Indeed, in the later case, this is an area of inconsistency between the two rulemakings. The Proposal would not allow repurchases of stock to be included in the business plan of a converting mutual for three years. Yet, a converted mutual may under the Interim Final rule repurchase stock one year after conversion. ABA urges the OTS to modify this portion to recognize the difficulty with this proposed measurement. A reasonable rate of return in a non-inflationary environment is different than a reasonable rate of return during a high inflationary period.
ABA understands the regulatory concern over the continued consolidation among savings institutions.
However, ABA suggests that such regulatory efforts are contrary to the best interests of the shareholders and are inappropriate factors to apply at the time of the conversion application. Accordingly, ABA urges the OTS to modify the proposed standard to permit institutions to use all of the tools available including stock repurchases after one year and to set a more realistic standard for rates of return. To do otherwise exposes the institutions to creative litigation by disgruntled shareholders claiming that the institution did not reach its artificially high, but required, performance goal. This potential may cause institutions to attempt investments or other ac tivities that pose greater risk in order to achieve the mandated rate of return. Creating a regulatory incentive to reach for yield is inconsistent with the OTS s concerns for safety and soundness.