Issues To Be Considered While Debating Interstate Bank Branching

GAO reviewed the Federal bank regulators' processing of commercial banks' applications to establish branches.

GAO found that intrastate branching of national and State banks is essentially a State law matter. The Federal and State laws combine to limit branching within a State's boundaries. Assuming that any adopted form of interstate branching would involve some sort of Federal regulatory review, the new process could require additional coordination within and among the participating regulatory agencies. The introductions of wider branching opportunities could necessitate changes. In assessing applicant capacity, more regulatory decisionmakers would become involved. In addition, Federal regulators could be hampered by the lack of statutory authority to provide States with supervision and examination information on out-of-State banking institutions. The assessment of market impact could require more information exchanges among regulator field offices and between regulators. The extent to which Federal regulatory agencies' decisionmaking will have to be centralized or decentralized will have an impact on the timeliness and cost of the branch approval process. If the Congress desires Federal regulators to assess the market impact of each interstate branching application, these assessment will be difficult to make and very judgmental without explicit criteria. Congressional and regulatory guidance on the factors to be considered in setting geographic boundaries should minimize these delays and encourage effective implementation of any new branching policy.