Caution urged on interstate banking

October 02, 1992|By David Conn | David Conn,Staff Writer

State Bank Commissioner Margie H. Muller, in a rare admission from a government official, dismissed her own report on interstate banking as "little more than a yawn."

But banking in Maryland and the nation is "on the threshold of a new era" called interstate branching, Ms. Muller argued yesterday, and that calls for the state to exercise extreme caution.

Interstate branching, should Congress authorize it, would allow companies such as NationsBank Corp. to dispense with the complications of establishing separate banks in each of the states in which it operates, and merely establish far-flung branches of one bank.

Currently, many states, including Maryland, allow banking companies to own subsidiary banks across state lines, but not to establish branches in other states.

Many bankers, including NationsBank chief executive Hugh McColl, have argued that only with national interstate branching can America's financial system become efficient enough to compete with foreigners.

"Maryland has had interstate banking long enough to know that ownership of banks by out-of-state entities has minimal impact on the industry as a whole or the economy generally," Ms. Muller wrote in her office's annual report to the General Assembly on interstate banking.

"But immediate and unrestricted interstate branching, in contrast, is a threat that must be understood and modified so that its effects will be least damaging to the banking industry and those it serves," she wrote.

In particular, Ms. Muller argued, each state should be able to set the conditions by which out-of-state banks convert existing branches to their own, and for monitoring those branches once they are converted.

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