Magazine article American Banker

Teeters: Thrift Competition Rule Needed; Complaints of Weighting in Fed's NCNB Decision

Magazine article American Banker

Teeters: Thrift Competition Rule Needed; Complaints of Weighting in Fed's NCNB Decision

Article excerpt

NEW YORK -- The Federal Reserve Board should establish an "objective methodology" for evaluating thrift competition, Federal Reserve Board Governor Nancy H. Teeters said.

Mrs. Teeters made the statement in a dissent from a recent Federal Reserve Board decision allowing NCNB Corp. of Charlotte, N.C., to acquire Ellis Banking Corp. of Bradenton, Fla.

The Federal Reserve announced the NCNB-Ellis approval on Feb. 15, but the accompanying statement and dissent were not released until last week.

Mrs. Teeters is one of the board's most frequent dissenters. Her term on the Fed has expired, but she is staying on until a successor is chosen.

"This case [NCNB-Ellis] represents a substantial departure from prior board decisions involving the weighting of thrifts in the board's competitive analysis," Ms. Teeters said in the dissent.

"In this case, the board relies solely on the purported competition from thrifts to mitigate what would otherwise be a clearly anticompetitive situation in the New Port Richey and Sarasota banking markets," she added.

Mrs. Teeters said it is unclear whether thrifts are direct competitors to banks in those markets.

"For this reason, I believe the board should establish a system with an objective methodology for weighting the competition from thrifts," she said.

An aide to Mrs. Teeters said the Fed governor was on personal leave until March 26, so she could not be reached for comment on further details of her proposal.

H. Rodgin Cohen, a partner at the New York law firm of Sullivan & Cromwell, said it was an "exaggeration" to describe the Fed decision as a departure from previous policy.

However, he added, "It is one more piece of evidence that the Fed in recent months is moving toward giving thrifts substantially more weight and that it is prepared to approve acquisitions that on a bank basis would be judged anticompetitive. A Departure from Past Practices?

In the past, the Federal Reserve evaluated the competitive effects of a bank acquisition solely on other banks in the relevant markets.

Bankers for years have been urging the Fed to consider thrift competition when looking at mergers and acquisitions, and some banks structure deals so that they are ruled on by the Office of the Comptroller of the Currency, which is considered to be more ready than the Fed to look at thrift competition.

Inclusion of thrifts in an evaluation of a market increases the total deposits in the area and, thus, lessens the competitive impact of a proposed merger.

In recent years, the Fed has been more willing to look at thrift competition than in the past. But in most of those cases, the acquisitions probably would have been approved anyway. 'Substantial Mitigating Factors'

In the last year, the Fed in a number of decisions has been willing to consider thrifts as "substantial mitigating factors. …

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