interstate branching goes into effect. It has to, because the Volunteer State is one of the two (Missouri is the other) with the most bordering states - eight. That means Tennessee will have lots of competition from its neighbors vying to host holding-company subsidiaries or become the home state of various regional banks operating across state lines. And it further complicates the task of creating uniform banking regulations with its many neighboring states, observers said. "We don't want Tennessee to be passed by," said Timothy L. Amos, general counsel for the Tennessee Bankers Association. "Our approach is we want to make sure Tennessee is not automatically disadvantaged, for some reason. We want to make sure that there is no structural or statutory problem that would tilt the balance toward another state." The association is in the early stages of preparing a legislative package for the next General Assembly session, which begins Jan. 9, that would ensure the state is on at least an equal footing with its neighbors. Earlier this year, the state opted into interstate branching, effective on the federal law's nationwide trigger date - June 1, 1997. Though still evolving, the bill for the next session would likely attempt to simplify the chartering process, facilitate branch and ATM openings, and ease residency requirements of directors, Mr. Amos said. Insurance powers and bank investment restrictions may also be considered, he said. "If Citicorp buys a bank down here, we don't expect them to move their headquarters to Tennessee," Mr. Amos declared. "But we would like to get the guy just over the border in Bowling Green (Ky.) who buys a bank in Clarksville (Tenn.)." As for the required state regulatory changes, Tennessee will have to address, among other things, the question of which state's regulator will be responsible for the in-state branches of an out-of-state bank. Out-of- state banks must now have separately chartered subsidiaries in each state where they operate - the host state's regulator examines the subsidiaries. "It will take a lot of coordination," said Talmadge B. Gilley Jr., who has been the state's bank commissioner for 37 years. "But if we're going to have a dual banking system, we will have to cooperate. There may be some personality problems, but it certainly is do-able. After all, we've been working with federal agencies for 10 years now."

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