A story in Saturday's business section reported incorrectly that the comptroller of the currency has suspended consideration of applications for nonbank banks. The comptroller's office will continue to consider applications but may not grant final approval because of a federal court order barring such action.
The "nonbank bank" became a non-issue yesterday as the Federal Reserve suspended all pending applications for the limited-service institutions, created for the purpose of evading prohibitions against interstate banking.
At the same time, the Comptroller of the Currency also announced a halt to consideration of nonbank bank charters, after having approved more than 200 in the past year. Because approval is required from both regulators, the applications that had received preliminary approval by the comptroller will be left hanging. Fewer than two dozen non-bank banks are now in operation.
The Fed acted following a mid-February decision by a Jacksonville, Fla., judge that temporarily barred the comptroller from granting charters to limited service banks.
A final verdict awaits the outcome of a suit brought by the Independent Bankers Association of America. As a representative of small banks, the trade organization vigorously opposes giving large banks and other financial organizations more power.
A non-bank bank is one that does not meet the definition in the Bank Holding Company Act of a bank; that is, an institution that both offers checking accounts and makes commercial loans. If it gives up one or the other power, it is not subject to provisions of the act that limit geographic expansion across state lines.
The nonbank bank ploy has been used by money center banks as well as major retailers in an effort to establish nationwide banking systems.
The comptroller enthusiastically approved applications, but the Fed did so most grudgingly.
Both regulatory agencies insisted they were waiting for Congress to decide whether or not limited-service banks should be permitted.
Congress failed to pass legislation last year. But the chairmen of both the Senate and House banking committees have vowed to close the nonbank-bank loophole in this session and require the divestiture of any such institutions established after July 1983.
The Fed also announced yesterday that it is returning an application from Citicorp to acquire a North Carolina industrial bank pending an appeal of a decision from the state banking regulator.