Financial Markets and Institutions (2-downloads)

large, complex banking organizations (LCBOs). This development has been facil-

itated by the repeal of the Glass-Steagall restrictions on combinations of banking

and other financial service industries discussed in the next section.

The Riegle-Neal Interstate Banking and

Branching Efficiency Act of 1994

Banking consolidation was given further stimulus by the passage in 1994 of the Riegle-

Neal Interstate Banking and Branching Efficiency Act. This legislation expands the

regional compacts to the entire nation and overturns the McFadden Act and Douglas

Amendment’s prohibition of interstate banking. Not only does this act allow bank

holding companies to acquire banks in any other state, notwithstanding any state laws

to the contrary, but bank holding companies can also merge the banks they own

into one bank with branches in different states. States also have the option of opt-

ing out of interstate branching, a choice only Texas has made.

The Riegle-Neal Act finally established the basis for a true nationwide banking

system. Although interstate banking was accomplished previously by out-of-state

purchase of banks by bank holding companies, until 1994 interstate branching was

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