[Congressional Record Volume 145, Number 165 (Friday, November 19, 1999)]
[Extensions of Remarks]
[Pages E2492-E2493]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 RECOGNIZING THE ARKANSAS BANKERS ASSOCIATION'S SUPPORT FOR FINANCIAL 
                             MODERNIZATION

                                 ______
                                 

                          HON. ASA HUTCHINSON

                              of arkansas

                    in the house of representatives

                      Thursday, November 18, 1999

  Mr. HUTCHINSON. Mr. Speaker, on behalf of the Arkansas Bankers 
Association, I would like to submit their remarks regarding a specific 
section of S. 900, the Financial Modernization bill, which has 
particular interest and importance to Arkansas. This section is titled 
``Interest Rates and Other Charges at Interstate Branches.''

       With the passage of the Riegle-Neal Interstate Banking and 
     Branching Act several years ago, the question arose as to 
     which state law concerning interest rates on loans would 
     apply to branches of the interstate banks operating in a 
     ``host state''. Would those branches be governed by the 
     interest rate ceiling of the charter location or that of 
     their physical location? The office of the Comptroller of the 
     Currency and the Federal Deposit Insurance Corporation 
     addressed this issue with options that basically give 
     branches of interstate banks the option of being governed by 
     either their home or host state requirements concerning 
     interest rates by structuring the loan process to meet 
     certain requirements.
       In Arkansas this has had a profound effect upon our local 
     banking community. Arkansas has a usury ceiling that places 
     the maximum rate that can be charged for many classes of 
     loans at 5% above the Federal Reserve Discount Rate. However, 
     over 40% of our banking locations in the state, those that 
     are branches of non-Arkansas based interstate banks, are in 
     effect no longer governed by this law. The out of state banks 
     are free to price according to risk, and thus charge lower 
     rates for the better credits and higher rates for the lower 
     quality credits. However, local Arkansas banks cannot price 
     according to risk and are thus placed at a significant 
     competitive disadvantage.
       In recognition of this inequity and the fact that if not 
     corrected our state may lose virtually all of its local 
     community banks, the Arkansas delegation supports language 
     that provides our local banks with the loan pricing parity in 
     all regards with non-Arkansas interstate banks operating 
     branches in Arkansas. Indeed, this is the intent of the 
     section concerning Interest Rates at Interstate Branching.

[[Page E2493]]

       The entire Arkansas Delegation is on record supporting this 
     section as well as Governor Mike Huckabee, and Bank 
     Commissioner Frank White. Further, a joint meeting of the 
     state house unanimously passed a resolution requesting the 
     Arkansas Congressional Delegation to address this important 
     issue.
       Very simply, the situation of placing local Arkansas banks 
     at a severe competitive disadvantage is a result of the 
     comptroller-general's interpretation of the Riegle-Neal 
     Interstate Banking and Branching Act.

  Mr. Speaker, from these words it is clear that the legislation is 
intended to assist community banks in Arkansas and allow Arkansans to 
receive loans and invest funds in their home state. With the passage of 
S. 900, I want to congratulate my colleagues on a job well done. This 
legislation will enable our financial industry to move into the next 
century. This bill not only helps states like Arkansas, but the nation 
as a whole.

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