NationsBank plan draws complaint D.C. official opposes interstate branching

November 13, 1993|By David Conn | David Conn,Staff Writer

An attempt by NationsBank Corp. to set up one subsidiary bank serving both Maryland and the District of Columbia hit a political snag, as an influential Washington official filed a protest with federal regulators last week.

Charlene Drew Jarvis, who chairs the Washington City Council's Committee on Economic Development, complained that the proposed maneuver could leave the District without control over the operations of a bank doing business within the city limits, she wrote in a letter to the U.S. Office of the Comptroller of the Currency (OCC).

Until now, all bank holding companies that operate in more than one state have had to establish separate "parent" banks in each of those states. The banks must have separate boards of directors, audit teams and financial reports filed with state and federal regulators.

Charlotte-based NationsBank asked the OCC last month for permission to run its branches from across state lines following a three-step restructuring:

First, it would move its American Security Bank unit from Washington to Silver Spring, as permitted by an 1886 law that allows banks to move their headquarters up to 30 miles away. That law was amended in 1959 to allow such moves across state lines.

Then, the company would merge American Security with Maryland National Bank. All states permit such "intrastate" mergers.

Finally, it would convert its American Security branches in Washington into Maryland National branches. Ultimately, the entire operation's name would be changed to NationsBank.

"I am of the opinion that Nation's has used creative interpretations of federal banking laws to accomplish what is, in effect, interstate branching, which has not yet been expressly permitted by either Federal or District of Columbia law," Ms. Jarvis wrote to the OCC on Nov. 4.

Ms. Jarvis and others are concerned that such a system would leave local lawmakers and regulators without any authority over the banks operating in their jurisdictions.

"Interstate branching will essentially obliterate the local board [of directors], the constitution of which was so important to us when we did interstate banking," Ms. Jarvis said in an interview yesterday.

Ms. Jarvis led a separate battle over local regulatory oversight this summer with First Union Corp., also of Charlotte. First Union sought to bypass the council's approval to enter the District when it bought the First American banks, which are located in Virginia, Maryland and Washington. That fight was resolved when First Union agreed to lend $200 million in the city's low- and moderate-income neighborhoods over the next 20 years.

An OCC representative said yesterday that the agency would take Ms. Jarvis' concerns into account regarding the NationsBank application, but that no decision would come before next week when the Senate Banking Committee was expected to vote on an interstate banking bill.

That bill, most of whose provisions passed both houses of Congress in 1991, but never became law, would allow interstate branching of the sort that NationsBank has proposed. It would, however, allow individual states to exempt themselves from such branching.

The Senate bill also would require a state's permission if a proposed acquisition were to give a company more than 25 percent of the banking assets of that state. The House is considering a similar bill.

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