Summary: Federal regulation of intrastate domestic bank branching sets the guidelines for the safety and soundness of any office, branch agency, additional offices, or any branch place of business located in any of the United States or its territories or in the District of Columbia at which deposits are received, checks paid, or money lent. The federal regulators, state governments, and banks are intertwined in the branching process by a mixture of federal and state laws. However, current federal review of new branch applications rarely restricts branch actions, produces little new information of supervisory value and, in the case of state-chartered banks, duplicates state efforts. GAO reviewed the efficiency and effectiveness of the federal processes for regulating intrastate branching.
Federal reviews require information from applicants that may not be needed and that delays branch investment decisions. GAO found that: (1) virtually all state bank applicants were classified by their federal regulators as fundamentally sound, and most of these applicants had previous branching experience; (2) the majority of state bank branching placements are located close to existing bank operations; (3) less than 3 percent of the applications were protested in 1979 and 1980; (4) only 17 percent of the branch applications were denied by federal regulators from 1975 through 1980; (5) reviews of an applicant bank's capacity to branch rely extensively on data and analyses already in the possession of the regulator; and (6) reviews of branch impact on the recipient community are difficult and duplicate state efforts. GAO questioned the policy of the Office of the Comptroller of the Currency which provides for an extensive review of each application. GAO believes that an exception-generated review approach for its conclusions and recommendations should be used. Because federal regulatory agencies treat bank remote facilities as they do staffed branches, banks must receive federal agency approval to establish these facilities even when the state involved does not consider the facilities to be branches. GAO believes that such a review is no longer necessary for state banks and should be further reduced for national banks, because such facilities represent minor actions. This would ensure regulatory consistency.
