Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, September 22, 1994 TAG: 9409230088
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Newsday
DATELINE: LENGTH: Medium
Experts do not expect dramatic changes because interstate banking, in which bank holding companies own banks in other states, is already a fact of life in many states. But, if states go along, the new rules on interstate branching will let banks create seamless branch networks. That raises questions for customers:
Q: Are there any advantages for me?
A: Consumers who live in a metropolitan area that straddles several states will find that interstate branching makes banking easier, experts say. Travelers also will find added convenience. If interstate branching is permitted, they will be able to go to a branch of their bank in another part of the country and conduct bank business with a teller, such as depositing a check or getting a money order.
Q: Will the law affect the fees a bank charges or rates on loans and deposits?
A: The American Bankers Association predicts that interstate branching will result in lower overhead expenses, which banks could pass along to consumers in lower rates and fees.
Not everyone is so optimistic. ``There may be some efficiencies, but I'm not sure they will be enough to show up in consumers' pocketbooks,'' says Michelle Meier, counsel for government affairs at Consumers Union. ``And what efficiencies there are could end up going to shareholders. If interstate banking results in less competition, banks will have little incentive to pass their savings on to consumers.''
Q: In other words, less competition means less pressure to give a low rate on a loan or a higher rate on a CD?
A: Not necessarily. Industry experts point out that banks will continue to have many non-bank competitors, such as finance companies and mutual funds, and so it's not in their interest to suddenly start raising loan rates or lowering deposit rates.
Q: Will this mean small, local banks are to be gobbled up by one of the industry's giants?
A: It's unclear whether this will mark the end of small community banks. It's true that the industry is in the midst of a wave of mergers that is likely to accelerate under the new law. But community banks are far from extinct. The American Bankers Association points out that, although 49 states already permit some form of interstate banking, there are still about 8,000 community banks with assets of less than $100 million.
To help safeguard competition, the new law sets some limits on how much money any one bank can hold - no more than 10 percent of deposits nationwide, or no more than 30 percent in one state. But one bank could still dominate a particular region, Meier says. ``A lot of concentration is very local,'' she says. ``This won't stop a bank from having a huge presence in Cleveland without much competition.''
Q: Is there a danger that the far-flung national bank networks will ignore the needs of local communities?
A: There is concern that the creation of huge national bank networks will lead to standardization of services that hurts communities with particular needs, such as inner-city neighborhoods. ``There may be much more lending by the numbers, and credit decisions that are made pretty far from a local community,'' says Allen Fishbein, general counsel for the Center for Community Change, a non-profit group based in Washington, D.C. ``We may see more cherry-picking, in which a bank goes into a new state and buys banks in affluent areas and stays away from parts of a state viewed as low-income or slow growth.''
The American Bankers Association, however, notes that banks still must comply with the Community Reinvestment Act, which requires them to meet the credit needs of all the communities in which they do business. And banks are in business to make loans, and they will continue to do so.
Q: When does the law take effect?
A: There are two phases: One year after Clinton signs the bill, interstate banking takes effect. As of July 1, 1997, banks will be able to begin merging their branch operations around the country, except in states that have opted out of interstate branching.
by CNB