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Riegle Neal Interstate Banking and Branching Efficiency Act of 1994

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The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 [IBBEA] amended the laws governing federally chartered banks in order to restore the laws' competitiveness with the recently relaxed laws governing state-chartered banks. The goal was the return to a balance between the benefits of a state bank charter versus a federal bank charter. Among other notable changes, the Act stipulated that a federally chartered bank wishing to expand must first undergo a review of its Community Reinvestment Act compliance.

Contents

Expansion of the Community Reinvestment Act

Three sections of the IBBEA address and expand the Community Reinvestment Act.

In section 107 ("EQUALIZING COMPETITIVE OPPORTUNITIES FOR UNITED STATES AND FOREIGN BANKS"):

(f) MEETING COMMUNITY CREDIT NEEDS.

In section 109 ("PROHIBITION AGAINST DEPOSIT PRODUCTION OFFICES"):

(b) GUIDELINES FOR MEETING CREDIT NEEDS. Regulations issued under subsection (a) shall include guidelines to ensure that interstate branches operated by an out-of-State bank in a host State are reasonably helping to meet the credit needs of the communities which the branches serve. (c) LIMITATION ON OUT-OF-STATE LOANS. [...] [...]

Section 110 ("COMMUNITY REINVESTMENT ACT EVALUATION OF BANKS WITH INTERSTATE BRANCHES") amends the Community Reinvestment Act itself to include a new section regarding the method of evaluating the compliance of banks with branches in more than one state.

Effect

Newly formed firms used less outside debt financing and invested less, suggesting that greater banking competition increased financial constraints for these firms. These effects diminished and ultimately reversed as firms aged.

References

Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 Wikipedia