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. Bankers' Bank

    A special type of bank that is created by a group of banks. Bankers' ...
  6. National Bank

    In the United States, a commercial bank chartered by the comptroller ...
Related Articles
  1. 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.
  2. 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.
  3. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
  4. Taxes

    Internet Sales Tax's Effect on Interstate Commerce

    Find out how a national Internet sales tax could affect interstate commerce, and why some bigger online retailers are lobbying for such a tax.
  5. 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.
  6. Investing

    IAT: iShares US Regional Banks ETF

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
  7. Insights

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  8. Insights

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  9. 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. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  2. How does the division of regional and national banks affect investing in the banking ...

    Research the difference between investing in regional versus national banks, and find out which strategy is the best fit ... Read Answer >>
  3. How do investment banks help the economy?

    Learn more about the functions of investment banks in a modern economy and how investment banks have been treated differently ... Read Answer >>
  4. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  5. What proportion of the global economy is comprised of banks?

    Read about the size and scope of the global banking sector, its importance and why it should continue to form a sizable portion ... Read Answer >>
Trading Center