Fed Can't Bar Relocations by Banks, U.S. Court Says
Rehm, Barbara A., American Banker
WASHINGTON -- The Federal Reserve Board lacks authority to rule on bank relocations, a federal appeals court has said.
The Fed's authority is over bank acquisitions, not relocations, according to the ruling Dec. 20 by the U.S. Court of Appeals for the District of Columbia. It was the latest in a series of legal defeats for the Fed, whittling its jurisdiction.
The case involved SouthTrust Corp. of Alabama, which moved the headquarters of a subsidiary across the state line to Georgia. The appeals panel said the McFadden Act assigns responsibility over relocations to the Office of the Comptroller of the Currency, rather than the Fed.
Gilbert T. Schwartz, a former Fed lawyer and now a partner with Skadden, Arps, Slate, Meagher & Flom in Washington, said the SouthTrust case has the potential to "override the interstate banking restrictions that a state has imposed."
By relocfating to a neighboring state, a bank could branch freely in that state, he explained. Meanwhile, it would retain branching rights in its original state by forming a separate bank.
"This case has the ability, in effect, to put into place interstate banking without regard to state laws," he said. …