Bank of the Ozarks in June did away with its holding-company structure as a way to save costs by removing oversight by the Federal Reserve.
And while other banks have the same structure, some say the institutions could be going back to the days of “regulatory arbitrage” seen before the financial crisis when banks sought more lenient regulators, the Wall Street Journal reported.
“It might be arbitrage,” said Karen Shaw Petrou, managing partner of the policy-analysis firm Federal Financial Analytics Inc. “But it’s also a huge boost to their challenged earnings.”
Bank of the Ozarks and other lenders are still regulated by the FDIC, which they said is not a lenient regulator.
“We didn’t really need to be regulated by both,” Bank of the Ozarks CEO George Gleason said.
The Arkansas-based bank, with about $21 billion in assets, is the largest company in recent years to shed its holding-company structure, which is used by about 80 percent of banks and thrifts. Signature Bank is another that doesn’t have a holding company.
Bank of the Ozarks is one of the most active lenders in New York City, especially in the risky construction-financing space so many competitors have pulled back from. In July, company executive Dan Thomas, who headed the real estate lending group, abruptly resigned. But that hasn’t stopped the firm from providing significant loans to New York developers. Earlier this month, it issued a $215 million loan to the developers of 537 Greenwich Street and in September provided the senior portion on a $170 million construction loan to the Chetrit Group for a retail-hotel tower on West 34th Street. [WSJ] – Rich Bockmann