Citizens Financial Group plans to combine its two banking charters into a single national bank in a bid to cut regulatory expenses.
The $158 billion-asset company asked regulators for permission this week to merge Citizens Bank (a national charter) and Citizens Bank of Pennsylvania (a state charter). If the Office of the Comptroller of the Currency approves, the combination would take place in January.
It would remove the Federal Deposit Insurance Corp. and Pennsylvania state regulators from among Citizens’ primary regulators, helping the company cut costs.
“The consolidation is a result of discussions that have occurred among senior management of Citizens over time, given that it will improve operational efficiencies, simplify the organizational structure and align Citizens more closely to its peers,” Frank Quaratiello, a company spokesman, said in an email Thursday. A research note issued earlier in the day by Jason Goldberg of Barclays reported Citizens' charter consolidation plan.
The move would also improve the capital ratios of Citizens Financial Group and the company’s liquidity by removing liquidity restrictions placed on Citizens Bank of Pennsylvania, according to the holding company’s application.
Citizens Financial had maintained the separate charters due to certain tax benefits, Quaratiello said. However, those tax benefits have gradually been reduced and are now outweighed by the other benefits.
Citizens Bank, headquartered in Providence, R.I., is the larger of the two bank charters, with $122 billion in assets and with 827 branches. Since Citizens Bank is a national association, the OCC is its primary federal regulator.
Citizens Bank of Pennsylvania, a state-chartered thrift based in Philadelphia, holds $36 billion in assets and operates 362 branches in the Keystone State and in New Jersey. The FDIC is its primary federal regulator.
If the combination is approved, Citizens Bank in Providence would be the surviving charter, and it would be regulated by the OCC.
The Federal Reserve would remain the regulator of the holding company.
In its application, Citizens also cited potential benefits from a reduction in enterprise risk, in addition to improved efficiency in its risk management, financial reporting and legal work. Citizens did not provide an estimate of specific financial savings from the charter merger.
Michael Nonaka, an attorney at Covington & Burling, is legal counsel to Citizens on the application.