WASHINGTON -- NationsBank Corp. asked federal regulators to crack
open the door for banks to get into real estate development.
In two carefully crafted applications, the North Carolina-based
company became the first national bank to apply under a
new system unveiled by the Office of the Comptroller of the Currency
last fall to let national banks enter new businesses.
The bank asked the OCC for the right to establish one separate
subsidiary to sponsor a single housing development and another to
lease real estate.
Both regulators and bankers say they want to move slowly to expand
banks' powers under the new system. Still, national bankers say they
hope the OCC will eventually allow them to move into new lines of
business, such as underwriting insurance and securities.
"In the first six months to a year, the OCC will play it
reasonably safe," said Robert Litan, director of economic studies at
The Brookings Institution.
Still, the NationsBank applications may create problems for the
banking industry. If the OCC approves the proposal to allow limited
real estate development, other banks may claim the agency has set a
precedent that most real estate development is permissible, Litan
said. "If they approve (it) they will have opened the door," said
NationsBank consulted with the OCC in developing the plans, and
Litan expects the agency to approve them.
The banking industry will be watching how the OCC handles the two
requests. Many bankers think the agency's reaction will set the
stage for how quickly regulators will allow other national banks to
move into new businesses.
Some conditions are likely. For example, the OCC must ensure that
barriers exist between NationsBank and its subsidiaries to guarantee
that problems at the subsidiaries won't threaten the health of the
Some bankers say the OCC will simply grant national banks powers
that other bank regulators have already given bank holding companies
and state-chartered banks.
U.S. banks can operate under an OCC charter for national banks, a
Federal Reserve charter for bank holding companies, a state charter,
or a combination.
While NationsBank Corp. is a holding company, it is applying to
the OCC for the new powers under its charter as a national bank.
The Fed already allows bank holding companies to engage in real
estate leasing through their separate affiliates.
"I don't think the OCC will encourage very venturesome
applications very early on," said Jim McLaughlin, regulatory
at the American Bankers Association. "For instance, I don't think
the OCC would encourage a national bank" to set up an insurance
underwriting subsidiary. …