NationsBank's shift of funds raises questions Bank moved money out of Texas to avoid giving up branches, regulators say



AUSTIN, Texas -- In April, around the time NationsBank Corp. announced that it would acquire BankAmerica Corp., NationsBank began to transfer almost half of the bank's Dallas deposits to corporate headquarters in Charlotte, N.C.

By the time it finished in May, $5.8 billion had been shipped to Charlotte.

Now Texas banking regulators say they believe the transfers were meant to circumvent a state law that could force NationsBank, now the largest lender in Texas, to divest branch offices in Dallas before completing the BankAmerica deal. The law was enacted in 1995 to prevent a single bank from gaining control, through an acquisition, of more than 20 percent of the bank deposits in the state.

Regulators also say the transfers potentially could hurt lending in metropolitan Dallas by shrinking the area's base of deposits.

NationsBank executives defend the move as proper and say it won't have any effect on lending in Texas because the money transferred to North Carolina wasn't from typical customer deposits and was never used for loans.

But at the same time, the bank contends that it shouldn't be required to sell any branches because of the merger, citing the deposit transfers as one supporting reason, according to documents NationsBank submitted to federal regulators.

Because of the deposit transfers, NationsBank should have close to 20 percent of the state's total deposits after the BankAmerica deal. But Texas regulators say they intend to raise the transfer matter with federal banking officials and may seek divestiture of some branches, anyway.

"It seems like a game to me. I'm concerned the concentration they represent isn't really diminished by moving deposits," said Cathy Ghiglieri, the Texas banking commissioner.

Ghiglieri lost a court fight last month and a measure of her own oversight powers when a federal judge allowed NationsBank to fold its Texas subsidiary into its main holding company.

"Why should that money go to North Carolina? Why should that money not be put back into this economy?" Ghiglieri said. "The problem in the '80s was with banks gathering up deposits and putting them in other places."

NationsBank officials say the deposits were solely related to a real estate investment trust and a national corporate cash-management product. They also defend their lending in Texas, citing what federal banking regulators and some independent groups say is a good record for making loans in lower- and middle-income areas.

"We have not relocated any Texas depositor's money as a result of this," said Tim Arnoult, president of NationsBank's Southwest operations, which include Texas.

Arnoult said Ghiglieri hasn't returned telephone calls from bank officials who want to explain the matter.

Federal regulators will rule on the proposed merger this year.

Since landing in Texas a decade ago, NationsBank has become the dominant player in the state, with more deposits than the next two largest banks combined. Its share of deposits at federally insured institutions in Texas was 21 percent at the end of March, up from 14.1 percent in December 1992. Adding San Francisco-based BankAmerica's Bank of America branches would have boosted the total to 23 percent, if not for the deposit transfers.

Increasingly, the wave of bank mergers has helped concentrate Texas deposits at a handful of bigger banks.

After completion of the NationsBank-BankAmerica deal and Wells Fargo & Co.'s proposed merger with Norwest Corp., almost 46 percent of the state's $223 billion in deposits will be controlled by four banks, all of which have headquarters in other states.

Pub Date: 6/16/98

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.