There was no shortage of interesting conversation topics at the 31st annual meeting of the Community Bankers Association of Illinois. But there was one name that seemed to be on everybody's lips - Wal-Mart.

When the Wal-Mart corporation applied for an industrial loan charter in the state of Utah in July, it got the attention of the banking industry. Wal-Mart's reputation as a merciless competitor and its immense size make it a major player in any market it chooses to enter. But community bankers in the Midwest have good reasons to be especially concerned.

"Anything Wal-Mart does in banking would be high-stakes," says David Manning, government relations director for CBAI. "They're pretty omnipresent in small towns. Their ability to leverage their marketing power in the banking business raises all kinds of questions."

Wal-Mart says that it is seeking the ILC in order to lower its processing costs on consumer transactions: credit cards, electronic checks and debit cards. But community bankers are worried that it might have bigger plans down the road. It already has made inroads into the financial services industry by providing paycheck cashing, by selling money orders, by providing consumer wire money transfers to Mexico, and by offering a Wal-Mart Discover card. And few observers think Wal-Mart is going to stand pat.

There is a very deep issue at stake in Wal-Mart's application for an ILC, says Manning. Because of its commercial ties, a Wal-Mart bank could have not only major competitive advantages, but might also be subject to a serious conflict of interest.

Take a guy who owns a hardware store in a small town. He can go to a community bank and get a smallbusiness loan," says Manning. "What are the chances of Wal-Mart granting a loan for a small retailer? It would be an interesting dilemma."

It's not clear that a Wal-Mart ILC, if granted, would automatically lead to a Wal-Mart bank. An ILC under careful constraints imposed by Congress might, in fact, have a neutral effect on community banks. But that outcome cannot be taken for granted, says Dale Leighty, immedi- j ate past chairman of the Independent Community Bankers of America. And many observers, including Leighty, think that a fullfledged Wal-Mart bank is the ultimate goal.

"Wal-Mart," he says, "is very much a threat. And [the ICBAI will be working to make sure that gorilla is kept at bay."

A few days after the meeting, CBAI sent the FDIC a four-page comment letter calling for public hearings on Wal-Mart's application for deposit insurance.

By Alfred Soucedo

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