State regulators this week assailed a plan that would allow national banks to open trust offices in states beyond their headquarters.
In comment letters to the Office of the Comptroller of the Currency, state banking departments criticized the proposal as an assault on their authority that also runs afoul of federal interstate branching law.
"The proposal is the latest OCC attack on state powers," wrote Robert A. Richard, senior vice president of the Conference of State Bank Supervisors. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Mr. Richard declared, entrusted to states enforcement of laws designed to protect consumers who use trust services.
The target of the state regulators' ire is a proposal to revamp "Part 9," the section of the OCC rulebook that governs national bank fiduciary activities. Under the proposal, national banks would be able to consolidate separate trust activities spread over a number of states into one department. Many states have laws requiring trust departments to be headquartered in-state.
The OCC also wants national banks to be treated just as state banks are. For example, if a state requires a national bank to apply for a special permit to offer trust services, then the OCC said state banks should be subject to the same requirements.
"We're simply saying that in principle a national bank in a state can do the same things a state-chartered fiduciary can do," said OCC chief counsel Julie Williams, who said the agency is aiming to complete the rule in April. "But it is not a question of national banks somehow being excused from other aspects of state regulation."
However, Texas Banking Commissioner Catherine A. Ghiglieri disagreed.
The comptroller "appears to have two main goals - to obtain all of the powers available under state law and to avoid all the restrictions," Ms. Ghiglieri wrote.
State banking commissioners also criticized a Dec. 8 interpretive letter in which the Comptroller's Office approved a request by Banc One Corp., Columbus, Ohio, to centralize its 11-state trust operation under a single national bank charter.
In the opinion, the agency said a national bank office conducting only trust business and not "core banking business" would not constitute a branch, and therefore would not be subject to the interstate branching restrictions in the Riegle-Neal law.
"The opinion was based on flawed reasoning and is in error," said Conrad W. Hewitt, California superintendent of banks. He noted that the OCC grants charters to institutions that engage solely in trust business.
"In the case of national banks of this type, if transacting trust business is not core banking business, what is?" asked Mr. Hewitt, who requested that the OCC overturn its Banc One decision.
Not surprisingly, national banks supported the Comptroller's Office.
In their comment letters, bankers said state laws requiring trust departments to have in-state headquarters or obtain a special exemption are inefficient and stand in the way of effective consolidation.
"This result is inconsistent with the OCC's goal of reducing the regulatory burden on national banks," wrote Steven A. Bennett, general counsel for Banc One.
This is not the first clash between state regulators and the comptroller.
Ms. Ghiglieri is suing the agency to keep national banks from branching interstate using a loophole known as the 30-mile rule, which allows banks to relocate their headquarters across a state line as long as the move does not exceed 30 miles.