WASHINGTON -- In order for state-chartered banks to remain competitive as interstate banking and branching laws take effect, states will have to change some laws, the Conference of State Bank Supervisors said Thursday.
The recently passed branching law gives states until June 1, 1997, to decide how they want to participate in the system. They can participate early by, passing their own law, opt out of interstate entirely, or pass a law granting their own institutions parity with national banks.
If they eto nothing, the national law becomes effective.
Among a laundry list of other suggestions, the group recommended that, in order to avoid being left at a competitive disadvantage, a state choosing to allow interstate branching should at least opt for parity S9 that state,Chartered banks have the same authority to branch in other states. as national banks.
"If a state does nothing, national banks will be able to operate branches across state lines after June 1, 1997, but state banks will not," said James A. Hansen, director of the Nebraska Department of Banking and Finance.
"Therefore, if states do not want to put their own state-chartered banks at a disadvantage, all states must take some action before June 1, 1997. Change is coming, and state banking departments must manage it." said Mr. Hansen, who is also chairman-elect of the CSBS.
The trade group highlighted a long list of laws to be changed and issues to be addressed by states before the new interstate laws take effect.
The first target date is Sept. 29, 1995, when bank holding companies will be allowed to acquire institutions across state borders as long as they are maintained as separately chartered banks. A second provision in the law, permitting banking concerns to convert out-of-state banks into branches, takes effect June 1, 1997.
In order to make state charters "a fully competitive option to national charters," states need to do more than simply decide whether or not to allow banks to branch across their borders, according to James B. Watt, president and chief executive of the CSBS.
"Everybody is focusing on whether to opt in or opt out, but there are a lot of other decisions that states need to make as a result of this bill," Mr. Watt added.
The group also advised states to consider repealing laws that will be preempted by the interstate law, such as those restricting or prohibiting the acquisition of a bank by an out-of-state holding company.
The CSBS is also looking at how states will determine how to assign responsibility for examination of out-of-state bank branches in their states.
Some view this as just one of a host of tricky areas that states will have to negotiate over the next few years.
"How different states share examiner revenues is definitely going to be a knotty problem," said John Rippey, legislative director for the Bankers Roundtable.