    Interstate Banking: Benefits and Risks of Removing Regulatory
    Restrictions (Chapter Report, 11/02/93, GAO/GGD-94-26).

    Many states have lifted restrictions on interstate expansion of bank
    holding companies, sparking an increase in interstate banking. Removal
    of federal interstate banking and branching restrictions could further
    spur the growth of larger, more geographically widespread banking
    companies.  The growth in interstate banking is concentrating assets at
    the national level as bank companies continue to buy out or merge with
    banks in other states. Concentration of assets at the state level,
    however, is limited to mergers and acquisitions among banks in the same
    state or local market.  Banks with assets of less than $1 billion have
    been able to maintain their national market share despite the growth of
    the largest banking companies.  Although the removal of interstate
    banking and branching restrictions could benefit the safety and
    soundness of the industry, the regulatory process, and many bank
    customers, such a move is not without risk.  Problems can arise if banks
    are poorly managed and regulated, asset concentration levels rise
    significantly, or credit is tightened for bank customers who find it
    hard to obtain loans elsewhere.  The risks to safety and soundness can
    be minimized by restricting interstate expansion to well-run and
    well-capitalized institutions and by properly implementing the early
    closure and safety and soundness provisions of the FDIC Improvement Act
    of 1991.  In addition, vigilant enforcement of antitrust laws and of the
    laws and regulations governing credit availability is essential.
    Additional regulatory authority could be needed to respond to unforeseen
    consequences of increased interstate banking.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GGD-94-26
         TITLE:  Interstate Banking: Benefits and Risks of Removing
                 Regulatory Restrictions
          DATE:  11/02/93
       SUBJECT:  Banking regulation
                 Bank management
                 Federal reserve banks
                 Financial institutions
                 Banking law
                 Bank holding companies
                 Regulatory agencies
                 National banks
                 Economic growth
                 Economic policies
    IDENTIFIER:  Bank Insurance Fund
                 BIF

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