys in a Dec. 4 response to the Texas officials' concerns.
By virtue of the Sun World presence, they argued, the North Carolina bank is eligible to acquire Texas institutions. They point to a provision in the National Bank Act that allows mergers between banks "located in the same state" even if headquartered in separate states.
Furthermore, the bank officials said, the Texas prohibition on interstate mergers is invalid because the ban does not cover state savings banks. Under Riegle-Neal, states that opt out must also ban interstate mergers by state-chartered institutions.
"The Texas opt-out law plainly fails these requirements," said NationsBank's lawyers.
But Ms. Ghiglieri rejected both of the bank's arguments. "Under the plain language of Riegle-Neal, the act applies when the banks have their main offices in different states," she wrote in her Dec. 23 response.
Ms. Ghiglieri also argued that Congress could not have intended savings banks to be included in merger prohibitions because federal thrifts were already permitted to branch interstate.
"Riegle-Neal requires that state opt-out legislation be nondiscriminatory," she said. "Texas could not have enacted a valid law which distinguished between federal savings banks and state savings banks."
NationsBank asked the Comptroller's Office to rule on its Oct. 22 merger application on an expedited basis, which would have required a decision within 45 days. However, because of the protests, the agency denied this request; a decision by the agency is expected early next year.
NationsBank has battled Texas officials over its Sun World subsidiary before. Despite objections from the Texas Banking Department, the federal appeals court in New Orleans ruled in July that NationsBank could use the so-called 30-mile rule to move Sun World's headquarters from El Paso into New Mexico and retain its Texas offices as branches.
Six state lawmakers, including Rep. Kenny Marchant, who is chairman of the House Financial Institutions Committee, complained that by approving the transfer, the Comptroller's Office was furthering its "thinly veiled agenda" to force nationwide branching over state objections.
"These merger applications came as no surprise to most of us in the Texas Legislature," the lawmakers wrote in Nov. 24 letter to Comptroller of the Currency Eugene A. Ludwig. They described the relocation of Sun World's headquarters as a "Trojan horse that was concocted by NationsBank with OCC complicity."
