Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 24, 1994 TAG: 9402240087
SECTION: BUSINESS PAGE: C-10 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The administration-backed bill, endorsed 19-0 by the panel, would strip away many of the federal legal barriers, dating to 1927, that have restricted the size and geographical range of American banks.
Interstate banking has been much sought by such large holding companies as BankAmerica Corp. of San Francisco and NationsBank Corp. of Charlotte, N.C., which seek to extend their reach nationwide.
However, the move is opposed by many small community bankers who fear their institutions will go the way of the corner grocery store. And a coalition of consumer groups contends the measure would allow state consumer protection laws to be pre-empted.
Advocates of interstate banking say eliminating the requirement that holding companies operate through separately chartered banks in each state, each with separate boards of directors and officers, could save the industry as much as $10 billion a year, some of which would be passed on to customers.
"This should translate into higher rates for depositors, lower costs for borrowers and reduced risks for the Bank Insurance Fund," said Sen. Donald Riegle, D-Mich., the Banking Committee chairman.
It also should provide more convenience to the 60 million people who live in border areas and the 4 million people who cross state lines each day to commute to work, advocates said.
And, they said, it should shore up the safety of the financial system by allowing banks to diversify their lending across regions and should free U.S. banks to grow as large and powerful as their European and Japanese competitors.
"The U.S. is the only industrialized country that restricts bank branching. . . . A German bank can open branches from Ireland to Greece, but it is unlawful for a California bank to open branches in Florida and Connecticut," said Sen. Alfonse D'Amato, R-N.Y.
Senators from New England and Texas said interstate banking would lessen the severity of regional economic slumps because large national banks would be better able to continue lending in distressed areas than smaller banks with all their previous loans tied up in that area.
Earlier this month, the House Banking subcommittee on financial institutions adopted a similar bill, 29-0. The full House committee is expected to act on it in several weeks.
The Senate version allows bank holding companies to acquire banks in other states one year after enactment.
Within two years, holding companies could consolidate their banks into branch networks of a single large multistate bank unless state lawmakers voted to stay out of the interstate system.
State lawmakers could opt for further relaxation by letting out-of-state banks open branches without acquiring an existing bank.
by CNB