WASHINGTON -- In the latest bid by banks to branch across state lines, NationsBank Corp. and First Fidelity Bancorp. are arguing that a legal loophole permits them to combine banks located in different juridictions.

The banks have separately asked the Office of the Comptroller of the Currency to approve the consolidations.

They said a clause in the 129-year-old National Bank Act permits a holding company in some cases to combine operations in two states by moving the headquarters of a bank in one state into the other.

The Comptroller's office appears to be leaning toward approval. Comptroller Eugene A. Ludwig announced last month that he backs full-scale interstate banking. Mr. Ludwig is reportedly ready to return the agency to the days when it was the regulator most willing to foster banking innovations through liberal reading of banking laws.

Protests Could Mean Delay

But Frank Maguire, senior deputy comptroller for corporate activities and policy analysis, said the applications could be held up by protests under the Community Reinvestment Act.

Both banks must advertize their application -- and that could prompt the reinvestment act objections.

But in an interview Thursday, Mr. Maguire said that these applications will be decided narrowly, not on any broad precedent-setting basis.

"This is a relocation," he said. "If the attorneys can convince me it's within the letter of law, then they're 99.9% there."

He said approval would save the banks money and benefit their customers.

It is not surprising that NationsBank is one of the banks pushing the regulators to expand interstate rights. Its chairman, Hugh McColl, has been the industry's most forceful advocate for unrestricted branching.

North Carolina-based NationsBank wants to merge its District of Columbia bank into its Maryland bank, which would operate the D.C. branches. New Jersey-based First Fidelity wants to consolidate its Philadelphia-based bank into its New Jersey bank, which would operate the Pennsylvania branches.

The National Bank Act allows a bank to relocate its headquarters anywhere within 30 miles. Once in a state, the McFadden Act allows a bank to branch within that state.

The Comptroller's office has approved five similar applications, but in those cases the banks used the loophole only to expand into a new state. The banks continued to operate separate banks in both states.

Thus, this would be the first time a bank used the 30-mile relocation provision to consolidate the operations of two states.

NationsBank, in an Oct. 6 application, said it would move its main Washington office to Silver Spring, Md., just a few miles northeast of the D.C. line.

On Sept. 24, First Fidelity asked to relocate its Philadelphia office to Salem, N.J., right across the Delaware River.

Customer service is the main motivation behind the applications, spokesmen for both banks said Thursday. As things stand today, customers who live and work in different states can do their banking in only one state.

For example, a NationsBank customer in the district cannot make a deposit at one of NationsBank's Maryland offices.

"We have a lot of customers who commute across the river to New Jersey," said Paul Levine at First Fidelity. "We are interested in creating a single bank" so customers can get all of the bank's services in either state.

Multistate Metropolises

There are many areas where economic integration has occurred across state lines. New York-Connecticut-New Jersey is the most obvious example, but there are many others. For example, Cincinnati straddles the Ohio/Kentucky border, and St. Louis and Kansas City each spill into two states.

Mr. Ludwig will not take part in the decision on the NationsBank application because he used to represent the bank before joining the government.

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