Northern Trust Corporation (Northern Trust) submits testimony in support of the Petition and encourages the FDIC to adopt rulemaking as requested in the Petition. Northern Trust is a multi-bank holding company that, as a result of the current patchwork regulatory environment, does interstate business through a state chartered bank, four national banks and a federal savings bank. Northern Trust conducts its banking business on a national basis and as such competes against both state and national banks.
Northern Trust cites the following reasons for its support for the Petition. First, under the current system it is often very difficult for a state bank to determine which laws may apply to its interstate banking activities. It is frequently not clear, for example, whether an out-of-state bank must qualify to do business in another state, or whether the banks home state law or the host state law is applicable when the bank does business with residents of the state. Some host state laws discriminate against out-of-state state banks and create both confusion and legal risk if the state bank engages in business activities in that state. This lack of clarity causes state chartered banks to assume a higher degree of legal risk when they do business across state lines.
Second, in order to do business across state lines, state banks must incur additional expense by incorporating new legal entities to engage in interstate activities. Alternatively, state banks may have to forego the opportunity to do business with customers in other states, thereby depriving the bank of potential revenue and consumers of additional service options. National banks have achieved a greater degree of certainty under the same Congressional mandate and are not required to incur these additional costs and risks. This disparity of treatment in effect penalizes banks for retaining a state charter instead of converting to a national charter.
Third, Congress clearly intended to provide for parity of treatment for state banks compared with national banks. In order to carry out the Congressional mandate to preserve and promote the dual banking system, the FDIC should adopt rulemaking that will carry out the Congressional mandate. If parity of treatment is not provided, the dual banking system will continue to erode and consumers will be deprived of the full range of choice among financial services providers.
Northern Trust believes that parity for state chartered banks should not lead to any reduction in protection for consumers. Northern Trust is committed to comply with laws and regulations that protect consumers and prohibit predatory and unfair lending practices. Northern Trust believes that many home state laws, such as those enacted in Illinois, provide appropriate protection for consumers and that there will not be a rush to the bottom with state banks relocating to the most permissive jurisdictions. The FDIC has all power and authority necessary to require lending standards that will protect consumers to the extent that home state laws are silent or do not provide adequate protection.