Securities Business Seen Benefiting Smaller Banks
Many of San Diego’s smaller banks probably would benefit if Congress were to pass legislation to expand the role that banks can play in the securities industry, according to Dennis Kelleher, president of the Washington-based Dealer Bank Assn.
The Dealer Bank Assn., which represents generally larger banks and has been pressuring Congress to expand the banking industry’s ability to compete in the securities industry that is now dominated by investment banks, held its annual meeting last week in San Diego.
However, Kelleher said the association now must concentrate on “getting the message out” to smaller banks that traditionally have ignored what limited securities industry opportunities now exist for banks.
Kelleher said the association must “educate” smaller banks about the potential for revenue and profit growth in the securities industry.
However, the U.S. Senate Banking Committee last Wednesday approved a bill that could stall the entry of banks into the securities industry. The bill, which still must go to the full Senate and the House of Representatives, would prohibit banks from adding new underwriting powers for at least a year.
“We’re afraid that such a moratorium, once in place, would be difficult to get rid of,” Kelleher said.
The Dealer Bank Assn.’s board described the moratorium as a “totally regressive” step that would “critically hinder the ability of banking institutions to compete in today’s rapidly changing global capital markets.”
Persuading Congress to increase the role that banks play in the securities industry will be difficult, according to Jerry Wagner, senior vice president and chief operations officer of San Diego Financial Corp., parent company of San Diego Trust & Savings Bank.
Wagner blamed Congress’ reluctance on “nervousness” generated by Latin American loan problems and the Federal Savings & Loan Insurance Corp., which needs an expensive recapitalization.
“I think Congress is going to be hesitant to open up the industry,” Wagner said. “But delaying (approval) will be to the detriment of our industry because (companies including) Sears and Prudential Insurance can continue to (offer more securities) than we can.”
At the same time, Wagner expressed doubts about how quickly smaller banks would move to expand into the securities business. Customers at many smaller, regional banks do not want securities products from their banks, he said.
Even San Diego Trust & Savings, with $1.3 billion in assets, has a “borderline” interest in many securities opportunities that are extremely attractive to much larger banks, Wagner said.
