As Interstate Looms, the Fed Address New Puzzle: Which District Is Bank

Preparing for the onset on interstate branching, the Federal Reserve Board on Thursday proposed a series of rules to clarify which banks are members of each reserve district.

Under the proposal, the Fed would first review a bank's charter to see if it designates a home city. If not, the Fed would determine where the bank is headquartered. The bank would then join the reserve bank that serves its home city.

The Fed did propose an exception. Banks could ask to join a different reserve bank if they conduct most of their business in that district or if a change would make it easier for regulators to supervise the institution.

The Fed also would accommodate states, such as Massachusetts and Nebraska, which require banks they charter to join the local reserve bank. Banks would only ask the Fed for a determination if they are acquiring banks in other reserve districts or if they are reorganizing their corporate structures.

Comments are due April 18. A final rule is expected before June 1, the date banks are allowed to begin branching across state lines.