Kansas banks switching to state charters to avoid Dodd-Frank

The Kansas-based Equity Bank announced last week that it will abandon its national bank charter for a state charter, a move that could spark an industry trend as banks seek to deal with mounting regulations.

Equity Bank, with $605 million in assets, is the largest bank to announce a charter change in the past few years, following in the footsteps of the Kansas-based Verus Bank, which changed its charter from national to state last fall. Commerce Bank, a $20 billion regional Kansas-based bank, also converted its charter from national to state last summer, the Wichita Eagle reports.

Kansas bank officials suggest that the charter changes could become a trend.

“We are hearing some national banks are considering a charter change, but until they actually write a letter…then there’s nothing for us to act on,” Kansas bank commissioner Ed Splichal said, according to the Wichita Eagle.

Bankers said that the national charter used to simplify the process of growth for banks looking to enter other states and issue mortgages in areas where the banks did not have offices. Under the Dodd-Frank Act of 2010, a state bank can establish a new branch without a bank charter or subsidiary in the desired state.

“The changes with Dodd-Frank are clear today and so the value of being a national bank has really changed over the last year,” Equity Chairman and CEO Brad Elliott said, the Wichita Eagle reports.

With a state charter, Equity Bank and Commerce Bank can avoid oversight by both the Federal Reserve and the Office of the Comptroller of the Currency for simple oversight by the Federal Reserve.

The costs associated with a state charter are much less than those of a national charter. Elliott said that Equity Bank will save approximately $100,000 every year, according to the Wichita Eagle.

“I think Dodd-Frank broke down some of the advantages that being a national bank brought,” Splichal said, the Wichita Eagle reports.

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