Interstate Banking Already Here, Touche Ross Expert Says

Article excerpt

While bankers have been busy barring doors to non-bank banks, other closed doors to interstate banking are being kicked in by financial f ailures such as those which occurred in Ohio, according to William K. Smith, visiting merger and acquisition expert for Touche Ross & Co.

"That kind of thing can happen overnight," said Smith, referring to Chase Manhattan's application to acquire two state-chartered Ohio savings and loan associations which are unable to qualify on their own for federal deposit insurance.

"An important issue is how the weakness of the thrift industry can affect the banking industry," said Smith. "You see that more and more all the time."

Chase has said it eventually wants to convert the thrifts and any others it may acquire into commercial banks, likely due to the fact that the Federal Reserve Board has previously restricted the power of thrifts owned by bank holding companies.

"As soon as they open the doors to let Chase into the state," said Smith, "they're going to go after the healthy institutions."

Smith reviewed key legal and market forces that he says will bring about unlimited interstate banking "faster than most bankers think it will."

Bankers may soon be faced with a deadline, said Smith, who predicts New York's Citicorp will be successful in its bid to break up New England's banking compact which excludes New York banks.

The U.S. Supreme Court is expected to rule in Citicorp's favor, said Smith, and simultaneously suggest Congress take action on the issue of regional banking compacts. Faced with a choice of extremes - intrastate banking only or unlimited interstate banking, Congress will likely step in and allow regional compacts with a deadline for triggering unlimited interstate banking.

"If Congress comes out and says they're giving you five years, you'll see a lot more people getting ready for regional and interstate banking," said Smith.

At present, Oklahoma bankers are on the record opposing participation in an interstate banking compact. That position was arrived at last year at a meeting of the Oklahoma Bankers Association when bankers indicated banks here need time to adjust to mergers spawned by new bank holding company laws before participating in regional banking. …