Business Law Newsletter
| Jurisdiction | United States,Federal |
| Citation | Vol. 9 No. 8 Pg. 1584 |
| Pages | 1584 |
| Publication year | 1980 |
1980, August, Pg. 1584. Business Law Newsletter
1584
Our banking system from early American history was set on a course as an industry of small enterprises, geographically fragmented and not centralized. These underlying features of the banking industry have yielded only modestly to powerful transmuting economic and social forces which have obliterated local markets in moving to a more efficient scale in most other industries. Accordingly, in the U.S. today there are close to 15,000 commercial banks (compared to 10 in Canada), over 4,000 savings and loan associations, 463 mutual savings banks and 23,000 credit unions.
Bank chartering was a routine matter during much of the free banking period up to the middle of the 1920's.(fn1) The general banking collapse of the 1930's brought about a re-constitution of the chartering process at both the national and the state levels. The Banking Act of 1935 established many new conditions for the chartering of national banks and states have required compliance with various standards before granting bank charters.
The attorney whose client is seeking a charter to enter a particular banking market must choose between applying for a state charter pursuant to the provisions of C.R.S. §§ 11-3-109 and 110 or applying for a federal charter pursuant to 12 U.S.C. 1 et. seq.(fn2) Under our dual banking system, banks may in fact choose one of three regulatory schemes pursuant to which they may do business: either one of two variants(fn3) of the state/federal system or the national system.
Although there are distinctions between the powers of state and national banks, it is the author's experience that those subtle differences have little impact on the choice of whether an applicant seeking to enter a market seeks a federal or state charter. Recently, the Colorado State Banking Commission has received many more charter applications than the local Office of the Comptroller of the Currency ("OCC"), the primary regulator of national banks. This preference for state charters in Colorado, however, may soon change due to the recent establishment of mandatory reserve requirements and a pronounced liberalization of chartering policies of the OCC.
There is considerable uniformity between the national and state statutory criteria for charter applications. In general, these criteria fall into three broad categories: (1) adequacy of capital; (2) competence of management; and (3) need for a new bank. Bank regulators make entry, merger and exit decisions under standards that allow them considerable latitude in determining the public interest, and the greatest differences in decision-making occur in the administration and interpretation of the statutory criteria.
In recent years, the choice of forum was often influenced or dictated by such considerations as capitalization and the spread of stock distribution between proposed shareholders. Relatively stringent restrictions on the part of the Office of the Comptroller of the Currency (also known as the Administrator of National Banks) resulted in a disproportionate number of state charter applications. Recent information, which has been confirmed to this author by the Washington and Denver Offices of the Comptroller, indicates that the Comptroller's Office has or is about to eliminate its requirements for diversified ownership. That fact, coupled with mandatory Federal Reserve membership, expedited processing time and other considerations discussed herein, should result in an increased amount of charter activity for that agency.
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