State-chartered banks have until November 23, 2026, to submit comments on a Federal Deposit Insurance Corporation (FDIC) proposal that would expand parity between state-chartered banks and national banks when conducting interstate activities (12 CFR Part 331). The notice of proposed rulemaking, approved by the FDIC Board of Directors on September 17, 2026, would clarify that certain host-state laws that do not apply to national banks likewise would not apply to out-of-state state banks, substantially expanding the ability of state-chartered banks to operate across state lines under a more uniform legal framework. This could reduce compliance costs and narrow longstanding competitive differences between state and national banks. With the comment period closing in just over three weeks, interested banks should act promptly to have their views considered.
Background
Under current law, national banks benefit from federal preemption of certain state laws when operating in host states. State banks, by contrast, have historically been subject to host-state laws when conducting activities outside their chartering state, creating a competitive disadvantage. The proposed rule was prompted in part by litigation involving the Illinois Interchange Fee Prohibition Act (covered here), in which the parties disagreed as to which state-chartered banks are “subject to Riegle-Neal” and therefore entitled to the protections of section 24(j) of the Federal Deposit Insurance Act (FDI Act). The FDIC’s proposal would clarify its interpretation and reduce uncertainty regarding the interstate activities of state-chartered institutions.
Key Provisions of the Proposed Rule
The proposed rule would provide that when host-state laws do not apply to a national bank, those laws would similarly not apply to an out-of-state state bank providing services in that host state, regardless of whether the state bank has a physical branch presence there. Consistent with section 24(j) of the FDI Act, the law of the state bank’s chartering state would govern its activities. The proposed rule would not affect the interest rates state banks may charge on loans, which remain governed by section 27 of the FDI Act. Notably, the proposed rule does not determine whether any particular state laws are preempted.
Although the proposal would enhance parity with national banks, it may draw opposition from state regulators or consumer advocates who view it as expanding federal preemption. Any final rule could also face judicial scrutiny regarding its scope and application.
For state-chartered banks operating nationally through digital channels, the proposal could significantly simplify compliance by reducing the need to analyze and satisfy multiple host-state legal requirements. Banks pursuing interstate growth strategies may find it particularly beneficial.
Implications for State Banks
If finalized, the proposed rule could affect how state-chartered banks evaluate compliance obligations when:
- Offering online banking products to customers nationwide;
- Providing payment-processing services across multiple states;
- Partnering with fintech providers serving customers throughout the United States; or
- Expanding loan or deposit products beyond their home-state footprint.
If adopted, the proposed rule could significantly benefit state-chartered banks by:
- Leveling the competitive playing field with national banks when operating across state lines;
- Reducing compliance burdens associated with navigating differing host-state regulatory requirements; and
- Facilitating expansion into new markets without the need for establishing physical branch locations.
State chartered banks should be mindful that FDIC’s proposed rule would address only the applicability of host-state laws and would not supplant a state bank’s obligations under its chartering state’s laws. A state bank would remain subject to the requirements of its state charter and would still need to determine, under the laws of its chartering state, whether a particular activity is permissible before offering it in any host state.
Next Steps Before the Comment Deadline
Banks should begin evaluating how expanded parity with national banks could affect their compliance obligations, product offerings, and growth strategies, considering:
- Reviewing products and services offered outside their chartering state;
- Identifying host-state laws that currently create compliance burdens; and
- Assessing whether the proposal could affect strategic expansion plans.
With the November 23, 2026, deadline approaching, banks should promptly decide whether to submit comments and begin drafting now to allow time for internal review. The FDIC invites comments on alternatives to the proposed rule, any unintended consequences, and whether the FDIC should amend Part 331 regarding permitted interest rates on loans. Because the proposal may draw opposition from state regulators and consumer advocates, comments from state banks that could benefit from the proposed rule, including concrete examples of host-state compliance burdens, may be especially valuable to the FDIC’s record. After the comment period closes, banks should monitor responses from state regulators and industry groups, as well as developments as the FDIC reviews comments and moves toward a final rule.
If finalized, the proposed rule could represent one of the most significant recent developments affecting interstate operations of state-chartered banks. If you have questions about the proposed rule or would like assistance preparing comments, please contact a member of Winthrop’s Bank Regulatory practice.
