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. Interstate Commerce Commission ...

    A body within the U.S. Department of Congress, charged with regulating ...
  2. McFadden Act

    Federal legislation that gave individual states the authority ...
  3. Bankers' Bank

    A special type of bank that is created by a group of banks. Bankers' ...
  4. Limited Service Bank

    Any type of banking business facility that is located separately ...
  5. National Bank

    In the United States, a commercial bank chartered by the comptroller ...
  6. Super Regional Bank

    A mid-sized bank that has a significant presence in a geographical ...
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. 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. Insights

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
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. 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 >>
  3. 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 >>
  4. 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 >>
  5. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
  6. 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 >>
Trading Center