State-chartered banks can lure customers to ATMs for stamps and draw depositors with Internet service because of new wild card regulations that took effect Friday.
The wild card regulations give banks the power to sell products such as tickets and gift certificates. A provision that allows banks to hold a minority or non-controlling interest in companies is designed to make it easier for banks to enter joint ventures. The regulations also clarified rules for state-chartered institutions that buy purchase mortgage loans individually or in loan pools.
The Massachusetts Bankers Association asked Commissioner of Banks Thomas J. Curry to craft the regulations because of requests from member banks.
It’s recognizing that what’s related to banking has changed significantly in the last several years, Curry said.
Abington Savings Bank wasted no time in acting upon the new powers. The bank announced last week that it has partnered with a technology firm to offer Internet access to its customers. The $650-million asset bank will contract with BISYS Information Solutions to act as an Internet service provider, offering customized Web portal sites. The firm works with banks to make them virtual Internet service providers, offering personal Web page hosting and personalized e-mail addresses.
The move is a big step for Abington Savings. The bank has yet to create an informational Web site. A message at www.abingtonsavings.com says the Web site is under construction, but promises to offer online account opening and bill payment.
By becoming an Internet service provider, Abington Savings could position itself as a high-tech company. Executive Vice President Kevin Tierney said that a bank’s reputation for security and privacy could encourage cautious consumers to go online.
We believe positioning our bank as the Internet entry point for our customers will generate significant competitive advantages, said Executive Vice President Kevin Tierney.
The bank has charted growth by opening new branches, including four South Shore supermarket branches.
The new rules will simplify the secondary mortgage business for state-chartered Capital Crossing Bank of Boston. The $640-million asset bank’s primary business line is the purchase of whole loans at a discount from their outstanding principal balances. The loans are secured primarily by commercial real estate and one- to four-family residential real estate.
It’s our view that state banks ought to be able to do what national banks do, said President and Co-Chief Executive Officer Richard Wayne. In Massachusetts there were certain specific statutory limitations governing banks when they originate loans. On the other hand national banks are permitted to go out and buy loans if they were in compliance with state statutes when originated.
‘Market Niche’
Capital Crossing launched an Internet initiative last fall with online banking and bill payment, but does not plan to become an Internet service provider. Some banks may be interested in becoming ISPs to provide free or discounted Internet access as a way to draw customers, Wayne said.
The new rules allow banks to convert ATMs from cash machines to full-service kiosks, said Kevin F. Kiley, executive vice president of the Massachusetts Bankers Association.
Each bank is going to make a determination as to what powers fit into its market niche, Kiley said. Some will use it, some won’t. What we want to do is ensure banks have the latitude to do these things if they want to do them.
Massachusetts is one of many states to adopt a wild card statute that trumps existing state law to give state-chartered banks parity with national banks. The state legislature passed the wild card bill in 1996, enabling state bank regulators to respond faster to changes in the industry. The law gives the commissioner of banks the ability to write regulations granting state banks powers that national banks have. The newest regulations mark the second time the statute has been amended.
A significant shift occurred when the legislature in ’96 advised us to promulgate national bank parity regulations, Curry said. It created a mechanism to allow a faster response.
A bill filed in this legislative session would expand the wild card provision to make it mirror the powers federal institutions were granted by the Gramm-Leach-Bliley financial modernization bill. The legislation drafted by the MBA would allow state-chartered banks to engage in activities that the Office of Thrift Supervision authorizes for federally chartered banks and activities deemed to be financial in nature.
The whole idea is to broaden the ability of the commissioner to allow state banks to do what federal banks do, Kiley said.
Both measures are aimed at making it easier for traditional banks to offer non-traditional products and services. Although stamp selling and Internet service has previously been the domain of large institutions like Fleet Bank, many community banks have adopted one-stop shopping approaches to attract and retain customers.
I don’t think people are lined up at the door to buy stamps at the local ATM, and although some places may be successful at selling tickets, I don’t see an overwhelming demand for that either, said Mark Primeau, executive vice president at Lynn-based Eastern Bank.
The mutual state-chartered bank has grown to $2.8 billion in assets and offers a number of online services. Although Eastern Bank and other state-chartered institutions may not offer all the new services, having the ability to do so is essential, according to Primeau.
If we have to operate with one arm tied behind our backs, it becomes very difficult to compete, Primeau said
The wild card regulations recognize the banking industry is changing quickly, and allows state-chartered players to adapt more quickly.
We’re not saying to every state-chartered bank in the commonwealth to go out and engage in every one of these activities, Curry said. We’re saying we have a flexible charter that if you choose from a business strategic standpoint to engage in these activities, you have the ability to do it. It keeps the state charter here in Massachusetts competitive with federal alternatives.
The approach the Bay State has taken eliminates legal guessing as to whether an activity is permitted, Curry said.
