Interstate Banking   DEFINITION of 'Interstate Banking'  The
expansion of banking across state lines. Interstate banking
became widespread in the mid 1980s, when state legislatures
passed legislation that allowed bank holding companies to
acquire out-of-state banks on a reciprocal basis with other
states. Interstate banking has led to the rise of both regional
and national banking chains.  BREAKING DOWN 'Interstate Banking'
Interstate banking has grown in three separate phases, starting
in the 1980s with regional banks. These companies are limited to
a specific region, such as the Northeast or Southeast, and were
formed when smaller, independent banks merged to create larger
banks. Then state law permitted a national trigger that allowed
mergers with banks in any other state after a certain date. The
Reigle-Neal Interstate Banking and Branching Efficiency Act
allowed banks which met capitalization requirements to acquire
other banks in any other state after Oct. 1, 1995. The direct
result of these legislatio