The Senate Thursday passed legislation that would make it easier for state-chartered banks to branch across state lines.

The bill would let state banks exercise powers allowed by their home state regulators when they branch into other states. However, these activities would be limited to those permitted to national banks.

Senate Banking Committee Chairman Alfonse M. D'Amato said the bill's passage "is great news for consumers, because it preserves the dual banking system."

The Conference of State Bank Supervisors has pushed for the legislation, arguing that without the change state banks will increasingly switch to federal charters to avoid the hassle of conflicting state laws.

The House approved similar legislation May 22. The Senate version, however, would require the Office of the Comptroller of the Currency to report to Congress all state laws preempted since 1992. Also, the Comptroller's Office must report annually on future preemptions.

Sen. Russ Feingold, D-Wis., also won a provision that would let Wisconsin, Iowa, and Puerto Rico continue to cap interest rates their residents pay to out-of-state credit card companies.

Rep. Marge Roukema, who sponsored the interstate branching legislation in the House, said Friday she expects the House to approve the Senate's changes early this week.

The Institute of International Bankers continues to lobby lawmakers to apply the new legislation to state-licensed branches of foreign-owned banks.

Separately Friday, the Comptroller's Office circulated a two-page list of concerns with a financial reform bill drafted by House Banking Committee Chairman Jim Leach.

Among the comptroller's objections: bank insurance offices would have to be based in towns of 5,000 or less, and bank subsidiaries would not be allowed to underwrite insurance. Also, the National Council on Financial Services, a new body created to resolve disputes between financial supervisors, would be dominated by nonbank regulators.

Rep. John LaFalce, a senior Banking Committee Democrat, was also pushing for changes to the financial modernization bill. The New York lawmaker wants to add several consumer protection measures, including anti-coercion rules that prohibit lenders from tying credit to the purchase of other products. Also, Rep. LaFalce wants to give consumers time to rescind the purchase of nondeposit products.

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