The Office of the Comptroller of the Currency is threatening the viability of the state bank charter, according to Federal Reserve Chairman Alan Greenspan.

"The dual banking system ... despite its advantages and achievements, is under attack," Mr. Greenspan said in a speech he was scheduled to deliver Saturday at the Conference of State Bank Supervisors meeting in San Diego.

The OCC's so-called operating-subsidiary rule has "served to tip the balance in favor of national banks," Mr. Greenspan said. The rule, which took effect Dec. 31, opened the door for national bank subsidiaries to engage in activities banned in the parent bank.

"Financial reform clearly is needed, but financial reform should not be interpreted to mean regulatory reform for its own sake," he said in the speech.

Nationwide interstate branching, which takes effect June 1, also has the potential to harm the state bank charter, Mr. Greenspan said. He said that banks with a presence in several states will find it burdensome to operate under differing state regulations.

"If that burden were to become excessive, banks with interstate operations-especially interstate retail operations-would likely turn to the national charter," Mr. Greenspan said.

Several of the largest state-chartered banks do not have significant retail operations beyond their home states, Mr. Greenspan noted, while others consist mainly of lead banks in multibank, multistate holding companies.

"It seems likely that some of these institutions will seek to consolidate their interstate retail operations under a national bank charter after interstate branching becomes fully operational," he said.

However, Mr. Greenspan argued that there is still hope for the state charter. Agreements reached among state regulators to coordinate supervision of interstate banks would contribute to "seamless supervision and examination," he said.

In addition, Mr. Greenspan urged Congress to approve a bill introduced by Rep. Marge Roukema, R-N.J., which would exempt out-of-state branches from most of a state's banking laws.

The bill "would place state-chartered banks on an equal footing with national banks with regard to permissible activities of branches in a host state," Mr. Greenspan said.

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