NationsBank and Bank of America Merger: What's in It for Corporates?

By Leahy, Bob | Business Credit, July/August 1998 | Go to article overview

NationsBank and Bank of America Merger: What's in It for Corporates?


Leahy, Bob, Business Credit


In mid-April 1998, NationsBank and Bank of America announced that their Boards of Directors have agreed to a merger. Newsletter usually doesn't comment on bank mergers because (a) there are so many bank mergers, and (b) most corporates don't get that excited about whether they get their banking services from Bank X (pre-merger) or Bank XY (post-merger).

The NationsBank and Bank of America merger is worthy of special mention because it will create a well-capitalized ($45 billion in equity) bank with a coast-tocoast presence. The map shows the 23 states in which the merged bank (to be called BankAmerica) will offer corporate services. (Alaska normally isn't located below California. We moved it there for clarity.)

Although the newspapers have published articles explaining how the bank merger will affect consumers, they strangely enough have not explained how the merger will impact corporates. This article should remedy that oversight.

In Which States Will the New BankAmerica Offer Corporate Services?

The new bank will offer corporate services in 23 states. The map shows the situation far better than a mere listing of the states. The new bank blankets the entire southeast, most of the Midwest (although having coverage in Indiana and Ohio would have been nice), the major states in the south (except for Alabama, Louisiana and Mississippi), and all of the states in the southwest and the west.

Generally speaking, NationsBank (based in Charlotte, NC) now operates in Texas and the states east of Texas. Bank of America (based in San Francisco, CA) now operates in Texas and the states west of Texas. Both banks have an overlapping banking presence in Illinois, Texas and New Mexico. The new bank will have 4,800 branches and 14,700 automated teller machines (ATMs). (ATMs are becoming increasingly important because store managers use them to make branch/store deposits.)

One National Payroll Account

The BankAmerica merger will allow a corporation to almost disburse its nationwide payroll from one bank account-while still complying with almost all unique state payroll labor codes. Corporates could disburse from one new BankAmerica payroll account, comply with most state laws and impose no hardship on corporate employees working in other states.

Nationwide, for example, corporates always could have disbursed from one account and complied with California's (to pick just one state) laws if they had drawn their payroll checks on a California bank account. But, because the California bank might not have had a national presence, east coast employees might have had problems cashing their paychecks. A corporate might have decided to use one account for 49 states' payrolls, and another for California payroll. But that approach complicates life for treasury managers, and guarantees that, someday, the California checks would be printed on the wrong check stock. This approach also would not have solved the problem with other states that have local encashment laws. The new BankAmerica bank would solve that problem in most states because the new bank would have a business presence in 23 states-including California.

Section 212 of California labor code requires that all pay checks be encashable somewhere in California. This means that corporates who wished to disburse their nationwide payroll from, say, Chase Manhattan Bank would have had to make special provisions to insure that California employees could cash their paychecks locally. It doesn't matter if you only have 10 California employees, or if all of them are on direct deposit. The law still requires you to set up an encashment arrangement with a California bank, check cashing service or gas station (you do not have to use a bank).

Although California is the most famous state with a local encashment requirement, there are other states with similar requirements. Alaska's labor code section 23.10.040 specifies that pay checks must be payable at a bank or depository inside the state. …

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