Federal Review of Intrastate Branching Applications Can Be Reduced
Highlights
Federal regulation of intrastate domestic bank branching sets the guidelines for the safety and soundness of any office, branch agency, additional offices, or any branch place of business located in any of the United States or its territories or in the District of Columbia at which deposits are received, checks paid, or money lent. The federal regulators, state governments, and banks are intertwined in the branching process by a mixture of federal and state laws. However, current federal review of new branch applications rarely restricts branch actions, produces little new information of supervisory value and, in the case of state-chartered banks, duplicates state efforts. GAO reviewed the efficiency and effectiveness of the federal processes for regulating intrastate branching.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should amend the McFadden Act and the Federal Deposit Insurance Act to differentiate between staffed branches and remote service facilities. |
Closed – Not Implemented
|
The McFadden Act will be reviewed on a much broader basis as part of industry structure debates. The GAO concern will be encompassed by these debates. The Supreme Court has recently exempted certain remote service facilities from interstate banking regulations. This may force changes in the regulations. |
| Congress should amend the Federal Reserve Act and the Federal Deposit Insurance Act to replace the requirement for a broad review of each new branch application with a notification process, wherein applicant banks notify the respective federal agency of their desire to branch. The agency would then respond within a fixed timeframe to this notification with the options of either having no objection, denying the branch, or requiring more data. |
Closed – Not Implemented
|
A major regulatory reorganization is under study that could encompass this process. Action on this specific recommendation is unlikely in light of a broader study. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Comptroller of the Currency | The Comptroller of the Currency should establish an exception-oriented new branch application processing system with explicit calendar-day processing time requirements for routine branch applications. Extensions beyond this timeframe should be exceptions which would necessitate an Office of the Comptroller of the Currency action to initiate. |
Closed – Implemented
The agency has streamlined its application process and issued new instructions. It has set separate guidelines for machines versus brick-and-mortar branches and established calendar day processing timeframes. An accomplishment report is being completed.
|
| Office of the Comptroller of the Currency | The Comptroller of the Currency should establish structured bank application reporting formats for national banks operating in states requiring the review of branch applications for their community convenience and needs impact, on the basis of the Office of the Comptroller of the Currency interpretation of individual state law requirements. |
Closed – Implemented
The agency has streamlined its application format. It believes that it is not feasible to adopt application formats for each of the 50 states' laws. GAO believes that the new format offers no additional guidance to banks.
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