On Oct. 1, Montana joins the other 49 states in allowing interstate banking.

The basic structure of the law was designed by Montana's banking industry leaders, to the satisfaction of bankers from small and large institutions, says John Cadby, executive vice president, Montana Bankers Association.

The new legislation, which sets limits on the level of outside ownership, is expected to have a limited effect on Montana banking, Cadby says. The Montana Bankers Association anticipates that a few banks in rapidly growing markets of Montana will be purchased by regional bank holding companies, he adds. Those rapidly growing markets are in western Montana, more specifically Kalispell, Missoula and Bozeman, where the economy is booming. Cadby does not expect much activity within the rural areas of Montana.

Major provisions of the law include:

• Allowing a financial institution located outside Montana, but owned by a qualifying regional bank holding company, to acquire a Montana bank. The region is defined as Colorado, Idaho, Minnesota, North Dakota, South Dakota, Wisconsin and Wyoming.
• Grandfathering bank holding companies outside the defined region that had a presence in Montana as of Jan. 1, 1993. These holding companies will also be allowed to acquire other banks in Montana.
• Restricting bank holding companies headquartered outside the qualifying region from purchasing Montana banks. If a non-regional bank holding company acquires a Montana holding company, it would have two years to divest itself of ownership of Montana banks held less than three years.

Also a non-Montana holding company cannot acquire control over more than 18 percent of deposits in federally insured banks, thrifts and credit unions. This limit will increase 1 percentage point on Oct. 1, 1994, and each consecutive year, to a maximum of 22 percent.

Finally, the maximum aggregate level of control over Montana bank deposits by bank holding companies that do not have headquarters in Montana, in federally insured banks and thrifts, is 49 percent.

—Diane Wells

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