§1835a — Title 12 Banks and Banking | U.S. Code

Summary

Out-of-State banks must not use the right to open branches in other states mainly to get deposits. Federal banking regulators had to make one set of rules that took effect June 1, 1997. The rules say branches in a host State must help meet local credit needs. At least 1 year after a branch is opened or bought, regulators will compare how much the bank lends in the host State to the deposits it takes there. If that lending is less than half the state average lending-to-deposit ratio, the regulator will review the bank’s loans and other facts to decide if the bank is helping local communities. If the bank is not doing enough, the regulator can order branch closures unless the bank gives a satisfactory plan, and can stop the bank from opening new branches unless it promises to meet the community’s credit needs. Before closing any branch, the regulator must give notice, hold a hearing, and follow the usual enforcement and hearing rules. These rules apply to any interstate branch opened or acquired under the interstate branching law. Definitions: appropriate Federal banking agency — the agency that supervises the bank; bank, State, State bank — common banking terms used in federal law; home State — where the bank’s main office or charter is; host State — where a branch is located; interstate branch — a branch opened under the interstate branching law; out-of-State bank — a bank whose home State is a different State (includes certain foreign banks).

Title 12, §1835a

Banks and Banking — Source: USLM XML via OLRC

(a)The appropriate Federal banking agencies shall prescribe uniform regulations effective June 1, 1997, which prohibit any out-of-State bank from using any authority to engage in interstate branching pursuant to this title,11 See References in Text note below. or any amendment made by this title 1 to any other provision of law, primarily for the purpose of deposit production.

(b)Regulations issued under subsection (a) shall include guidelines to ensure that interstate branches operated by an out-of-State bank in a host State are reasonably helping to meet the credit needs of the communities which the branches serve.

(c)(1)Regulations issued under subsection (a) shall require that, beginning no earlier than 1 year after establishment or acquisition of an interstate branch or branches in a host State by an out-of-State bank, if the appropriate Federal banking agency for the out-of-State bank determines that the bank’s level of lending in the host State relative to the deposits from the host State (as reasonably determinable from available information including the agency’s sampling of the bank’s loan files during an examination or such data as is otherwise available) is less than half the average of total loans in the host State relative to total deposits from the host State (as determinable from relevant sources) for all banks the home State of which is such State—

(A)the appropriate Federal banking agency for the out-of-State bank shall review the loan portfolio of the bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host State; and

(B)if the agency determines that the out-of-State bank is not reasonably helping to meet those needs—

(i)the agency may order that an interstate branch or branches of such bank in the host State be closed unless the bank provides reasonable assurances to the satisfaction of the appropriate Federal banking agency that the bank has an acceptable plan that will reasonably help to meet the credit needs of the communities served by the bank in the host State, and

(ii)the out-of-State bank may not open a new interstate branch in the host State unless the bank provides reasonable assurances to the satisfaction of the appropriate Federal banking agency that the bank will reasonably help to meet the credit needs of the community that the new branch will serve.

(2)In making a determination under paragraph (1)(A), the appropriate Federal banking agency shall consider—

(A)whether the interstate branch or branches of the out-of-State bank were formerly part of a failed or failing depository institution;

(B)whether the interstate branch was acquired under circumstances where there was a low loan-to-deposit ratio because of the nature of the acquired institution’s business or loan portfolio;

(C)whether the interstate branch or branches of the out-of-State bank have a higher concentration of commercial or credit card lending, trust services, or other specialized activities;

(D)the ratings received by the out-of-State bank under the Community Reinvestment Act of 1977 [12 U.S.C. 2901 et seq.];

(E)economic conditions, including the level of loan demand, within the communities served by the interstate branch or branches of the out-of-State bank; and

(F)the safe and sound operation and condition of the out-of-State bank.

(3)(A)Before exercising any authority under paragraph (1)(B)(i), the appropriate Federal banking agency shall issue to the bank a notice of the agency’s intention to close an interstate branch or branches and shall schedule a hearing.

(B)section 1818(h) of this title shall apply to any proceeding brought under this paragraph.

(d)This section shall apply with respect to any interstate branch established or acquired in a host State pursuant to this title 1 or any amendment made by this title 1 to any other provision of law.

(e)For the purposes of this section, the following definitions shall apply:

(1)The terms “appropriate Federal banking agency”, “bank”, “State”, and “State bank” have the same meanings as in section 1813 of this title.

(2)The term “home State” means—

(A)in the case of a national bank, the State in which the main office of the bank is located; and

(B)in the case of a State bank, the State by which the bank is chartered.

(3)The term “host State” means a State in which a bank establishes a branch other than the home State of the bank.

(4)The term “interstate branch” means a branch established pursuant to this title 1 or any amendment made by this title 1 to any other provision of law and any branch of a bank controlled by an out-of-State bank holding company (as defined in section 1841(o)(7) of this title).

(5)The term “out-of-State bank” means, with respect to any State, a bank the home State of which is another State and, for purposes of this section, includes a foreign bank, the home State of which is another State.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This title, referred to in subsecs. (a), (d), and (e)(4), is title I of Pub. L. 103–328, Sept. 29, 1994, 108 Stat. 2339, which enacted this section and section 43, 215a–1, and 1831u of this title, amended section 30, 36, 215, 215a, 215b, 1462a, 1820, 1828, 1831a, 1831r–1, 1841, 1842, 1846, 2906, 3103 to 3105, and 3106a of this title and section 1927 of Title 7, Agriculture, enacted provisions set out as notes under section 215, 1811, 1828, 3104, 3105, and 3107 of this title and section 1927 of Title 7, and amended provisions set out as a note under section 1811 of this title. For complete classification of this title to the Code, see Tables. The Community Reinvestment Act of 1977, referred to in subsec. (c)(2)(D), is title VIII of Pub. L. 95–128, Oct. 12, 1977, 91 Stat. 1147, which is classified generally to chapter 30 (§ 2901 et seq.) of this title. For complete classification of this Act to the Code, see

Short Title

note set out under section 2901 of this title and Tables. Codification Section was enacted as part of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, and not as part of the Federal Deposit Insurance Act which comprises this chapter.

Amendments

1999—Subsec. (e)(4). Pub. L. 106–102 inserted before period at end “and any branch of a bank controlled by an out-of-State bank holding company (as defined in section 1841(o)(7) of this title)”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1999 AmendmentAmendment by Pub. L. 106–102 effective 120 days after Nov. 12, 1999, see section 161 of Pub. L. 106–102, set out as a note under section 24 of this title.

§1835a Prohibition against deposit production offices