Texas Banking Commissioner Catherine A. Ghiglieri said state banks will be allowed to branch and merge interstate. The state regulator made the move this week in response to a recent court decision allowing NationsBank Corp. to fold its Texas operations into its North Carolina headquarters.

"The courts did not uphold the desire of the Texas Legislature to opt out of interstate branching," Ms. Ghiglieri said. "We do not intend to place our state banks in a position of competitive inequality. I will entertain any application filed by a state bank to engage in interstate mergers or branching."

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