State banking commissions

The regulatory powers of the federal banking agencies overlap with those of the state banking agencies, which rule upon charter applications in their respective states and regularly examine all state-chartered banks. The states also have rules prescribing the minimum amount of equity capital for individual banks and frequently place interest-rate ceilings on deposits and loans. Many states in recent years have imposed restrictions on the growth and formation of bank holding companies, requiring state approval before a holding company may be formed or, once formed, before it can acquire additional authorities, consider the new bank's prospects for earnings, the convenience and needs of the public in the area to be served, and the potential for damage to existing financial institutions if a new charter is granted.
One of the areas in which state banking law currently is supreme is that concerning branch banking. Since the McFadden Act of 1927, the federal government has allowed the states to determine whether commercial banks operating within their borders will be permitted to establish any branch offices and, if so, under what circumstances. Today, 15 states forbid full-services branch offices. These so-called unit-banking states are situated mainly in the Midwest and south and include taxes, Kansas, Nebraska, and Colorado. However, as we saw earlier, there is a definite trend toward greater use of branching and holding company activity in most pats of the United States. Recent examples include Florida, which until 1978 was a unit-banking state and now permits limited branching on a countywide basis. The state of New York converted to statewide branching in 1976 following an experiment with limited branching in designated regions. Most experts predict that in future years branch banking in one form or another will spread across the United States as needs for larger banking organizations and new financial services increase.