Federal and state regulators agreed Wednesday to coordinate oversight of state-chartered banks operating across state lines.

The Federal Reserve Board and the Federal Deposit Insurance Corp. said they will alternate exams of these state banks with state supervisors. Some exams may be done jointly by federal and state agencies. Regardless, under this agreement, state banks operating interstate will not be bombarded by regulators.

"An appropriate federal regulator and a home-state supervisor will coordinate the supervision of interstate banks so as to ensure their safety and soundness and at the same time reduce regulatory burden," said Richard Spillenkothen, the Fed's bank supervision director.

Nick Ketcha, director of the FDIC's division of supervision, said "the more we are talking to each other and using common forms and common approaches," the better.

The decision to work more closely grew from efforts to keep the state banking charter viable in an interstate world. The Conference of State Bank Supervisors unveiled its plan for simplifying state bank exams this month.

"The framework is a model for state banking departments to design their own agreements on sharing responsibility for the supervision of multistate, state-chartered banks," said John L. Bley, director of financial institutions in Washington state and the chairman of the task force that developed the model.

According to Mr. Bley, the framework will reduce regulatory burden by appointing a single regulatory contact in the bank's home state - the state where it is chartered.

This home-state supervisor would direct the safety and soundness exam and coordinate other exams conducted by regulators from the state where the branch operates.

Mr. Bley predicted that in two or three years most states will adopt this framework. He noted that four Mid-Atlantic states and 11 states in the West already have adopted this plan. States in the Southeast are working on one.

"Probably 90% to 95% of the terms in those agreements are consistent, and I think that if we can look forward, we can see where more states are going to sign on to one of those three agreements," said Mr. Bley.

Mr. Smith writes for the Medill News Service.

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