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Interstate Branch Banking Progress Report

Wednesday, April 1, 1998

It has been nine months since banks were allowed to implement interstate branching, as permitted by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Although interstate branching laws have not significantly affected the majority of Eighth District account holders, there have been a few changes in two areas:

Overall Effect of Merger Activity on the Eighth District

Between June 1, 1997, and Feb. 1, 1998, 10 cross-district mergers involving Eighth District institutions took place. In four of the mergers, the District gained 22 out-of-district banks with $6.4 billion in assets; in the other six, the District lost 35 banks with total assets of 36.4 billion.

Changes in Regulation D and the Introduction of the New Account Structure

As a result of changes in Regulation D and the introduction of a new Federal Reserve account structure on Jan. 1, 1998, institutions may hold only one account with the Fed, regardless of location. Accordingly, the Federal Reserve has been working with institutions to close both separate pass-through accounts kept for reserve maintenance of respondents and secondary accounts held because the institutions have a business presence in multiple Reserve Offices.

By the end of 1998, at least 52 Eighth District separate pass-through or secondary settlement accounts are expected to close, 70 percent of which will merge with master accounts in this District. Also, at least 30 pass-through or secondary settlement accounts that Eighth District institutions hold in other districts will be closed, and the relationships will move to this District.