The Connecticut Banking Department lost the first round Tuesday in its legal challenge of the federal government's controversial "30-mile rule."
A U.S. district judge in Hartford, Conn., denied the state agency a temporary injunction to bar Fleet Financial Group Inc. from consolidating five of its banks in Connecticut, Massachusetts, and Rhode Island by moving their headquarters 30 miles or less across a state line.
Though the case isn't closed - the court is slated to issue a final ruling in June - the Office of the Comptroller of the Currency was cheered by Tuesday's decision.
"The judge made an evaluation of the likelihood of success, and he didn't feel that there was a strong likelihood that the state would prevail," OCC Chief Counsel Julie L. Williams said.
Connecticut is the third state, after Texas and Michigan, to try to block the OCC from permitting a national bank to branch across a state line under the rule.
The lawsuit was prompted by the OCC's March 27 approval of Fleet's application to consolidate its New England operations. Under the OCC's order, Fleet converted banks in Connecticut and Rhode Island into branches of its Massachusetts-based bank.
Connecticut Banking Commissioner John P. Burke said the federal agency was ignoring a state law requiring his approval for out-of-state banks to branch into the Nutmeg State.
"With some boldness, the OCC is saying if you're a national bank you can do anything you want," Mr. Burke said.
While Tuesday's decision dealt a serious a blow to Connecticut's suit, Mr. Burke said he isn't giving up. "There's a cavalier attitude coming out of the OCC," he said, "so we're going to the wall with them on this one."
The 30-mile rule, a loophole in the National Bank Act, has been on the books since the 1970s but was used only intermittently until 1994.
Early that year, the Comptroller's Office began encouraging national banks to take advantage of it to streamline operations and move into new markets. Since then, the agency has approved 53 such applications, and six are pending.