WASHINGTON -- Anticipating action this year on interstate branching legislation, state bank regulators have begun looking for ways to make their charters more competitive.

"We're attempting to identify what it is that the banks need to be able to operate effectively across state lines," said Doyle C. Bartlett, vice president for legislative services at the Conference of State Bank Supervisors.

The problem the state regulators face is twofold, Mr. Bartlett said. First, banks that operate in more than one state are looking for a uniform set of laws that they can follow nationwide.

Second, the branching bill under consideration now maintains the right of the Comptroller of the Currency to preempt state laws for national banks in areas involving fair lending, community reinvestment, consumer protection, and intrastate branching.

Balance Could Tip

As a result, a national charter may prove much more appealing in some states, even for institutions that don't want to branch across state lines.

If enough banks decide they are better off with a national charter, the state regulators could find themselves with a shrinking constituency. For the system as a whole, the balance of the dual banking system could shift decidedly in favor of the federal government.

"To remain competitive, there will have to be more uniformity in state laws," said Mr. Bartlett.

The state regulators have formed a task force to develop a set of "model laws" in certain key areas that could be enacted by all 50 states. That would provide a sense of uniformity on core issues, while giving the states discretion in other areas, Mr. Bartlett said.

"We need to leave enough flexibility to meet local needs," he said. "But there has to be a basic statute to let interstate organizations operate effectively.

Broad View Taken

Mr. Bartlett said the group is still looking broadly at issues, and has yet to narrow down a group of core concerns. He declined to say what issues might be considered.

But one area sure to loom large in the trade group's calculations is state taxation, said Kenneth A. Guenther, executive vice president of the Independent Bankers Association of America.

Because the tax code is complex, nationwide banks would prefer to operate with as uniform a system of state codes as possible.

"There's definitely a need for model laws in the tax area," Mr. Guenther added.

Mr. Bartlett said the group hopes to have recommendations ready by the end of the summer, before the 1995 legislative sessions start.

Plenty of Time

Although the House and Senate have set different dates for interstate branching to begin, most observers believe the two chambers will agree on June 1, 1997, as the day when full interstate branching will begin. States would be allowed to permit interstate activity earlier if they choose.

That is time enough for all states to go through at least two legislative sessions. In most states, legislatures will meet at least three times.

The preemption issue presents a different set of concerns.

The Department of the Treasury, after negotiations with a group of consumer and banking organizations, proposed retaining the Comptroller's preemption authority in four key areas, including consumer protection laws.

However, the Treasury Department proposal would require the Comptroller to give notice and accept public comment before determining that a state law does not apply to national banks.

A Check on Exemptions

Consumer groups, unhappy with the Comptroller's decision to preempt a New Jersey law that requires banks to provide a basic package of services for low-income people, believe the Treasury proposal will check, though not stop, the national bank regulator from providing such exemptions for national banks.

The IBAA's Mr. Guenther said the Treasury proposal will have the result of creating "a built-in bias in favor of interstate banks."

On the other hand, he noted, "preemption is a formidable weapon that banks can use in dealing with state legislatures."

'Unfair as Hell'

If lawmakers know that burdensome laws will have the effect of giving national banks an advantage over state-chartered institutions, they may decide to ease up.

However, the IBAA, with its states'-rights orientation, opposes the idea of allowing the Comptroller of the Currency to preempt state laws.

"Three years down the road, my members may look down the street and see a branch of NationsBank," said Mr. Guenther. "And that branch may carry a much lighter regulatory load. That's unfair as hell, and it could have charter implications."

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