FDIC Proposes Parity for State Banks Without Host-State Branches
A proposed FDIC rule would give an out-of-state, state-chartered bank the same protections from host-state laws as a national bank, even if it has no physical branch there.
The FDIC has proposed a rule to ensure regulatory parity between out-of-state, state-chartered banks and national banks, regardless of physical presence. The proposal would amend 12 CFR Part 331 so that if a host state's laws do not apply to a national bank, they likewise do not apply to a state-chartered bank operating there, even without a branch. This move was prompted by litigation over an Illinois interchange fee law, which revealed uncertainty about whether existing protections under Section 24(j) of the FDI Act extended to state banks without a host-state branch. By closing this parity gap, the FDIC aims to align regulations with modern banking practices, where activity increasingly occurs through non-branch channels. For affected banks, the rule could provide significant compliance cost savings, which the FDIC estimated at over $300 million for the Illinois law alone. The proposal will not affect rules governing interest rates on loans. A 60-day comment period will open upon the notice’s publication in the Federal Register.