A battle is brewing over interstate branching in, of all places, California.
The Golden State, the nation's biggest banking market and the world's fifth-largest economy, has historically been one of the most pro-branching states and has had intrastate branching since the 1960s. But a fight among trade groups over interstate branching has ruptured the united front the industry has usually presented state lawmakers for 50 years.
The trade group for community banks, the California Independent Bankers, has launched a drive to scuttle a bill sponsored by the California Bankers Association that would have California opt in early to the branching provisions of the Riegle-Neal Interstate Banking and Branching Act.
"This is a First Interstate Bank-written and -sponsored bill," said Craig Hudson, executive director of the California Independent Bankers and chief of the Independent Bankers Association's western region office. "It does an awful lot for First Interstate, but does nothing for community banks except put them at an extreme competitive disadvantage."
In the state legislature, where the two bills that would give early effect to interstate branching are in committee, lawmakers have always cooperated with the industry on banking law, making it virtually impossible to defeat a bill sponsored by the California Bankers Association. But California Independent's opposition has thrown a wrench into the works.
"I'm not entirely sure the bill will pass," said Jan Owen, a consultant to the state Senate Committee on Banking and Commerce. "These laws are bizarre enough to most legislators, so when there's a difference of opinion in the industry, it doesn't bode well."
California Independent wants the state to wait until the automatic trigger for interstate branching in June 1997 to give community banks time to recover from the state's recession and to allow time to assess the impact on the state's consumers, economy, and tax structure.
Mr. Hudson said that 95% of his 200 members are opposed to early opt-in, chiefly because the early opt-in measure has loopholes that would allow out-of-state banks to branch into California without buying an existing bank.
The California Bankers Association is baffled by California Independent's opposition.
"It's clear that the vast majority of (the 450) banks in the state favor early opt-in," said Gregory O. Wilhelm, head of the group's state government relations unit.
