BANKS ‑- BRANCHES ‑- NATIONAL AND STATE
Branch banks are not authorized in rural areas of a county except where principal place of business is located.
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January 6, 1955
Honorable R. D. Carrell
Supervisor of Banking
Department of Public Institutions
Public Lands-Social Security Building
Olympia, Washington Cite as: AGO 55-57 No. 2
We have your communication of December 29, 1954 requesting the opinion of this office as to whether a national or state bank having a capital of $500,000 or more may establish and operate a branch bank in an unincorporated area outside of the county in which is located its principal place of business.
We answer your inquiry in the negative.
In arriving at the foregoing conclusion, we have read and considered a number of private legal opinions concerning the same problem written by members of the bar of our state which have been extremely helpful.
The question propounded requires an interpretation of RCW 30.40.020 derived from section 5, chapter 42, Laws of 1933, set forth in part as follows:
"A bank or trust company having a paid-in capital of not less than five hundred thousand dollars may, with the approval of the supervisor, establish and operate branches in any city or town within the state. A bank or trust company having a paid-in capital of not less than two hundred [[Orig. Op. Page 2]] thousand dollars may, with the approval of the supervisor, establish and operate branches within the limits of the county in which its principal place of business is located.
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"No bank or trust company shall establish or operate any branch in any city or town outside the city or town in which its principal place of business is located in which any bank, trust company or national banking association regularly transacts a banking or trust business, except by taking over or acquiring an existing bank, trust company or national banking association or the branch of any bank, trust company or national banking association operating in such city or town."
A state bank is generally considered to be a quasi-public corporation created by and subject to regulation by the state legislature. The state supervisor of banks has been given the discretionary authority to approve or reject an application to establish a branch. In addition, the legislature has required certain capital requirements to be met before the supervisor may approve the establishment of a branch state bank.
It seems clear from the provisions of the code set forth above that the legislature intended to restrict the area in which branch banks may be authorized by the supervisor of banking. Giving to the language of the statute its usual and normal meaning, we conclude as follows:
(1) A bank having a paid-in capital of not less than $500,000 may establish a branch in anycity or town within the state.
(2) A bank having a paid-in capital of not less than $200,000 may establish branches within an unincorporated area of a county in which its principal place of business is located.
[[Orig. Op. Page 3]]
(3) A bank may only establish a branch in a city or town other than its principal place of business by taking over or acquiring such existing bank as there may be operating within such city or town.
The problem with respect to national banks establishing branches is somewhat different. In the first place, national banks located within the state are controlled primarily by federal law. Title 12, section 36 relating to branch banks as amended July 15, 1952, chapter 753, section 2 (b) 66 Stat. 633, provides in part as follows:
"A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) Within the limits of the city, town or village in which said association is situated, if such establishment and operation are at the time expressly authorized to State banks by the law of the State in question; and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks. In any State in which State banks are permitted by statute law to maintain branches within county or greater limits, if no bank is located and doing business in the place where the proposed agency is to be located, any national banking association situated in such State may, with the approval of the Comptroller of the Currency, establish and operate, without regard to the capital requirements of this section, a seasonal agency in any resort community within the limits of the county in which the main office of such association is located, for the purpose of receiving and paying out deposits, issuing [[Orig. Op. Page 4]] and cashing checks and drafts, and doing business incident thereto; Provided, That any permit issued under this sentence shall be revoked upon the opening of a State or national bank in such community. Except as provided in the immediately preceding sentence, no such association shall establish a branch outside of the city, town, or village in which it is situated unless it has a combined capital stock and surplus equal to the combined amount of capital stock and surplus, if any, required by the law of the State in which such association is situated for the establishment of such branches by State banks, or, if the law of such State requires only a minimum capital stock for the establishment of such branches by State banks, unless such association has not less than an equal amount of capital stock."
An excellent discussion of the federal legislative history of branch banking by national associations is contained in an opinion by the Department of Justice to the Secretary of the Treasury, dated October 27, 1933, Opinions of Attorneys General, Volume 37, 1932-1934. The general theory respecting national and state branch banking is set forth on page 329 by a quotation from Mr. Luce (Cong. Rec., Vol. 77, p. 5895):
"'* * * In the controversy over the respective merits of what are known as unit banking and branch banking systems, a controversy that has been alive and sharp for years, branch banking has been steadily gaining in favor. It is not, however, here proposed to give the advocates of branch banking any advantage. We do not go an inch beyond saying that the two ideas shall compete on equal terms and only where the States make the competition possible by letting their own institutions have branches. In short, [[Orig. Op. Page 5]] we say only that if a State invites the race, let the better horse win. That system which proves itself the better able to serve the people will in the end prevail.'"
The holding of the opinion was to the effect that a national banking association may establish and operate branch banks with the approval of the Comptroller of the Currency, subject to the restrictions as to location imposed by the law of the state respecting state branch banks.
In view of our statute which authorizes state branch banks, it would seem that national banking associations may establish branches upon approval by the Comptroller of Currency in such locations as are authorized by the state statute and subject to the same restrictions.
Therefore in conclusion, it is our opinion that a state or national bank may not establish a branch bank in the State of Washington except in strict conformance with the provisions of RCW 30.40.020.
We hope this will be of assistance to you.
Very truly yours,
DONALD E. WATSON
Assistant Attorney General