DEFINITION of 'Interstate Banking'

The expansion of banking across state lines. Interstate banking became widespread in the mid 1980s, when state legislatures passed legislation that allowed bank holding companies to acquire out-of-state banks on a reciprocal basis with other states. Interstate banking has led to the rise of both regional and national banking chains.

BREAKING DOWN 'Interstate Banking'

Interstate banking has grown in three separate phases, starting in the 1980s with regional banks. These companies are limited to a specific region, such as the Northeast or Southeast, and were formed when smaller, independent banks merged to create larger banks. Then state law permitted a national trigger that allowed mergers with banks in any other state after a certain date. The Reigle-Neal Interstate Banking and Branching Efficiency Act allowed banks which met capitalization requirements to acquire other banks in any other state after Oct. 1, 1995. The direct result of these legislations was the onset of nationwide interstate banking.

RELATED TERMS
  1. Chain Banking

    Conceptually a form of bank governance that occurs when a small ...
  2. Interstate Commerce Commission ...

    A body within the U.S. Department of Congress, charged with regulating ...
  3. Branch Banking

    Engaging in banking activities such as accepting deposits or ...
  4. Douglas Amendment

    An amendment made to the Bank Holding Act of 1956. The Douglas ...
  5. State Bank

    A financial institution that has been chartered by a state to ...
  6. Bank

    A financial institution licensed as a receiver of deposits. There ...
Related Articles
  1. Insights

    The World's Top 10 Banks

    Learn more about the world's largest banks and how more financial power shifts eastward as China is home to four of the world's largest banks.
  2. Personal Finance

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  3. Insights

    A Brief History of U.S. Banking Regulation

    From the establishment of the First Bank of the United States to Dodd-Frank, American banking regulation has followed the path of a swinging pendulum.
  4. Personal Finance

    Banking Has Changed: What Does It Mean For Consumers?

    Banks have long been leading spenders on technological innovations. Learn the key changes in the banking industry and what institution is right for you.
  5. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  6. Investing

    Introduction To The Chinese Banking System

    As China steps into a greater role in the global economic system, their banking system continues to evolve.
  7. Investing

    KRE: SPDR S&P Regional Banking ETF

    Learn about the SPDR S&P Regional Banking Fund, an exchange-traded fund (ETF) that invests in equities of regional banks located in the United States.
  8. Personal Finance

    How Will Bank Regulation Affect British Banks?

    We look at the proposed changes to Britain's banking system, and see whether it will be able to stay competitive.
RELATED FAQS
  1. Is the banking sector appropriate for a growth investor?

    Explore the suitability of bank stocks as a sector appropriate for growth investors to consider including in their investment ... Read Answer >>
  2. What economic indicators are important to consider when investing in the banking ...

    Find out which economic indicators are most useful for investors in the banking sector, especially those influenced by central ... Read Answer >>
  3. What developed countries have the highest concentration in the banking sector?

    Learn about the developed countries that have the greatest concentration in the banking sector and the most important emerging ... Read Answer >>
  4. What are the main reasons an investor should consider an allocation to the banking ...

    Learn about investment opportunities in the commercial and investment banking industry. Find out why many investors choose ... Read Answer >>
  5. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
Trading Center