WASHINGTON -- A Treasury Department-backed compromise on one aspect of the interstate branching bill is playing to mixed reviews in the banking industry.
The plan would subject branches of out-of-state national banks to state law in four areas: fair lending, community reinvestment, consumer protection, and intrastate branching.
It would also require the Comptroller's office to give notice and accept public comment before preempting state laws that would otherwise affect national banks.
The Bankers Roundtable, a big-bank trade group, termed the compromise acceptable, but the American Bankers Association and Independent Bankers Association of America both criticized it -- for different reasons.
'Our Top Issue'
"We don't think the comptroller should be allowed to preempt any state laws," said Kenneth A. Guenther, executive vice president of the IBAA.
Edward L. Yingling, chief lobbyist for the ABA, expressed a preference for the Senate version of the interstate bill, which does not touch the preemption issue and treats national bank branches the same, no matter where the parent is based.
"Applicability of state law is our top issue and we'll be working very hard to fix it," said Mr. Yingling.
But Jim Murphy, executive vice president of Rhode Island's Fleet Financial Group, said the "compromise proposal is a sound one," and said his bank "will have no trouble living with it."
The Treasury Department deal, which was hammered out over the past month with a number of consumer groups, will likely have a significant influence on the interstate bill, which is nearing final passage. However, House and Senate negotiators are likely to make at least some changes in the package.
Consumer groups pressing for the language limiting the ability of the Comptroller's office to preempt state laws were particularly unhappy about a case involving a basic banking law in New Jersey. In that case, the Comptroller's office said the state law does not apply to national banks.
'More Discipline'
Assistant Treasury Secretary Richard S. Carnell conceded that the proposed language would not prevent a national bank regulator from preempting state laws, but said the language "would bring more discipline to the analysis."
"The narrative specifically criticizes the New Jersey decision," said Mr. Carnell, referring to language his department proposed for inclusion in the conference report accompanying the final bill. Such language doesn't have the force of law, but is considered by regulators and courts in interpreting the law.
The compromise does not address the Marquette decision, which permits banks to export interest rates across state lines.
Other Sticking Points
"Applicability of state law," as the issue is known, is one of three major controversies holding up the interstate bill. A second issue concerns when interstate organizations should be able to consolidate - after 18 months, as prescribed by the House, or in three years as the Senate has decided.
Even more controversial, however, is the treatment of U.S. branches of foreign banks. The Senate bill requires them to branch from a U.S.-based bank, a provision foreign banks say would subject them to less favorable treatment than American banks receive abroad.
