WASHINGTON - In a potential challenge to states that are considering "opting out" of interstate branching, federal regulators said Wednesday they will approve the creation of a multistate bank in a state which bars the practice.

Overriding the strenuous objections of Kansas bank regulators, the Comptroller's office allowed Lenexa-based Bank Midwest of Kansas to move its main office across state lines in a merger with Bank Midwest, its sister institution in Kansas City, Mo.

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