FDIC Would Free Out-of-State Banks From Host Jurisdiction Laws

The FDIC proposed a rule to give state-chartered banks operating outside their home jurisdiction the same treatment as national banks under host jurisdiction law.

Under the proposal, a host jurisdiction's laws that do not apply to a national bank would likewise not apply to an out-of-state bank chartered elsewhere that provides services there. The exemption would apply whether or not the state bank operates a branch in the host state. Consistent with Federal Deposit Insurance Act ("FDIA") Section 24(j) ("Activities of insured State banks"), the law of the bank's home jurisdiction would govern instead.

The proposed rule would not affect the interest rates state banks may charge on loans, which remain governed by FDIA Section 27 ("State-chartered insured depository institutions and insured branches of foreign banks"). The FDIC said the proposal makes no preemption determination. It instead addresses which jurisdiction's laws govern when a bank chartered in one state serves customers in another.

Comments are due 60 days after publication in the Federal Register.