Thrifts hungry for a national bank charter had their appetites whetted this week as the Office of the Comptroller of the Currency began asking new questions about their applications.
The seven companies, led by Great Western Financial Corp., want to use the new bank charters to avoid the high-cost of insurance on thrift deposits.
While the thrifts' legal rights are relatively clear, the Comptroller's Office has been stalling approval for more than a year, hoping Congress would pass legislation shoring up the Savings Association Insurance Fund. Once the thrift fund is capitalized, banks and thrifts will pay the same premium.
This week, agency staff members contacted representatives at two thrifts with questions about their applications.
"The fact that they want answers by sometime next week suggests that they are moving the applications along very promptly," said one industry representative involved with the process.
However, the representative said that the Comptroller's Office has suggested that at least one of the thrifts amend its application to "make the national bank more substantive" by more clearly separating its operations from those of the thrift.
Keeping the national bank and thrift operations distinct would be prohibitively expensive, a banking lawyer said.
"If this means that you're going to have to have separate management, separate capital and even separate branches, you're talking about a killer requirement," he said.
A spokeswoman for the Comptroller's Office said the agency "would never tell anyone to amend their application."
Still, that's the message industry sources have picked up. For some of the thrifts, the OCC's concerns are not a problem.
"That wouldn't seem unreasonable to me," said William A. Cooper, chairman and chief executive of TCF Financial Corp., a $7.5 billion-asset thrift holding company in Minneapolis. "The OCC is the most progressive banking agency around, and if they figured that this was required to complete these applications, I can respect that."
Besides TCF and Chatsworth, Calif.-based Great Western, the thrift companies that have applied for national bank charters are Cal Fed Bancorp, Los Angeles; Bank United of Texas, Houston; Charter One Bank, Cleveland, and Chicago's St. Paul Bancorp and Bell Bancorp.
The seven institutions applied to open national bank offices in their thrift locations in hopes of paying higher rates on bank deposits, and enticing thrift customers to shift their funds.
"We're doing this to protect the interests of our shareholders and customers," said Doug Wallis, general counsel for Cal Fed's California Federal Bank.
While the $14.2 billion thrift's parent company applied to open a national bank office in its main branch, Mr. Wallis said it would open a full-service national bank if required.
"If they guaranteed we'd get the charter if we moved it across the street, I can't imagine we would let that get in the way," Mr. Wallis said.