When the National Bank of Commerce petitioned the Treasury Department to be allowed to underwrite corporate debt, it wasn't trying to be revolutionary. All the Memphis-based bank wanted was for one of its subsidiaries to be able to make bond deals for its customers on a primary, not secondary, level. But as some see it, opening up investment banking to more than 2,500 banks regulated by the Office of Comptroller of the Currency (OCC) will change the financial landscape for middle-market services.
"We aren't set up to underwrite corporate securities," concedes Robert McPherson, general counsel for the National Bank of Commerce's operating subsidiary, NBC Capital Markets Group Inc. "Our underwriting activities initially would be limited to participating with other firms. At present, we are not able to be a member of a selling group."
Still, if NBC Capital gets approval, other banks will follow, creating more players in the investment-banking market, especially on the local level, and this could drive down fees. When Zions First National Bank of Salt Lake City was given approval to underwrite municipal revenue bonds, other banks, including the National Bank of Commerce, followed it into the market.
According to Kevin Mukri, a spokesperson for the OCC, the comment period for the petition is over, but there is no timeline on the decision-making process.
The Glass-Steagall Act still prevents banks and their operating subsid-iaries from trading and underwriting securities, but the OCC has taken a more liberal view. "The OCC has decided that now is the time to make the fight to authorize securities underwriting for operating subsidiaries of banks, and the National Bank of Commerce is willing to participate in that right," observes Bert Ely, of Ely & Co., an Alexandria, Va., bank consulting firm.
If NBC Capital's petition is addressed positively, McPherson says he hopes his company will have the ability to participate in underwriting syndicates and deal in mortgage-backed securities.