New State Law Will Shorten Bank Merger Period

Gov. M Jodi Rell has signed legislation that will shorten the time period for a bank merger in Connecticut when a healthy financial institution is looking to take over the assets of a failed bank.

Specifically, the law will allow the banking commissioner to accept applications for “expedited” banks, which would assume the liabilities and purchasing assets of in-state banks that have been taken over by the Federal Deposit Insurance Corp.

Additionally, the law allows the banking commissioner to waive the filing of a Community Reinvestment Act plan for banks that meet certain standards, and expedites the process for them to establish bank branches.

In December, Banking Commissioner Howard Pitkin said he would 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 wanted 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 told state lawmakers at a meeting in December. “The process is too slow.”

Under the law, which will be in effect from Oct. 1, 2009 to Sept. 30, 2011, individuals wishing to organize an expedited Connecticut bank must file an application with the banking commissioner.

The law allows the commissioner to waive any banking laws and regulations necessary for the consummation of a bank acquisition involving an expedited Connecticut bank if he finds that it is “advisable and in the interest of depositors or the public.”

The commissioner must, however, require that expedited banks federally insure their accounts and deposits. Any waiver the commissioner grants must be in writing and include the reasons for the waiver.

If approved, the expedited bank would be able to take over the deposits and assets of banks that have been placed in receivership or conservatorship by the FDIC.

The new law doesn’t specify exactly how long it would take for the expedited bank to form, but presumably it would be much faster than the current process.

Insurance Bills Not Passed

As the legislative session recently came to a close, state lawmakers failed to act on two key bills that the state’s insurance industry was keeping close tabs on, including one that would allow insurers to join an interstate compact and another that would limit their ability to use geographic location or credit history as an underwriting tool.

Senate Bill 456, which insurance industry lobbyists have been supporting for years, would have allowed Connecticut to join 32 others states in an interstate compact aimed at streamlining the approval process for new insurance products, but the proposal never even made it out of the insurance and real estate committee.

The compact, which is organized by the National Association of Insurance Commissioners, is a multi-state agreement that creates a central point for filing, reviewing and approving insurance products based on national uniform standards.

It allows insurers to get new products approved in a matter of weeks, much quicker than the current system, which can take 60 to 90 days or longer.

Insurance companies argue that the current slow approval process is putting them at a competitive disadvantage. Certain other financial services companies that are pushing similar products are federally regulated, so they can sidestep the state-level approval process and get their products to the market quicker.

Big states such as Texas, Ohio, and Michigan have already joined the compact, as have all New England states except, Connecticut.

The proposal faced fierce opposition from Attorney General Richard Blumenthal, who has said joining the compact would jeopardize important consumer protections.

In a victory for the industry, however, lawmakers did not approve proposed legislation that would place new limits on the use of geography or credit history as an underwriting tool for auto insurers.

Greg Bordonaro is a Hartford Business Journal staff writer.