CHICAGO - Large banks in Illinois were handed a victory last week when the state's governor eliminated intrastate branching restrictions.

The original proposal led to the introduction of an opposing bill that spurred one of the toughest fights during the last session of the state's legislature.

Though the opposing small-bank bill was defeated, the state's community banks will not be hurt by the relaxation of Illinois' home-office protection laws, a banking group argues.

|On an Equal Footing'

"Now everybody in Illinois is on an equal footing," said William J. Hocter, president of the Illinois Bankers Association.

"Aggressive managers [at large and small banks] are probably going to prosper, and those not interested in opening branches may not do so well," said Mr. Hocter.

Either way, he added, the consumer may benefit as competition heats up among banks in all communities, large and small.

Keeping Their Distance

Until Gov. Jim Edgar signed the new legislation at the annual meeting of the Illinois Bankers Association, the law had prohibited banks from opening branches within a certain distance from another bank's headquarters.

The state's small-bank trade group, the Community Bankers Association of Illinois, wanted the restrictions eliminated over five years.

In Illinois, state banks outnumber national banks by 713 to 330.

The community bankers' group has nursed the wounds it suffered in the turf battle and is now offering programs to help community bankers branch within the state.

The Personal Touch

Moreover, "community banks can continue to offer their customers something that large branching organizations can never offer: personalized service and roots in the community," said David E. Manning, governmental relations director for the community bankers group.

"The challenge is for Illinois community bankers to get that message out."

Diane Swonk, a regional economist at First Chicago Corp., said that large banks will gain most from the easing of restrictions.

Banks like First Chicago, First of America Corp., and NBD Bancorp will be able to cut costs substantially by converting bank charters into branches, she said.

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