State-chartered banks could become obsolete unless their regulators remove roadblocks to interstate branching, Federal Reserve Board Chairman Alan Greenspan is warning.

The liberalization of national banks' interstate branching powers last year has already affected state banks, Mr. Greenspan said in a speech he was to deliver Saturday. State banks' share of industry assets dropped 2.5 percentage points in 1997, the first decline in eight years, he noted.

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