Federal regulators plan to keep closer tabs on banks that operate branches under different names.
The four agencies-the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and Office of Thrift Supervision-issued a joint statement last week asking banks to disclose "clearly and conspicuously" that a branch is a unit of a particular institution but has a different name.
Otherwise, they said, customers could unwittingly deposit funds in two affiliated branches and potentially exceed the $100,000 limit covered by deposit insurance.
Roughly 50 U.S. banks have branches with different names, according to Bauer Financial Reports Inc. of Coral Gables, Fla. Among them are San Francisco-based Bank of America, which does business as Seafirst Bank in the Seattle area, and Cleveland-based Ohio Savings Bank, which operates its Florida branches as Amtrust Bank.
Though most banks having branches with other names make ownership clear, Marc J. Goldstrom, legal counsel with the FDIC, said the agencies are responding to the wave of mergers in recent years. Some acquirers, he said, are operating purchased banks as branches without changing their names.
"The typical scenario occurs after a merger when a larger bank for marketing reasons wants to keep a community bank's name to retain ties to the community," Mr. Goldstrom said.
Another concern is the Internet.
Detroit's Comerica Bank, for example, operates a virtual bank called AccessOne Bank System. And while only a handful of banks have virtual branches with different names, the agencies want to make sure that banks are up-front about the Internet branch affiliations as electronic banking becomes more popular.
But some customers are confused.
For example, Bauer Financial says customers have called for a rating of Amtrust-a branch of Ohio Savings-only to find out that the bank, technically, does not exist.
"I try to tell them that this is a branch with a totally different name, but you can imagine how hard that is to explain to some people," said Paul Bauer, the rating company's president.
Only a handful of states mandate that banks disclose when they operate branches under another name. One state that has taken action recently is Tennessee, where Tupelo, Miss.-based Bancorp South does business as Volunteer Bank.
Regulations are already in place in Tennessee requiring that branch signs disclose affiliations with a bank or banking company that operates under a different name.
Beginning May 28, those regulations will extend to advertising and documents such as checks and account statements, said Bill C. Houston, commissioner of Tennessee's Department of Financial Institutions. "Sometimes the wording on those signs was so small you couldn't even read it," Mr. Houston said.
The statement from the federal agencies recommends that the legal name of the insured institution also be displayed in signs, advertising, and in documents. The guidelines-which take effect July 1-are not mandatory. Mr. Goldstrom at the FDIC said it would be up to each agency to decide what to do if a bank fails to comply.
Banks, to this point, do not seem to be objecting to the guidelines. James D. McLaughlin, director of regulatory affairs at the American Bankers Association, said it was "reasonable" that the agencies would want to eliminate confusion.
But he said he was surprised by one provision that asks customers to sign waivers each time they open an account at a separately named branch. The guidelines require that customers sign the statements acknowledging that they are aware that the branch and other branches are part of the same institution and that deposits are not separately insured.
"That seems like an overabundance of paperwork," said Mr. McLaughlin. "Customers get a little annoyed when they have to sign their names too many times."