Local bankers offer views on overhaul

By Don Shilling

Bankers debate whether proposed regulations would increase efficiency or decrease variety.

Area bankers have differing viewpoints on an attempt to overhaul regulation of the nation’s financial system.

The proposal by the Bush administration would streamline a number of federal oversight bodies and also could impact how states regulate financial institutions.

Doug McKay, chairman and chief executive of United Community Financial Corp. in Youngstown, said he hopes consolidation will make the system more efficient and consistent. UCFC is the parent of Home Savings and Loan Co. and Butler Wick Corp.

Home Savings is chartered by state agencies, while some banks have federal charters. McKay said that this means that Home Savings is operating under different rules than some of its competitors.

For example, state examiners could force Home Savings to reduce its percentage of commercial real estate loans, while federally chartered banks wouldn’t have that restriction, he said.

Steve Gurgovits, chairman of F.N.B. Corp. in Hermitage, Pa., said, however, that he likes the dual regulatory systems. Moving to a single system would lessen the variety of products that are offered to customers, he said. First National Bank of Pennsylvania, which is part of F.N.B., has a federal charter.

For example, state charters allow banking companies to operate a real estate brokerage but federal charters don’t, Gurgovits said. Banks with federal charters, however, have fewer restrictions on the type of lending they can offer, he said.

Some state regulators have expressed concerns that Bush’s proposal would pre-empt state regulation of securities and insurance. McKay said states will play a big role in developing the regulations.

Barb Fisher, vice president of marketing and deposit services at Farmers National Bank, said she doesn’t expect much to change at the Canfield-based bank. Farmers has a federal charter and already is subject to stringent regulations, she said.

The big change in the Bush proposal will be for investment bankers and others who haven’t been as strictly regulated, she said.

Gurgovits said mortgage brokers are among those who face regulation and licensing for the first time. Brokers who encouraged people to take out subprime loans with adjustable rates were a linchpin for the current credit crisis that has rattled the nation’s finance system. They were able to package those loans and sell them to large investment houses, which recently have been reporting large losses because of foreclosures.

In addition to new regulations for mortgage brokers and investment banks, the proposal merges day-to-day bank supervision into one agency, down from five.

All of the bankers said they wanted to wait to see the specifics of the plan before commenting further.

“The devil is in the details,” Gurgovits said.

The plan must work its way through Congress, where Democrats have already said it doesn’t go far enough in dealing with abuses in mortgage lending and securities trading.

shilling@vindy.com