State-chartered banks in South Dakota could soon get the same authority to branch as freely within the state as their national bank counterparts.
The South Dakota Banking Commission has offered legislation that would ease the regulatory process for banks wanting to open branches or establish loan production offices or for start-ups looking to obtain state charters. Of the 89 banks and thrifts based in South Dakota, 67 are state-chartered, according to the Federal Deposit Insurance Corp.
"We want our state banks to be more on par with national banks," said Curt Jensen, a lawyer in Rapid City who works with the commission and helped draft the legislation. "We want to make sure there is parity in the marketplace."
Under the legislation, banks would no longer have to go in front of the five-person commission to get approval for branches. The same goes for the organizers of start-ups seeking state charters.
Though typically those hearings are not particularly controversial, they can become tough to schedule, Mr. Jensen said. Instead, decision-making authority would be shifted to the state banking director. Applicants could still present their case to the commission, if denied by the director.
"That would speed along routine applications," Mr. Jensen said.
Banks would also no longer have to prove there is "a need for additional banking in the community," he said. They would still have to prove they were well-capitalized and able to serve the community, but their viability would be determined by market conditions.
"Eliminating that 'need' requirement brings South Dakota in line with the same criteria that a national bank has when [it is] seeking to branch," Mr. Jensen said.
A final change would dissolve what Mr. Jensen described as an "antiquated" regulation that bars any bank from entering a town with fewer than 3,000 people that has the main office of an existing state- or national-chartered bank, or a town of 3,000 to 10,000 people that already is home to two banks.
He said this rule constricts community banks' ability to expand and effectively compete against national banks, which have no such restrictions, as well as against Farm Credit System institutions.
"We didn't see a logical reason for that restriction," he said. "The legislation is about freeing banks to compete and freeing consumers to choose."
The South Dakota Bankers Association strongly supports the legislation, said Curtis Everson, the trade group's president.
"It would make things less costly and less cumbersome," he said. In December the association's 13-member board unanimously voted to support the bill.
"We see a lot of positives in it," Mr. Everson said. "Also, competition is good for everybody; it keeps the banks focused on taking care of their customers. This is very healthy for the banking industry of South Dakota."
The legislative session is expected to adjourn in mid-March. Feb. 26 is the deadline for bills or joint resolutions to be passed by both houses.
