Regulators make loan-to-deposit ratios public

WASHINGTON – Federal regulators this month made public new host state loan-to-deposit ratios, which will be used to determine compliance if a bank wants to establish or acquire branches outside of its home state.
The Federal Reserve board of governors and the Federal Deposit Insurance Corp., in conjunction with the Comptroller of the Currency, issued the loan-to-deposit ratio, which will be used to compare a bank’s estimated statewide loan-to-deposit ratio to estimated host state loan-to-deposit ratio for any particular state, according to a FDIC report.
“The second step requires the appropriate agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches,” according to the report.
A bank that fails both steps is in violation of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and would be subject to sanctions.
Rhode Island’s host state loan-to-deposit ratio is 85 percent. Utah has the highest loan-to-deposit ratio at 101 percent and Delaware is the lowest with a ratio of 47 percent.
The FDIC says no additional data was collected from financial institutions to implement the ratios, “due to the legislative intent against imposing regulatory burden,” so the agencies used a proxy to estimate the ratios, as insufficient lending data was available on a geographic basis.
“The estimated host state loan-to-deposit ratios, and any changes in the way the ratios are calculated, will be publicized on an annual basis,” according to the report.

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