ICBA - Publications - Of Mutual Interest 5/8/12

Of Mutual Interest 5/8/12

Of Mutual Interest

A compilation of Mutual, Thrift and Federal Savings Association news

  May 8, 2012

The Mutual Community Bank Competitive Equality Act

The ICBA Mutual Bank Council would like to get your feedback on The Mutual Community Bank Competitive Equality Act (Act), H.R. 4217, which was introduced by Rep. Michael Grimm (R-N.Y.), to help formulate ICBA’s position on the legislation. The act would authorize the Comptroller of the Currency to charter mutual national banks, either de novo or through a conversion from another mutual depository institution, including either mutual savings institutions or credit unions. Under the act, members of mutual national banks would have no voting rights.

Additionally, the act would authorize mutual institutions to raise capital by issuing investment certificates, which may be included as Tier 1 capital. The certificates must be non-voting, except in certain events such as nonpayment of dividends or merger, non-cumulative, and redeemable at the sole discretion of the board of directors.

The act would also permit a mutual holding company with public stockholders to waive dividends to compensate minority shareholders if an independent board or committee approves the dividend waiver. To be independent, the majority of the board of directors of the mutual holding company must consist of directors who are not affiliates of any stock subsidiary of the mutual holding company and who do not directly or indirectly own any shares of the stock to which the waiver would apply. An independent corporate committee would consist of persons who are not stockholders, affiliates, depositors, borrowers or members of the mutual holding company or any stock subsidiary of the mutual holding company. This provision would provide a way to bypass the requirements in the Federal Reserve Board’s rule on paying dividends, which requires a mutual holding company to obtain approval from its members before it can waive its right to dividends paid by a stock subsidiary.

The act also includes additional provisions for which we would like to get feedback. Please respond to the following questions by May 18, 2012.

Mutual Bankers Gather in Washington for ICBA Policy Summit

During this year’s ICBA Washington Policy Summit, mutual bankers gathered from around the country with their fellow community bankers and met their members of Congress and federal financial regulators to discuss top issues affecting the industry. In nearly 200 meetings with congressional offices, mutual bankers urged lawmakers to stop the credit union business-lending push, extend full FDIC coverage of noninterest-bearing transaction accounts, support the Communities First Act and create a new farm bill.

ICBA mutual bankers also met with representatives of the financial regulatory agencies to discuss top industry issues. Mutual bankers discussed their concerns with Comptroller of the Currency Thomas Curry and Federal Reserve Governor Elizabeth Duke as well as representatives from the Consumer Financial Protection Bureau and the FDIC.

During the ICBA Washington Policy Summit, Sen. Jerry Moran (R-Kan.) told the bankers that the industry is important to the future of the American economy and way of life. Moran, who is sponsoring the ICBA-advocated Communities First Act, said the harsh regulatory environment favors the largest financial institutions and must be addressed. The Communities First Act includes targeted regulatory-relief provisions benefitting the nation’s community banks and has been a top-priority issue for the Washington Policy Summit meetings.

Moran said that the industry’s relationship-based model creates a symbiotic relationship between community banks and their customers. He said these relationships—not regulatory and paperwork burdens—are essential for a safe and sound banking sector.

ICBA’s Mutual Bank Council Vice Chair Urges Congress to oppose Credit Union Business Lending Bill

The head of a former credit union that converted to a mutual bank called on members of Congress to oppose legislation that would more than double the cap on credit union member business loans. Paul Mackin, CEO of Think Mutual Bank in Rochester, Minn., and ICBA’s Mutual Bank Council vice chairman, wrote in a letter to lawmakers that the member-business-lending cap was implemented to keep credit unions focused on consumer lending to people of modest means, consistent with their original tax-exempt mission.

Mackin wrote that the ICBA-opposed Small Business Lending Enhancement Act (S. 2231/H.R. 1418) would allow credit unions to compete with community banks while retaining their tax-exempt status and the unfair competitive advantage it offers. Credit unions who want to expand their business lending should consider converting to a bank, he wrote.

“Charter conversion is a viable alternative for credit unions dissatisfied with their charter. Many have converted and others are under consideration,” Mackin wrote. “Many credit unions are satisfied with the original charter and are filling an important role in our financial system.”

These arguments closely reflect ICBA’s strong opposition to the credit union industry’s legislative push. The association is urging community bankers across the nation to reach out to their members of Congress to voice their concerns with this dangerous legislation. Click here to read the letter.

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