District Circular Letters
September 10, 1999
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). These ratios update
data released on August 13, 1998 (see our letter dated August
20, 1998).
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 banks in 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) 974-2242.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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