Magazine article American Banker

Comptroller: Let Banks Make the Call on Their Corporate Structure

Magazine article American Banker

Comptroller: Let Banks Make the Call on Their Corporate Structure

Article excerpt

Eugene A. Ludwig wants the market - not the government to shape the corporate form banks must use.

"The holding company format was not created for a real public policy reason," Mr. Ludwig, the comptroller of the currency, said in a recent interview. "There is no compelling safety-and-soundness reason that these structures need to be there.

"The issue here is choice."

Given a choice, he said, banks will move toward a simpler corporate structure. In a recent speech to the Jerome Levy Economics Institute, Mr. Ludwig noted that in 1986 the typical multistate holding company had 12 bank affiliates. By the middle of 1995, holding companies had consolidated their banks into about half as many charters.

"We are seeing a clear market trend for bank holding companies to consolidate their operations into the minimum number of charters possible," Mr. Ludwig said.

As Mr. Ludwig sees it, banks should be able to conduct most of their businesses directly, including some products and services prohibited for their parent companies.

Mr. Ludwig's vision runs counter to that of House Banking Committee Chairman Jim Leach, whose Glass-Steagall bill would allow federally insured banks to engage in securities and insurance activities only through holding company affiliates.

Rep. Leach has said that these activities are riskier than core banking activities, and should be separated from the bank through holding company units. The Federal Reserve, which played a large part in writing the Leach bill, favors the holding company model as well. …

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