Florida Moratorium on Nonbank Banks Held Unenforceable
ST. PETERSBURG, Fla. -- Critics say a bill passed by the Florida legislature that places a six-month moratorium on nonbank banks stands little chance of withstanding a constitutional challenge.
And they predict that the banks that have already received permission to establish nonbank bank offices in Florida will proceed undeterred by the pending legislation. Florida's nonbank bank moratorium was passed in a special session of the legislature last Thursday, one called chiefly to repeal the state's controversial unitary tax.
That tax was repealed last Friday. It had been viewed as inimical to Florida's effort to attract industry. Ironically, it was originally passed in a whirlwind session similar to the one last week, a session that many legislators later had cause to regret.
But the Florida bankers and state Comptroller Gerald Lewis put intense pressure on legislators for the moratorium. Florida has been one of the most popular destinations for banks wishing to establish nonbank offices. Of the more than 300 applications filed with the U.S. Comptroller of the Currency, 54 were for operations in Florida.
The Florida bankers did not welcome the competition. And the bill that was hastily passed last week appears to stall that competition. It states that no bank holding company or any other company can control a bank in Florida unless that banks fits the definition in the Bank Holding Company Act. One or the Other
That act defines a bank as an institution that both takes deposits and makes commercial loans. The nonbank banks elude this definition because they either take deposits or make commercial loans, but not both.
By reinstituting the Bank Holding Company Act definition, the legislature would close the nonbank bank loophole -- if Gov. Bob Graham signs the bill, as he has indicated he will,
But Bowman Brown, the Miami attorney who represented U.S. Trust Corp. of New York in the case that led to the flood of nonbank-bank applications, says there is no way florida can enforce the law. …