State Moves to Lessen Problems over Generic Bank Names

Article excerpt

What's in a bank name? That which shareholders call the Peoples First Community American Exchange Bank of Security by any other name would earn income just as speedily.

The preceding twist on Shakespeare's famous quotation was inspired by the Oklahoma State Banking Board meeting last week.

The board adopted a new rule which specifies that banks with what I call generic names must clearly identify their place of origin when they branch into new territory.

With all the talk about franchise value, one might think that a bank would want to clearly identify itself apart from all others in its marketing. But that is not necessarily the case.

The name of a bank is an important means in which to convey the institution's strength, stability and longevity. In the banking industry perhaps more than in others, the name also conveys community. And as far as community goes, nobody knows the community like the hometown folks.

Most of the 393 banks in Oklahoma are in small towns. Most of those banks are small, even by Oklahoma standards. In fact, only 50 banks in the state have more than $100 million in assets. The business these small banks are competing for comes from within their communities _ from the people with whom the bankers go to church, sit on school boards and plan events like rodeos and parades.

Another fact of the banking industry is that consolidation is happening, especially among those smaller banks where it makes less and less sense to hire more people just to keep up with regulations.

Bank mergers and acquisitions mean that new institutions with different ownership are moving into old community banks and trying to take up where the previous group left off. One of the first things they want to stress to existing customers is how much the same the institution is, even though it has new owners and a new name.

This desire to retain the community feel of the previous locally based institution while seeking to convey a sense that nothing has changed can combine to encourage banks to dance around their identity and where they are based.

That is the problem the state board sought to address with its rule forcing banks to own up to who they are. It prohibits banks in Oklahoma from obscuring the location of their main office in their advertising and signs.

The rule was directed at those banks that have "confusingly similar" names, a problem that arises more often that one might think.

The Oklahoma Legislature defined "confusingly similar names" as those which are identical to other bank names or those which include one of 16 specific words I call "generic bank names" because of how frequently they appear in the monikers of banks. They are: American, Central, Citizens, City, Commerce, Commercial, Community, Exchange, Farmers Merchants, First, Guaranty, Oklahoma, Peoples, Security and United.

According to my count, 217 of the 393 banks in Oklahoma use these words to identify their institutions. My count doesn't even include those institutions seeking to be completely generic and doing business simply as "The Bank of (town name)."

Not surprisingly, the most common word used in Oklahoma bank names is First. It is the main identification of 108 banks _ ironically 54 of them are national banks and 54 are state banks. …