The Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, and the Office of the Comptroller of the
Currency today issued the host state loan-to-deposit ratios that the banking
agencies will use to determine compliance with section 109 of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on May 22,
2003.
In general, section 109 prohibits a bank from establishing
or acquiring a branch or branches outside of its home state primarily for the
purpose of deposit production. Section
109 also prohibits branches of banks controlled by out-of-state bank holding
companies from operating primarily for the purpose of deposit production.
Section 109 provides a process to test compliance with the
statutory requirements. The first step
in the process involves a loan-to-deposit ratio screen that compares a bank’s
statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for
banks in a particular state.
A second step is conducted if a bank’s statewide
loan-to-deposit ratio is less than one-half of the published ratio for that
state or if data are not available at the bank to conduct the first step. The second step requires the appropriate
banking agency to determine whether the bank is reasonably helping to meet the
credit needs of the communities served by the bank’s interstate branches.
A bank that fails both steps is in violation of section 109
and is subject to sanctions by the appropriate banking agency.
The updated host state loan-to-deposit ratios are attached.
Attachment
Federal Reserve Andrew
Williams (202) 452-2955
FDIC David Barr (202) 898-6992
OCC Dean DeBuck (202)
874-5770