It's seldom that bankers take off their navy blue suits and kid gloves to mix it up in public. But that's exactly what is happening in Colorado these days. Emotions are running high in the banking community here over an amendment to the state constitution, which is on the November ballot, that would allow statewide branch banking.
Colorado is one of a minority of states that require unit banking. That is, each chartered bank can operate in only one location. It has been that way since Colorado became a state. Although 38 states have adopted branch banking in some form or another, this is the first time the question has been put to a state electorate.
For some time the big Denver banks have chafed against this restriction. To grow, they have been forced to set up holding companies to control chains of individually chartered banks. Not only is this expensive, but it also makes it more difficult to transfer money from those areas with excess funds to those with excess demand, explains Thomas C. Stokes, executive vice-president of United Banks of Colorado Inc., one of the biggest holding companies in the state.
After a years of simmering, several factors have brought this issue to a boil.
One new source of pressure is recent changes in the laws regulating savings and loans. These are allowing the S&Ls to compete more directly with full-service banks. In Colorado, S&Ls are not restricted to a single location.
Another factor is the recent influx of out-of-state banks into Colorado. As recently as five years ago, there were virtually no out-of-state banks here. But the capital-short local economy and the opportunities created by energy development are drawing financial institutions like flies to honey. Bank of America, Seattle-First National, Wells Fargo, Republic of Dallas, Citicorp, and Continental of Illinois have set up offices.
These outsiders are not, in general, interested in consumer banking but in bankrolling business development.
"This is bad for the local economy, because the interest goes to San Francisco, Chicago, or Dallas," Mr. Stokes argues. He and a number of his colleagues believe that branch banking would enable the Denver banks to compete on a more even footing with these out-of-state competitors.
But branch banking is perceived as a definite threat by the independent, largely rural banking establishment.
Almost 100 Colorado towns are now served by only one commercial bank, and the owners of these establishments are not eager for a change. Statewide branch banking would give the Denver banks a greater advantage over small banks than they now have.
Currently, it is often easier for a holding company to buy an existing bank in an area rather than setting up a new one. Because a branch could be less expensive to establish if the amendment passes, the market value of small rural banks would be reduced.
The smaller bankers argue that branch banking would enable the big banks to spread throughout the state, drive independent bankers out of business, siphon money out of the rural communities to Denver, and jack up the cost of borrowing.
The Denver bankers' rebuttal is that the independents are simply afraid to compete and that the competition will make banking more efficient and therefore less expensive.
So far the anti-branch-banking forces appear to have been the most effective in their campaigning. A recent Denver Post poll found public sentiment running 40 percent against the measure, with 30 percent in favor and 30 percent undecided.
But both sides are intensifying their efforts in the last few weeks before the election, and the ultimate result remains in doubt.