State banks likely dodge capital rule

LITTLE ROCK — A deal to apply proposed capital requirements only to bank holding companies with $15 billion or more in assets has been reached by U.S. Senate and House negotiators.

The agreement gives U.S. Sen. Blanche Lincoln at least a temporary victory in the complex legislation that seeks to overhaul the nation’s financial system.

Lincoln’s preference had been to exclude all banks from the requirements, spokesman Marni Goldberg said Thursday. But the Democrat pushed for a $15 billion threshold, instead of the $10 billion limit supported by some Senate Democrats, because the higher limit would exempt all banks in Arkansas.

Only one bank in Arkansas, Arvest, has more than $10 billion in assets. If the $10 billion limit had survived, Arvest would need to raise about $115 million in capital.

Lincoln is on a commit-tee wrestling with merging House and Senate versions of the overhaul.

The proposed capital requirements as they appeared in an amendment written by Sen. Susan Collins, R-Maine, would have eliminated for all banks the use of trust preferred securities, which are similar to promissory notes, as capital. The amendment was approved by the Senate in May.

Collins said in a release at that time that the measure provided “a disincentive to [banks] becoming ‘too big to fail’ and ensures an adequate capital cushion in difficult economic times.”

But Lincoln’s office said the requirements would hurt banks’ abilities to lend to businesses and consumers “when access to credit is already difficult to come by.”

Goldberg said that the agreement, reached Wednesday night and which would change language in the Collins amendment to exempt banks with less than $15 billion in assets, wasn’t likely to change. However, it wouldn’t be final until the close of a conference designed to reconcile differences between the two chambers’ versions of financial overhaul, which was expected Thursday night, Goldberg said.

The exempted banks wouldn’t be able to add more trust preferred securities to their capital. Only their existing securities would be included.

The next-largest Arkansas banks, such as Simmons First National of Pine Bluff or Little Rock’s Bank of the Ozarks, have about $3 billion in assets.

Ken Hammonds, president of the Arkansas Bankers Association, said Thursday that the other banks in the state could have been hurt by the $10 billion limit.

“That was never an Arvest thing with us,” Hammonds said, adding that other members of his association also had supported a higher threshold.

“With the way Washington is hammering us, the only way we’re going to be able to survive, some of the banks, is [with] buyout[s], and to merge. And so with the future buyouts and mergers that are possible over the next five years, some of our $3 billion, $4 billion holding companies could very easily be $10 billion.”

Hammonds said his group wanted to set the threshold high enough so banks could grow.

“I had asked [Lincoln] for a good while to please vote for a higher number,” he said.

Lincoln is seeking re-election this year. Challenging her is John Boozman, a Republican and U.S. representative for the 3rd District.

The holding company for Arvest Bank is almost entirely owned by the Walton Family, which also owns 45 percent of the stock of Wal-Mart.

Arvest Bank Group’s political action committee has given $11,500 to Lincoln since 1999, Arvest said. Wal-Mart Stores employees and Wal-Mart’s political action committee have given $85,700 to Lincoln, The Wall Street Journal said Wednesday, citing the Center for Responsive Politics.

Arvest said in a prepared statement Thursday that the deal to exclude banks with less than $15 billion in assets was “a positive step” but “it’s premature to fully comment until it’s been included” in the final legislation and voted on.