The cost of complying with new federal banking regulations aimed at tighter oversight of financial institutions has convinced Shelter Mutual Insurance Cos. to close Shelter Bank.
All Shelter Insurance agents and employees were notified yesterday that company officials will soon begin the process of gaining government approval to close the bank.
"The regulatory requirements have become such that it is not feasible to continue the operation," said Joe Moseley, Shelter Insurance vice president of public affairs.
As a result of increased regulation brought about by the Frank- Dodd Act, which aimed to address the national banking crisis four years ago, banks held by insurance companies would be required to have a different accounting system than they now use. The federal banking regulations not only would apply to the bank but also to some of the insurance operations.
"That's one of the better examples of why this wouldn't make sense to go forward," Moseley said.
Compliance with the new regulations could potentially cost more than the income generated by the bank, he said. But the shutdown won't happen soon. "It is a final decision," Moseley said. "What's not final is the wrapping up. That takes time."
Shelter officials said it will take "several months" to work through the regulatory steps to complete the closure. The bank will remain open in the meantime.
"The bank continues to be profitable and sets new records every year," Moseley said. "It's operating in just the way it was envisioned."
Shelter Bank began operating 13 years ago and has a facility at 1817 W. Broadway. The bank also has an online presence, but the bulk of banking activity occurs through individual agencies.
"It probably is fair to say that each of our agents is a branch, and each of their offices is a branch," Moseley said.
Customers won't notice any difference, he said. Shelter Mutual will purchase the loans from the bank, but payments and deposits will continue to be made with the bank "until there isn't a bank anymore," Moseley said, "and that's going to take some time."
Meanwhile, the company is offering severance packages to the 23 employees who will be displaced by the closure. Moseley said Shelter "will make every effort to place them somewhere else within the company" or to help them find jobs with other local financial institutions.
Other insurers are making similar moves in reaction to the new regulatory landscape. Life insurance giant MetLife Inc., for instance, has been working to shed the deposit operations of its MetLife Bank unit. And Thrivent Financial's foundation, based on a membership base, has announced it will change its model rather than raise fees for its customers.
Reach Jodie Jackson Jr. at 573-815-1713 or e-mail email@example.com.
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This article was published on page A1 of the Saturday, September 8, 2012 edition of The Columbia Daily Tribune with the headline "Shelter winds down its bank amid changes: Federal regulations too costly to comply with, Moseley says." Click here to Subscribe.