NationsBank Corp. is determined to expand into New Mexico by evading interstate branching restrictions in Texas. But state Banking Commissioner Catherine A. Ghiglieri is equally determined to prevent it.

Ms. Ghiglieri sued the NationsBank subsidiary Sun World on July 19 to prevent the former El Paso thrift from relocating its headquarters to Santa Teresa, N.M., while retaining its two Texas branches.

Sun World, which NationsBank acquired last year and converted to a bank, has $130 million of assets.

The Lone Star State opted out of national interstate branching last year and forbids its banks from opening branches in another state. Ms. Ghiglieri, in her suit, also argued that nationally chartered banks such as Sun World lack authority to branch into other states.

"If they want to relocate into New Mexico and give up their branches in Texas, I wouldn't have any problem with it," Ms. Ghiglieri said. "But the retention of the branches is the problem. That violates what we think is the prohibition against interstate branching."

NationsBank spokeswoman Mary Waller said the Charlotte, N.C.-based company views the issue as a matter of customer convenience, since the El Paso market spills over into Santa Teresa.

"There's already a lot of border blending going on, and we want to be better able to serve customers in that area," Ms. Waller said. "If you live in Santa Teresa and work in El Paso, we want you to be able to do your banking business no matter where."

NationsBank, which applied to the Office of the Comptroller of the Currency for permission to move Sun World's headquarters, is relying on a loophole in federal law known as the 30-mile rule.

The rule, which dates from 1866, allows a nationally chartered bank to move its headquarters to another state and retain branches in its former home state if the new headquarters is within 30 miles of the old.

More than 50 banks, including NationsBank, have used the 30-mile rule in the past two years to get a jump on the lifting of interstate branching restrictions that is scheduled for 1997. NationsBank has used the rule four times since 1994 to consolidate East Coast banks.

Few states, however, have been as vociferous in defending their branching restrictions as Texas. It is the only state in the union to opt out of national interstate branching.

Texas will maintain its current branching restrictions until 1999, while other states end theirs next June 1.

Ms. Ghiglieri's department won a major victory this year when it defeated an attempt by Commercial National Bank of Texarkana to establish its headquarters on the Texas side of the border while retaining branches in Arkansas. The OCC last year approved Commercial National's application, but the state banking departments of Texas and Arkansas convinced a U.S. District Court judge to reverse the regulator's decision.

Ms. Ghiglieri said she's hoping the Commercial National ruling will bolster her case against Sun World. But she admitted the Texarkana case doesn't qualify as a precedent because the Sun World case is being litigated in a different district court.

"We're going to have to litigate everywhere if we're going to keep interstate branching out of Texas," Ms. Ghiglieri said.

She is getting support for her lawsuit from William J. Verant, director of New Mexico's financial institution division. Mr. Verant said he filed objections with the OCC June 4.

In an interview, Mr. Verant said he felt the Sun World headquarters relocation would discriminate against New Mexico banks, which cannot branch into Texas.

Ms. Ghiglieri's suit is to be heard Sept. 5 in U.S. District Court for the Western District of Texas, El Paso division.

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