Governor George V. Voinovich signed the interstate branching bill (Senate Bill 40) into law yesterday. The new law, which goes into effect immediately, gives Ohio-chartered financial institutions the authority to conduct interstate branching.

"This important legislation gives Ohio-chartered financial institutions the same opportunities that national banks will have as of June 1," Donna Owens, director of the Ohio Department of Commerce, said. "State and federal financial institutions now have a level playing field on which to compete in the marketplace."

Under the law, Ohio-chartered banks, savings and loan associations, and savings banks can fully participate in interstate branching. It permits Ohio institutions to merge with and acquire branches of financial institutions located in other states and to establish new branches in other states. As a result of interstate branching, the maintenance and operation of banking activities in multiple states can be coordinated through common ownership of banking subsidiaries.

Senate Bill 40 brings Ohio in line with the federal Riegle-Neal Interstate Banking and Branching Efficiency Act. Riegle-Neal mandated nationwide interstate banking after September 29, 1995 and interstate branching for national banks after June 1, 1997. States had the option to then choose to allow branching for both state and national banks before June 1, 1997 or to prohibit interstate branching for all banks. More than 40 states have passed legislation authorizing interstate branching.

In response to Riegle-Neal, the Ohio Department of Commerce formed the Financial Institutions Advisory Committee to study the implications of interstate banking and branching in Ohio. The committee included state banking regulators as well as representatives of Ohio financial institutions. The committee studied the issues and developed a consensus toward determining the role Ohio will play in the interstate environment.

The Ohio General Assembly addressed the interstate banking issue by enacting Senate Bill 217, the interstate banking bill, in 1996. This law gave Ohio bank holding companies the opportunity to acquire other banking organizations in any state as long as the Ohio company is treated to the same opportunities under the other state's laws.

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