CHICAGO — An independent state banking group is criticizing Continental Illinois Corp., beneficiary of a $4.5-billion federal bail-out, for its proposal to buy two suburban banks.
Members of the Independent Community Banks in Illinois protested the proposed purchase in a letter to the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Comptroller of the Currency.
"The insolence of Continental's recent announcement mocks the thousands of bankers who have tediously adhered to the rules and regulations of banking," the 500-bank group wrote in the letter, mailed Monday.
Accused of 'Feasting'
"Rather than repaying the FDIC, whose capital infusion has enabled Continental to satisfy its regulatory capital requirements, Continental is feasting on suburban Chicago banks under the pretext of developing a stable base of retail deposits," the letter said.
Continental officials declined comment on the protest.
Continental announced Feb. 24 that it had entered into agreements to buy First National Bank of Deerfield and First Suburban Bank of Olympia Fields for $12.6 million in cash.
In announcing the agreements, Continental, holding company for Continental Illinois National Bank & Trust Co., said it intended to seek further acquisitions in Illinois.
Officials of the holding company said such acquisitions were part of a strategy meant to rebuild deposits at Continental Illinois, which was hit by a run in 1984 and became the subject of a $4.5-billion federal rescue effort.
Timing of Announcement
The protesting group, which consists primarily of smaller banks, was particularly angered by the timing of Continental's announcement.
Word of the purchase agreements came three days after Continental officials estimated publicly that the FDIC might lose more than $1.56 billion on $2.5 billion in loans transferred from Continental Illinois at the time of the bail-out.
"Clearly, Continental is not a normal bank," the letter said.
"To declare FDIC-funded Continental now eligible to make bank acquisitions when well-managed community banks are paying for Continental's folly through higher FDIC premiums cannot be tolerated!"
The Independent Bankers Assn. of America, which is holding its annual convention this week, also is expected to file protests against the Continental plans.