Magazine article American Banker

Easier Route to Interstate Sought for State Banks

Magazine article American Banker

Easier Route to Interstate Sought for State Banks

Article excerpt

Lawmakers and industry officials urged Congress on Wednesday to make it easier for state-chartered banks to branch across state lines, insisting that the future of the dual banking system is at stake.

"Current law creates an artificial, unintended incentive to choose a national bank charter," New Jersey Deputy Banking Commissioner John Traier told the House Banking Committee's financial institutions subcommittee.

Mr. Traier, testifying for the Conference of State Bank Supervisors, argued state-chartered banks must be allowed to offer the same products in all their branches, regardless of where they are located.

The hearing came as the June 1 trigger date looms for final enactment the Riegle-Neal interstate branching law. That legislation, passed in 1994, allowed national banks to maintain their full powers when branching interstate, but left unclear who controls the activities of state banks when they cross state lines.

In a bid to clear up these questions, the financial institution subcommittee's chairwoman, Rep. Marge Roukema, R.-N.J., has introduced legislation that would exempt out-of-state branches from most of a state's banking laws.

Mr. Traier strongly endorsed the measure, but some state legislators said the bill would usurp their authority. In joint written testimony to the subcommittee, Alabama state Rep. Al Knight and Colorado state Sen. Bill Schroeder said the legislation would strip states of the right to regulate banks wi thin their borders.

Consumers of out-of-state banks should not be "forced to seek assistance from banking authorities in the next state or in a state across the country," they said.

But Mr. Traier argued that without a healthy dual banking system, state banks will cease to be a source of innovation and competition in the industry. Without legislation, state-chartered banks will not branch across state lines, he said. …

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