PHOENIX — Using the conversion ploy, the American BankersAssociation appears ready to launch a new legislative attack nextJanuary on its favorite target, the so-called “large bank-likecredit unions,” with a possible bill forcing them to convert to amutual savings bank charter based on business lending across statelines.

In a farewell speech to the annual ABA convention last week,Harris Simmons, the outgoing chairman, hinted at the legislativeapproach in comments about continued unbridled expansion of largeCUs with a “real answer” requiring them to “obtain a charter moreappropriate to their business–a mutual savings bank.”

The Utah banker, described in ABA publications as “Enemy No. 1″of CUNA and the industry, said some large CUs now look favorably ona charter change with a number already voluntarily converting plusothers which “seem ready” to make a switch.

Simmons, the chairman of Zions Bancorp of Salt Lake City, alsorenewed the ABA attack on NCUA disclosure policies on conversionsand field of membership rulings charging the agency “routinelyignored the letter and intent of the law” in allowing large CUs toillegally grab small business loans from banks.

“These aggressive credit unions have now turned their attentionto small businesses–a customer segment which defies the veryconcept of a common bond characterized by a meaningful affinityamong its members” as required by federal law, charged Simmons.

He went on to tell the ABA audience that advances by these largeCUs have led to “serious erosion of many banks' consumerfranchises.”

“The consumer deposit franchise of the credit union industry isroughly twice the size of Bank of America's and consists of 85million customers,” he said.

The CU gains, he said, “have come at the expense of all banks,large and small” claiming five years ago 17.7% of all incrementalconsumer financed by deposit institutions was handled by CUs, anumber which has since climbed to 39%.

The Zions CEO went on to fault the governance practices of largeCUs, calling their public ownership “opaque.” It is “virtuallyimpossible,” he told the ABA gathering, “to ascertain the strengthof their internal controls, the compensation of their officers orthe perks provided to their boards.” This comes at a time whenbanks find themselves subject to Sarbanes Oxley and new SECdisclosures on executive and director compensation. “If creditunions really wanted to improve their industry's regulation, a goodplace to start would be in creating greater transparency for theirmembers in their institutions' governance,” he said. Reviewing hisaccomplishments during his ABA term, the Utah banker cited theindustry's success in blocking the Credit Union RegulatoryImprovement Act adding, “we've worked hard to contain the expansionof large bank-like CUs in the Congress and in the courts.”

Regarding the pursuit of mutual savings bank legislation nextJanuary and the hints in Simmons' speech, an ABA spokesman wouldonly say such legislation “remains an option.”

Simmons' successor at ABA, Earl McVicker, a Hutchinson, Kan.bank chairman, made no mention in his formal acceptance speech ofpunitive anti-CU bills and there have been suggestions that thechairman/CEO of Central Bank & Trust may lack some of thevitriolic zeal of the Zions CEO in attacking CUs.

On that score, a featured profile of McVicker in the in-houseOctober issue of “ABA Banking Journal” handed out to delegates didsay the Kansas banker remains “an equally determined adversary” onCUs as Simmons.

However, the article quoted McVicker as finding a diversity ofmember views on topical issues and while “the majority of the bankshave much more credit union competition than they do from the FarmCredit System,” in some “pockets” it's a different picture.

As a result, “it keeps me calibrating what's important” to themembership citing other concerns like the Wal-Mart industrial loanapplication, FDIC commercial real estate guidelines and mortgagelending strides of realtors encroaching on bankers' turf.

The article concluded that McVicker “is aware that he'srepresenting a diverse industry with different ideas of what'simportant.”

The ABA has repeatedly referred to expansion of the Farm CreditSystem as a problem paralleling the CU fight.

Simmons in his speech went further, attacking the FCS with thiscomment, “Many of the same concerns we have about credit unionsapply to the Farm Credit System which is wandering way off theranch with a project to finance Main Street businesses and largecorporate customers in addition to expanded authority to serveanyone in towns of 50,000 population.

“Only the Farm Credit System could produce a proposal thatsmells so much like manure,” he said. The encroachment of FCS andCUs represent a threat to bank safety and soundness as thesecompetitors “are allowed to expand at our expense,” he concluded.–[email protected]