MISSOURI FACES INTERSTATE BRANCH BANK ISSUE

JEFFERSON CITY -- To permit interstate banking or not to permit interstate banking That is a the question facing Missouri in the months ahead, and whether it is nobler to follow the pattern set by federal legislation or reject its diminished regulations is the decision that must be made by members of the General Assembly, probably in next year's session.

The direction the state will take gets under way when a join interim committee begins a series of public hearings this month, with the first scheduled Tuesday at Kansas City. The legislative study panel is headed by Democrats, Sen. Ed. Quick of Kansas City and Rep. Chris Liese of St. Louis.

Interstate branch banking became a state issue a year ago when President Clinton signed into law the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. The first phase of the new law goes into effect at the end of next month, Sept. 30, when interstate banking will be permitted nationwide.

But, the new federal law does more than codify a situation that exists, in several ways. While bank holding companies have been acquiring financial institutions across state lines for some time, the new federal legislation nullifies statutes in any state forbidding the practice. Missouri cannot outlaw interstate banking and for all practical purposes already permits the practice.

What Missouri legislators must decided between now and June 1, 1997, is whether the state chooses one of three options concerning interstate branch banking. Those options include: to permit branching prior to June 1, 1997, to wait for the June 1, 1997, deadline when interstate branching will automatically become legal or to decline to participate in interstate branching prior to the 1997 effective date.

If the General Assembly makes no decision, then the provisions of the federal act will kick in on June 1, 1997, and banking institutions will be permitted to engage in branch banking across state lines. The General Assembly can also take steps to bring Missouri under the provisions of the interstate branching portion of Riegle-Neal before the effective date nearly two years away or members can vote to exclude the state, but that must be done before the middle of 1997.

What makes the topic a real political "hot potato" is the wide range of views held by bankers across the state, with some legislators facing the unpleasant task of having bankers within their district who both favor and oppose some portion of the Riegle-Neal Act. Unanimity on the question is virtually impossible in the state's banking community, and battle lines have formed less on the size of institutions than their geographical location. Banks near state borders are more likely to favor interstate branching, while those many miles from Missouri's boundaries are less likely to favor it.

A spokesman for the Missouri Bankers Association, Bill Ratliff, says his organization is making no recommendation but has attempted to hold informational seminars to acquaint members with the various ramifications of the federal legislation. One of these is a so-called deposit cap established by Riegle-Neal, limiting a bank holding company to 30 percent of the share of insured deposits within a state. Under existing statutes in Missouri, a holding company only have 13 percent of the deposit total.

Ratliff explains that bankers' views are all over the field, with some favoring the Riegle-Neal provisions but opposed to the higher deposit cap allowance, while others would prefer different limits and oppose interstate branching. At lease some legislators can soon expect to find themselves in the middle of a political mine field when they seek to vote an elusive banking consensus within their districts.

Only one state, Texas, has thus far voted to opt out of the federal legislation, but lawmakers there agreed to take another look in a couple of years. A source in that state reports considerable bitterness within the financial community when the measure was before the Texas legislature.

One group in Missouri, the Kansas City-based Missouri Independent Bankers Association, is clearly opposed to the federal legislation and wants Missouri to reject interstate branching. Another Group, favoring the 1994 act, is the Concerned Bankers for Missouri's Future. Most of MIBA's membership is made up of community bankers, while a smattering of both large and small banks comprise the Concerned Bankers' group.

Members of the "hot-seat" interim committee include, in addition to the co-chairman, Sens. Bill (Lacy) Clay of St. Louis, Ronnie DePasco of Kansas City, Sam Graves of Tarkio, Irene Treppler of St. Louis and Reps. Joe Treadway of Lemay, Mariland Williams of Dudley, Mark Elliott of Webb City and Zane Yates of Oakville. The panel plans to hold two other hearings in addition to the one at Kansas City, with one to be held at St. Louis. The third site has yet to be determined.