WASHINGTON — The Board of Governors of
the Federal Reserve System, the Federal Deposit Insurance Corporation, and the
Office of the Comptroller of the Currency today issued the host state
loan-to-deposit ratios that the banking agencies will use to determine
compliance with section 109 of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994. These ratios update data released on June 26, 2008.
In general, section 109 prohibits a bank
from establishing or acquiring a branch or branches outside of its home state
primarily for the purpose of deposit production. Section 109 also prohibits
branches of banks controlled by out-of-state bank holding companies from
operating primarily for the purpose of deposit production.
Section 109 provides a process to test
compliance with the statutory requirements. The first step in the process
involves a loan-to-deposit ratio screen that compares a bank’s statewide
loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a
particular state.
A second step is conducted if a bank’s
statewide loan-to-deposit ratio is less than one-half of the published ratio
for that state or if data are not available at the bank to conduct the first
step. The second step requires the appropriate banking agency to determine
whether the bank is reasonably helping to meet the credit needs of the
communities served by the bank’s interstate branches.
A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.
The updated host state loan-to-deposit ratios are attached.
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