Nationwide Banking on the Way

February 28, 1994

Congress is poised to knock down the barriers to interstate banking, a step that would allow any bank to buy another bank anywhere in the country. If the bill survives attempts to load it up with killer amendments, a process that has doomed the initiative in the past, it would supersede Maryland statutes that limit takeovers and mergers to banks already located in the Southeast Compact region extending from here to Florida.

As a result, the few Maryland-owned banks remaining would be vulnerable to acquisition bids from larger banks elsewhere in the country. This state lost any chance of becoming a regional banking powerhouse when Maryland National went in the tank because of unwise real estate operations and was purchased by NationsBank, a Southeast Compact bank in Charlotte, N.C. If the pending measure becomes law, NationsBank probably would dismantle separate corporate structures now required throughout its vast network, with savings estimated at $50 million a year.

While the bill now heading for the Senate floor would eliminate restrictions on cross-state bank acquisitions, it would still allow states to opt out of new rules permitting interstate branching nationwide, a process that would allow holding companies owning banks in several states to merge them into a single branch network. In another "states rights" provision, states could choose to forbid out-of-state banks from setting up branches within their borders unless they own existing institutions.

Maryland is one of 14 states that, so far, has resisted the trend toward nationwide banking. But with the big players -- North Carolina, Virginia, Georgia and perhaps Florida -- breaking out of the Southeast Compact and going national, the pending federal statute is getting close to ratifying what already exists. The Independent Bankers Association of America, which helped torpedo a broader Bush administration bill in 1991, so far has raised only token opposition to the new measure. One reason is that it has been shorn of an amendment that would have stopped banks from engaging in lucrative insurance agency transactions.

Although Maryland's decline as a banking center is lamentable, we support nationwide banking as a means of simplying operations and bringing about cost savings of ultimate benefit to the consumer. Congress, however, should take care in writing this legislation to prevent massive flows of assets from branch-banking states to headquarters states.

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