Chase Manhattan Corp., the New York-based parent of the nation's third largest commercial bank, has received Federal Reserve Board approval of its plan to form a limited service bank in California.
The Board of Governors of the Federal Reserve on Monday approved Chase's plans to establish a "nonbank bank" headquartered in Newport Beach. The Federal Reserve oversees bank holding companies. Chase also must get approval from the comptroller of the currency, which regulates national banks. Chase said it hopes to open the bank in mid-March.
The Chase Manhattan National Bank of California will make commercial loans and accept time deposits from four California offices now operated by Chase U.S. Consumer Services. The Chase Manhattan subsidiary currently provides automobile, boat and home equity loans. The offices are in Newport Beach, La Jolla, Palo Alto and Walnut Creek.
Interstate Law Dodge
Chase Manhattan is one of the many bank holding companies, including a number of California-based institutions, that are seeking approval for nonbank bank applications in what government and banking officials see as a way around laws prohibiting interstate banking.
Under federal laws, banks--defined as institutions that accept demand deposits and make commercial loans--are barred from opening full-scale branch offices across state lines. Nonbank banks avoid being defined as banks by making commercial loans and not accepting demand deposits, or visa versa, thus avoiding the interstate banking restriction.
Timothy McGinnis, Chase senior vice president for national financial services, said in a statement that Chase's nonbank banks "will make the current market more competitive, and we look forward to the day when Chase becomes a full-service bank in these important states."
Along with approving the Chase's bank in California, the Federal Reserve also approved plans to establish a limited purpose bank in Arizona, the Chase Manhattan Bank of Arizona, with offices in Phoenix and Tucson.