Banking Commissioner Howard Pitkin will ask state lawmakers to consider legislation to cut the time it takes for Connecticut banks to complete a merger or obtain a charter.
The current regulatory process can take months. Pitkin said he wants to cut that period to a matter of days in case a Connecticut bank is on the verge of failure and needs to be quickly combined with a healthier institution.
“I think this new world we are in requires us to be a lot faster,” Pitkin said at the Connecticut General Assembly’s 2008 Biennial Issues Conference earlier this month. “The process is too slow.”
The banking department made a similar request during the savings and loan crisis in the late 1980s, but lawmakers shot down the idea.
“I’m all in favor of it,” said Gerald Noonan, president of the Connecticut Banker’s Association. “If there is adequate capital, why slow down the process? Anything that reduces the time it takes for government to do something is terrific.”
William Bouton, a partner at the Hartford law firm Hinckley, Allen & Snyder, said a merger between banks usually takes at least months, with the regulatory process taking as long as 90 days.
When a healthy bank is buying an ailing bank, the private parties can accelerate the negotiations. The regulatory process can become the largest obstacle.
In particular, banks are required to demonstrate compliance with the Community Reinvestment Act, which encourages lending to individuals and businesses in low- and moderate-income neighborhoods.
The banking commissioner evaluates and ranks banks on their community reinvestment performance and members of the public have 30 days to comment.
“On occasion you’ll get objections to a merger which can delay the process,” Bouton said.
Jesse Van Tol, a spokesman at the National Community Reinvestment Coalition, did not return a call seeking comment.
Robert Zelinger, a law partner at Levy & Droney in Farmington, agreed that collapsing the time period to complete deals is a good thing, particularly if a bank isn’t doing well. “But the acquiring bank needs to have time to do its due diligence,” he added.
