Banking Industry Debates Comptrollers' Branch Denial

By Titus, Nancy Raiden | THE JOURNAL RECORD, May 25, 1994 | Go to article overview

Banking Industry Debates Comptrollers' Branch Denial


Titus, Nancy Raiden, THE JOURNAL RECORD


Did the U.S. Comptroller of the Currency do an injustice to the four Oklahoma banks that had sought to branch beyond state limits by taking so long to make a decision in the controversial case?

The first of the four applications had been on file for 10 months before the Office of the Comptroller finally issued a denial on May 5. The applications sat in the regulator's Washington, D.C., legal office for most of that time.

Grumblings about a missed window of opportunity have been heard from some bankers favoring the applications. Their position is that the opportunity for approval existed from the time the original statute limiting branching by statechartered savings and loans expired in July 1993 until the Oklahoma Legislature enacted an identical law in March.

Opponents of the applications counter that the emergency rule instituted by Bank Commissioner Mick Thompson in June 1993 effectively kept any window firmly locked.

"I contend they never had a window of opportunity because the administrative law took effect prior to the sunsetting of the statute," said James P. McKeown, executive manager of the Community Bankers Association of Oklahoma.

Paul Foster, general counsel for the Oklahoma State Banking Department, said parity was the real issue. Since no state-chartered savings and loan could ever branch into a banked town, the national banks never had a basis for their applications.

The four banks had sought to branch into towns that already had banks. The branch applications were the first Oklahoma test of a legal theory developed in a Mississippi case. That case, known as Deposit Guaranty, allowed national banks in that state to branch to the same extent as state-chartered savings and loans, their competition.

The fact that the Office of the Comptroller of the Currency denied the Oklahoma applications was not a surprise. The issue was controversial from the beginning and as such had at best only a 50-50 chance of succeeding.

The stakes were high _ an approval had the potential of forcing open Oklahoma's restrictive branching laws. But a positive result would have been met quickly with a legal challenge, the end result of which might not have been known for years. Action by the state Legislature in the meantime could have made the whole point moot.

Bob Griffin, director of litigation for the comptroller's office, offered an explanation for the length of time it took for the regulator to decide the issue.

"These were the first Deposit Guaranty applications in Oklahoma. . . They were not just regular branching applications. On top of the other things you would look at in an ordinary branching application, you have to look beyond the individual bank."

In order to fit the Deposit Guaranty scenario, the comptroller must first address the factual issue of whether the other entity _ in this case, state-chartered savings and loans _ does banking business in the state.

The Oklahoma applications also had the complication of Thompson's emergency rule extending the branching restrictions for state-chartered banks.

"That raised a legal question. Was it effective to national banks under the McFadden Act? Also, I suspect there were added policy considerations. Even if it was decided that legally they could do it, would the comptroller want to do it?"

He suggested that Comptroller Eugene Ludwig, who is a lawyer, has indicated that the agency should make sure it is doing the right thing when it approves such issues.

The fact that the comptroller's office has won all four or five of its Deposit Guaranty lawsuits might have added to that element of caution. None of those suits were tried in the 10th Circuit, of which Oklahoma is part.

Griffin also said he does not believe the comptroller's office was waiting on the state Legislature to find out what action it was going to take on the issue. …

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