Goldman Sachs Group Inc. is applying for a New York state charter for its new banking subsidiary, bucking the trend of major commercial banks seeking charters from federal regulators.

Last month, the Federal Reserve designated Goldman and Morgan Stanley as bank-holding companies. The classifications give the two Wall Street firms access to new, low-cost funding sources but also subject them to heavier oversight by regulators.

While both companies will be monitored by the Fed, they have a choice over which government agency supervises their banking subsidiaries.

Morgan Stanley last month applied for a federal charter with the Office of the Comptroller of the Currency, a division of the Treasury Department. The OCC regulates most large New York banks, including Citigroup Inc. and J.P. Morgan Chase & Co.

Goldman, however, is applying for a charter from the New York State Banking Department, the agency said Monday.

A Goldman spokesman said the firm has a "long association with New York State" and "we're pleased . . . that relationship will be reinforced" by becoming state-regulated.

Goldman's application also signals that the company doesn't have immediate plans to buy or build a large, multistate retail-banking franchise, contrary to what analysts and investors have been speculating in recent weeks.

Otherwise, Goldman probably would have been more likely to seek a national-bank charter, in which it is generally easier for lenders to expand across state lines.

Richard Neiman, New York's banking superintendent, said that a state charter "shouldn't inhibit" Goldman from buying an out-of-state retail bank. He noted that at least one big state-chartered lender, M&T Bank Corp., of Buffalo, N.Y., has hundreds of retail branches in Pennsylvania and Maryland.

As the New York regulators review Goldman's application, Mr. Neiman said they will be talking with the firm's executives about their appetite for retail-banking deals.

A person familiar with the matter said Goldman never seriously considered applying for a federal charter with the OCC.

Mr. Neiman said Goldman's application also is an endorsement of the dual federal-state approach to bank regulation.

The current regulatory system has drawn widespread criticism for splintering authority among several federal agencies as well as the states. Different agencies sometimes fail to communicate with each other, allowing problems to fall through the cracks.

Earlier this year, Treasury Secretary Henry Paulson proposed a regulatory overhaul that would consolidate banking supervision in Washington.

Mr. Neiman said Goldman's desire for a state charter "will add new vitality to the dual banking system," especially since Mr. Paulson is a former Goldman chief executive.

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