In the latest move by city officials to oppose the conversion of New Haven Savings Bank from a mutual savings bank to a capital stock bank, the New Haven Board of Aldermen approved a resolution Oct. 7 calling on the Federal Deposit Insurance Corporation to maintain the requirement that the bank’s depositors be allowed to vote on the plan.
The bank’s corporators voted last month to convert the bank’s ownership from its depositors to stockholders, a change which the bank’s executives said would help it to grow and compete more effectively. Opponents, who argue that the conversion increases the risk that New Haven Savings Bank will be taken over by another financial institution, say the bank needs to seek more community input before proceeding.
“The New Haven Savings Bank is trying to avoid a process in which the owners of the bank get to make a decision,” Ward 1 Alderman Ben Healey ’04, who voted in favor of the resolution, said.
Under FDIC regulations, the conversion from a mutual to a capital stock bank requires the approval of at least the majority of the bank’s depositors. The FDIC may only waive this requirement if doing so would not compromise the bank’s safety and soundness or be detrimental to the institution, its depositors or the public interest.
The conversion is part of the bank’s larger plan to merge with the Tolland Bank and the Savings Bank of Manchester. Supporters of the change in ownership type say the conversion will allow New Haven Savings Bank to acquire the necessary funds to complete the merger — a strategy that bank executives have said will increase the bank’s competitiveness and decrease its likelihood of being subsumed by a larger financial institution. The new company would do business as NewAlliance Bank and be based in New Haven.
New Haven Savings Bank Senior Vice President Paul McCraven refused to comment on the Board of Aldermen’s resolution and any possible effects it may have on the bank’s waiver application.
“We submitted our request and we’re waiting for [the FDIC] to rule on it,” McCraven said.
In addition to urging the FDIC to deny the waiver, the resolution calls on the bank to reconsider seeking a waiver and begin to organize the depositors’ vote.
The resolution argues that depositor-owned banks — such as the existing New Haven Savings Bank — help the community by “maintaining a local focus; ensuring that local dollars are invested locally; helping working-class residents accumulate wealth; and increasing the availability of financial services to local populations.” In contrast, the resolution argues, mutual stock banks only work to benefit their shareholders by “pursu[ing] higher returns, even at the detriment of the community or depositors.”
“The FDIC needs to consider the impact on the local community,” Healey said. He said he thinks the FDIC will give serious weight to the resolution as it considers the bank’s waiver request.
The board sent copies of the resolution to the bank, the Connecticut State Bank Commissioner, New Haven Mayor John DeStefano Jr., the FDIC, and New Haven’s state and federal legislators.
FDIC spokesman David Barr said eight other institutions in the state of Connecticut have asked for and received waivers of the depositors’ vote in the recent past. Barr said he had not been told of any institutions that had been denied the waiver.
Barr said he cannot speak about pending waiver applications, including the application by New Haven Savings Bank. The amount of time it takes to consider the request varies and the governing statues do not specify a time frame, Barr said.