McFadden Act

DEFINITION of 'McFadden Act'

Federal legislation that gave individual states the authority to govern bank branches located within the state. This includes branches of national banks located within state lines. The act was intended to allow national banks to compete with state banks by permitting them to open branches within state limitations.


The McFadden Act was passed by Congress in 1927. It was modified in 1994 by the Riegle-Neale Interstate Banking and Branching Efficiency Act, which allowed banks to open limited service bank branches across state lines by merging with other banks. This act repealed the earlier provision within the McFadden Act prohibiting this practice.