Deposit Guaranty Leads Skirmish in Mississippi to Expand Banking Law; Threat of Shutdown Hangs over Moves to Create Multibank Holding Company
Against a background of banking deregulation, economic difficulties, the impending arrival of interstate banking, and three year of legislative inaction, Mississippi's two largest banking institutions and their smaller allies are battling to change 50 years of law and tradition.
Involved are some of the larger banks in Tupelo and on the Gulf Coast backed by an army of others, most of them small and medium-size homeowned community banks.
At stake, say the bankers, is the future of the Mississippi banking industry and of the state's economy.
Leading the charge against state banking rules is Deposit Guaranty Corp., of Jackson, the state's largest bank holding company, with assets of about $2.3 billion.
Deposit Guaranty is fighting on two fronts. Early in September it filed an application with the Y.S. Comptroller of the Currency to set up a branch in Gulfport, thus challenging a rule that limits bank branching to within 100 miles of the home office.
also, a little later in September, the company filed an application to organize a new bank, Deposit Guaranty National Bank of Grenada, in Grenada, Miss. If that is approved, the company will then ask the Federal Reserve Board for permission to acquire the bank and create a multibank holding company.
"After getting such approval, Deposit Guaranty believes it would be free to expand statewide, based on the opinion that national banks in a multibank environment are not bound by the Mississippi law prohibiting 'chain banking,'" said John Ray, banking analyst for Morgan, Keegan & Co., a Memphis-based investment firm.
But the efforts are not without risk. Although it is unlikely, state banking authorities could ask the state courts to shut down Deposit Guaranty if it opens the branch or the subsidiary bank in defiance of what state officials view as the law.
Deposit Guaranty executives have said that, under the McFadden Act, national banks such as Deposit Guaranty may open a branch any place that state banks are allowed. State banks, under the act, include savings banks and savings and loan associations, both of which may branch statewide in Mississippi. Deposit Guaranty contends the act allows it to have a branch anywhere in the state.
Company officials also pointed out there is no Mississippi law specifically referring to multibank holding companies. However, a 1934 law that bans "chain" banks -- a group of two or more banks owned by the same person or company -- has generally been applied to rule out such holding companies.
Deposit Guaranty officials contend that because of the way the word "bank" is defined, the law only applies to state banks, not national banks.
The Gulfport branch proposal seems to be getting the most attention from Mississippi bankers, said Vern Fasbender, director of analysis for the Atlanta district office of the U.S. Comptroller of the Currency. Fourteen letters have been filed, most against the plan, he said. The only letter about the new bank charter came from state banking commissioner Jean Porter, who said she was against the plan because she considers it illegal, Mr. Fasbender said.
Legal issues will probably determine whether the applications are approved, Mr. Fasbender added, saying, "If you've got a good, strong organization, we're going to approve it if it's legal. Deposit Guaranty is strong."
Ms. Porter said Deposit Guaranty officials have agreed to wait at least 10 days after getting approval, if it comes, before opening either the branch or the Grenada bank to give her department time to act. that is because the Comptroller does not give her department immediate notice of branch and charter approvals, she added.
"Basically, we're concerned about dealing with an open bank, as opposed to an unopened bank, and the convenience to the consumer," she said. The 10-day waiting period allows time to set up a judicial hearing, Ms. …