By Nancy Raiden Titus
Journal Record Staff Reporter
Oklahoma banking industry trade groups are quite pleased with
the state's branching law even though it is one of the most
restrictive in the country.
Preservation of franchise value and protection from
competition are two strong reasons for the position in an
industry that often complains of excessive regulation.
Under current Oklahoma law, healthy banks that want to expand
are forced to look to acquisitions as a method of building a bank
network. Banks have an unlimited ability to branch by
acquisition, but they are only allowed to open two new, or de
novo, branches within the city limits or in an unbanked town up
to 25 miles away.
The law encourages consolidation, which experts agree is
needed in Oklahoma, but in doing so it also drives up the price
of banks in prime locations. It also keeps some banks from having
to face competition from branches of larger institutions located
Preserving franchise value is the No. 1 reason for banker
opposition to changing the laws, said Dr. Gary Simpson, who holds
the Oklahoma Bankers Association Chair of Commercial Bank
Management at Oklahoma State University.
"The individual franchise value of a chain is worth more given
He explained using familiar eateries as examples. If
McDonald's has tight restrictions on where a person could locate
one of its restaurants while Pizza Hut allows its franchisors to
put them on every corner, the McDonald's franchise would have
"Everybody says they like free enterprise competition for
everybody else, but when it comes to me, I want a monopoly. A
monopoly is what a business works to get. That is why we have
Simpson agreed that Oklahoma needs more banking industry
consolidation but is opposed to setting arbitrary limits before
allowing expanded branching.
"It is not necessary to get rid of 50 more banks before we get
statewide branching. Some effects are the same if you have 50
more or (50) less banks. There is not that much difference. You
want only the strongest to branch so they can afford to operate.
I'd say most of the banks trying to do the branching are pretty
solid. If you wait for 50 less, it wouldn't make that much
"Branching will reduce the number of charters because there
are some banks that have a charter that will sell out. Some might
be a target for a branch that might be protected now. Maybe there
is no one with money that wants to go into a protected
environment, but it might be attractive to sell."
He said bankers' arguments against expanding branching laws
could be considered self-serving.
"But the other side of the coin is what the bankers are
talking about _ and I believe there is some truth to it _ what's
going to happen in the local community?"
The common argument is that a branch will take deposits out of
the community and use them for lending elsewhere. That was the
reason the Community Reinvestment Act was created. …