New York Regulators Seize Trust Company
Feb. 07, 1995
NEW YORK (AP) _ In New York State's first bank seizure in more than two years, state banking authorities have taken possession of Nationar, a trust company jointly owned by 67 savings banks.
The New York State Banking Department seized the 62-year-old commercial bank Monday because it had liquidity problems and could not meet daily cash obligations.
Nationar is a ``bankers bank'' that processes and clears 700,000 consumer and business checks daily for savings banks, credit unions and supermarkets around the state, many of which are too small to maintain their own check processing operations.
The bank does not hold consumer deposits or make loans, said Claire Sykes, a spokeswoman for the banking department.
The seizure may delay clearing of some checks as savings banks served by Nationar make other arrangements to have their checks cleared. Nationar's check operations will be assumed by an outside company hired by the state to take over until a buyer for Nationar is found.
``We don't anticipate any problems, but there there could be a few checks that will be affected,'' said Sykes.
David Totaro, head of marketing at Dime Bancorp., one of Nationar's biggest customers, said consumers won't be affected, but some may get an extra day of grace for checks they wrote.
``We would anticipate that some checks could take longer to clear,'' said Totaro.
Ernest Patrikis, general counsel at the Federal Reserve Bank of New York, said checks drawn on banks using Nationar were held Thursday while the Fed establishes new arrangements with the banks for clearing the items.
Banks that used the service relied on Nationar to cover any shortfall that occured between the time that checks were paid and funds were deposited in their account with Nationar.
Apparently Nationar was not able to meet cash flow needs. Nationar customers are now required to deposit sufficient cash on a daily basis to cover all transactions.
Nationar, once known as the Savings Bank Trust Co., was chartered in 1933 as a central reserve bank for savings banks, providing emergency funds, check clearing, research servcies and statistical information.
The bank handles processing tasks and acts as a go-between for the savings institutions and the Fed's clearing system.
By pooling assets and having Nationar deal with check processing, the savings banks avoided the expense of maintaining their own check handling operations.
After the savings and loan crisis, many of Nationar's customers were bought by other banks. Sources said the bank began losing money and started selling its services to credit unions, supermarkets and retailers.
In recent years, Nationar was governed by a board of directors and management team drawn largely from outside the banking industry, said the Community Bankers Association of New York State in a statement.
Robert Rittereiser, president and chief executive officer at Nationar, did not return phone calls seeking comment. Rittereiser, a veteran Wall Street investment banker, headed E.F. Hutton & Co. during the mid 1980s. Prior to his tenure at the firm, Hutton admitted some 2,000 counts in a check-kiting scandal.