By Hugh Carney and Dale Baker
ABA Viewpoint
The FDIC’s recent parity proposal is an important step toward preserving parity between state and national banks and strengthening the dual banking system. Some commenters may frame this proposal as an expansion of national bank preemption to state banks. But that framing misses an important distinction: the FDIC proposal would clarify which state’s law applies when a state-chartered bank operates across state lines, preserving home-state law where host-state law is preempted for national banks. State-chartered banks operating nationwide have a significant stake in maintaining clear, consistent standards for core banking activities.
Hugh Carney is EVP of financial institution policy and regulatory affairs at ABA, and Dale Baker is vice president of trust policy.
That point is especially important as states consider laws regulating payments, lending, deposits, servicing and other banking activities that are conducted across state lines. Modern banking does not stop at the state line. In a purchase transaction, the consumer may live in one state, the merchant may operate in another, the bank may be chartered in a third, and the relevant processing activity may occur somewhere else entirely. Without clear federal standards, banks face the risk that a single banking product will be subject to overlapping, inconsistent or operationally incompatible state requirements.
For national banks, the OCC’s federal preemption provides a well-established framework for addressing that problem. But state-chartered banks are not merely bystanders. Through state wildcard statutes, parity provisions, federal statutory protections and the FDIC’s authority to implement federal law, state banks also depend on a legal framework that permits them to provide banking services on a regional and national basis.
Many states have adopted wildcard or parity statutes designed to ensure that banks chartered by their state can compete with national banks. These laws generally allow state banks to exercise powers comparable to those available to national banks, often subject to state regulatory oversight. The purpose is straightforward: a state charter should not become a second-class charter simply because national banks receive new or clearer federal authorization to engage in a banking activity. However, parity statutes do not always ensure consistency for how state banks exercise those powers when providing services outside their home state.
That principle is particularly important in payments. Interchange, card issuance, transaction authorization, settlement and related payment activities are not bound to a location. They are part of a national payments system that depends on common rules, common infrastructure and real-time processing across the entire network. An individual state law that attempts to regulate the economics or mechanics of only some transactions creates operational challenges not just for national banks, but also for state banks that issue cards, provide merchant accounts, serve customers or process transactions across state lines. Federal law recognizes this concern in several ways. One of the most important is Section 24(j) of the Federal Deposit Insurance Act, enacted as part of the Riegle-Neal interstate banking framework. That provision places out-of-state state banks on comparable footing with out-of-state national banks for when host-state laws apply to branches. Congress wanted to prevent state banks operating across state lines from being disadvantaged relative to national banks. If a host-state law does not apply to a branch of a national bank, then it should not apply to a branch of an out-of-state state bank.
That parity principle matters in the current preemption debate, and the Illinois Interchange Fee Prohibition Act highlights the problem. If a state law restricts interchange fees or otherwise alters how a payment card transaction must be processed, the operational burden does not fall neatly on one charter type. National banks, state banks, savings associations, payment networks, merchants, processors and consumers are all part of the same system and are all equally harmed by inconsistent state laws. Treating the issue as only a concern for national banks ignores how modern payments actually work.
The harder question is how parity protections apply when an out-of-state state bank serves customers or merchants in a state where it has no physical branch. That is not an edge case. In 2026, many state-chartered banks provide services nationwide without a branch in every state where their cards are used, loans are serviced, deposits are accessed, or payments are processed, and some have no branches at all. A rigid branch-based understanding of federal parity protections would produce an odd result: an out-of-state state bank with a physical branch in a host state would not be subject to the host state’s law, but a state bank that does not have any physical presence in the host state would be subject to the host state’s laws.
That result would invert the logic of interstate banking law. Riegle-Neal addressed the question of what happens when a bank chartered in one state enters another state. Does the bank continue to follow its home-state law even when it establishes a branch in a host state? Riegle-Neal says yes. When a bank has no branch in a state, it is not conducting branch banking in that state simply because its customers, cards or transactions have some connection to the state. In those circumstances, the bank has not entered the host state, and it should also continue to follow its home-state law.
This is where the FDIC has an important role. Of course, the FDIC is not the OCC, and state banks are not national banks. But the FDIC does administer key provisions of the Federal Deposit Insurance Act, and it has broad rulemaking authority to carry out the laws within its jurisdiction. Where Congress has provided federal protections for state banks, the FDIC can and should clarify how those protections apply in a modern interstate banking environment.
The FDIC’s parity proposal would not federalize the state charter or erase the role of state supervisors. To the contrary, it would preserve the state banking system by ensuring that state banks can continue to compete nationwide without being trapped in a patchwork of conflicting state requirements. State supervisors would remain central to chartering, examination, enforcement and oversight, and the banks they supervise would not be placed at a structural disadvantage when they engage in banking activities that necessarily cross state lines.
The broader policy point is simple: operational uniformity is not a national bank luxury. It is a necessity for banking system. Payments, lending, deposit taking and servicing all depend on legal rules that can be implemented at scale. When states impose conflicting requirements on those activities, the burden falls on banks of every charter type and ultimately on the customers and communities they serve.
Providing clear federal standards for parity in the regulation of core banking activities therefore benefits the dual banking system as a whole. National banks need certainty to exercise federally authorized powers. State banks need parity to remain competitive. And consumers and businesses need banking services that work seamlessly across state lines.
ABA Viewpoint is the source for analysis, commentary and perspective from the American Bankers Association on the policy issues shaping banking today and into the future. Click here to view all posts in this series.
