A safer and more convenient - but more concentrated - banking system is expected to result from interstate banking legislation that has cleared both the House and Senate.
Minor differences remain to be reconciled, but a leading proponent of interstate banking, Sen. Christopher Dodd, D-Conn., predicted a final version would reach President Clinton's desk for signature by Memorial Day. He is expected to sign it."The lives of bank customers nationwide will improve considerably for the better as a result," he said.
The 60 million people who live in border areas and the 4 million who commute to work across state lines would be able to establish bank accounts in their home states and make deposits and cash checks in branch offices in nearby states, he said.
The Senate approved its version by voice vote Tuesday. The House adopted a similar bill March 22.
"This bill will increase the safety and soundness of our banking system and reduce risk to our bank deposit insurance fund and in turn the American taxpayers, who back up that fund," said Sen. Donald Riegle, D-Mich., chairman of the Senate Banking Committee.
Riegle said the measure will allow banks to more easily diversify their lending geographically. That will make them better able to compete internationally, less vulnerable to failure and less likely to severely cut their lending because of a regional economic downturn.
However, one of the few opponents, Sen. Byron Dorgan, D-N.D., said the bill could endanger the flow of credit to regions experiencing slow economic growth.
"More and more concentration in the banking industry is not going to serve this country," he said. "I worry a great deal about what that will mean to rural America."
The Senate bill bans interstate mergers that would result in a bank controlling more than 10 percent of all bank and S&L deposits nationally or more than 25 percent in a single state.
But a bank would have to grow to roughly twice the size of Citicorp, the nation's largest, before the national concentration limit would start to restrict it.
The bill marks the most important change to the structure of the banking system since the Bank Holding Company Act of 1956 and - in stages - lowers barriers to interstate banking dating to 1927.
Within a year of enactment, bank holding companies would be permitted to establish a bank in any state.
Starting in June 1997, holding companies would be able to convert their individual state banks into branch offices of a single large bank. State legislatures would be permitted to opt out of interstate branching, although few are expected to do so.
The second change, on branches, is considered by far the most significant and would enable the nation's biggest banks to save millions of dollars a year by eliminating the separate boards of directors and roster of corporate officers now required in each state in which they operate.
It's expected to quicken the already fast pace of mergers in the banking industry and help such giants as BankAmerica Corp. and NationsBank Corp. to extend their reach from coast to coast.
Every state, except Hawaii, already permits banks to be owned by out-of-state holding companies. But the current system has been described by Treasury Secretary Lloyd Bentsen as a clumsy patchwork, with many states imposing conditions on out-of-state owners and banks forbidden to have multistate branch networks.