District Circular Letters
August 20, 1998
BANKING SUPERVISION AND REGULATION:
SECTION 109 OF THE RIEGLE-NEAL ACT
To State Member Banks, Bank
Holding Companies, U.S. Branches and
Agencies of Foreign Banks, and Others Concerned
in the Twelfth Federal Reserve District
Host State Loan-to-Deposit Ratios
The Federal Reserve Board, the Office of the Comptroller of the Currency,
and the Federal Deposit Insurance Corporation, have issued the enclosed
host
state loan-to-deposit ratios. The banking agencies will use these
ratios to determine compliance with section 109 of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (Interstate Act).
Section 109 prohibits any bank from establishing or acquiring a branch
or branches outside of its home state under the Interstate Act primarily
for the purpose of deposit production and provides a two-step process
to test compliance with the statutory requirements:
- The first step involves a loan-to-deposit ratio screen that compares
a bank's statewide loan-to-deposit ratio to the host state loan-to-deposit
ratio for a particular state.
- The second step requires the banking agencies to determine if the
bank is reasonably helping to meet the credit needs of the communities
served by the bank's interstate branches.
A bank that fails both steps is in violation of section 109 and is subject
to sanctions by the banking agencies.
Additional Information
For additional information regarding the section 109 host state loan-to-deposit
ratios, please contact our Banking Supervision and Regulation Department,
at (415) 974-3007.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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