FDIC Proposes State Bank Parity Rule for Interstate Services

On September 17, 2026, the Federal Deposit Insurance Corporation (“FDIC”) announced that it is inviting comment on a notice of proposed rulemaking (the “Proposed Rule”) that would change which state’s laws apply to state banks doing business outside their chartering state (“home state”).

Under existing law, when a bank operates a branch in a state other than its home state (the “host state”), the laws of the host state apply to the branch only to the extent that the host state’s laws apply to a branch of an out-of-state national bank. Where a host-state law is inapplicable under this provision, the law of the home state applies instead. The Proposed Rule would extend this treatment to services provided by an out-of-state bank in a host state, without regard to whether the out-of-state bank maintains a branch in the host state.

The FDIC frames the Proposed Rule as a modernization of the parity principles Congress established in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Riegle-Neal”) and the Riegle-Neal Amendments Act of 1997 to address a banking market in which state banks increasingly serve customers through online and other nonbranch channels. The FDIC also cites recent litigation over the Illinois Interchange Fee Prohibition Act (“IFPA”) as creating uncertainty over whether state-chartered banks without Illinois branches receive the same protection from host-state law as national banks.

Both the American Bankers Association (“ABA”) and the Conference of State Bank Supervisors (“CSBS”) issued statements supporting the proposal, with ABA noting that it “will strengthen our nation’s dual banking system by allowing state banks to compete nationally while maintaining state chartering and state supervision’s central role” and CSBS stating that the rule “would help preserve competitive balance within the dual banking system and ensure that charter choice is driven by business needs and supervisory quality rather than outdated regulatory distinctions.”

Comments on the Proposed Rule are due by November 23, 2026.

1. Background

(a) The Dual Banking System and Riegle-Neal Parity

Since the 19th century, the United States has maintained a dual banking system in which banks may be chartered by either a state or the federal government. Congress has periodically enacted legislation to maintain parity between state-chartered banks and national banks. The FDIC, which has authority to implement several provisions of federal law establishing parity for insured state-chartered banks, has long sought to maintain a level playing field between state banks and national banks. Section 24(j) of the Federal Deposit Insurance Act (“FDI Act”), which sets out the state bank parity provision described above, was added by Riegle-Neal in 1994 and amended by the Riegle-Neal Amendments Act of 1997.

(b) The Illinois IFPA as the Immediate Catalyst

The FDIC expressly links the Proposed Rule to litigation over the IFPA, an Illinois law that prohibits charging or receiving interchange fees on the tax or gratuity portion of card transactions and restricts associated data use. The IFPA’s effective date has been delayed to July 1, 2027. After the Office of the Comptroller of the Currency (“OCC”) concluded that the IFPA is preempted as to national banks, the resulting district court injunction raised a key question as to whether section 24(j) parity extends only to out-of-state state banks with Illinois branches, or to all out-of-state state banks serving Illinois customers. That uncertainty—and efforts in an array of other states considering similar legislation—has, at least in part, prompted this rulemaking.

2. The Proposed Rule

The Proposed Rule revises 12 C.F.R. part 331 to extend the existing host-state law parity framework to any services provided by the out-of-state state bank. Under current regulations, a state becomes a “host state” only if an out-of-state state bank maintains a branch there, and even then, only with respect to the activities of the branch. The Proposed Rule would add “or provides services” to that definition, so that a state also becomes a host state when an out-of-state state bank provides services there—regardless of branch presence or use of a branch to provide the service. The FDIC does not define “provides services,” which may be a subject for comments. The practical effects of this change include:

• Broader parity framework: Currently 12 C.F.R. § 331.3 addresses only the application of host-state law to branches of out-of-state state banks. The Proposed Rule would cover both branches and services provided in a host state—eliminating the requirement that a state bank maintain a physical branch in the host state to receive parity treatment.
• Relevance for digital and branch-light models: The FDIC emphasizes that banks now commonly serve customers through online banking, mobile banking, and other non-branch channels. The Proposed Rule is designed to avoid forcing state banks to establish branches in host states solely to receive parity with national banks—something not required of national banks themselves.
• Complement to OCC preemption: For OCC determinations that a state law is preempted for national banks—such as the OCC’s IFPA determination—the Proposed Rule would clarify that state banks receive equivalent treatment under section 24(j). Importantly, this does not mean the same law applies to both state banks and national banks; rather, if a host-state law does not apply to national banks, it also would not apply to out-of-state state banks.
• Choice-of-law rule, not a preemption determination: The Proposed Rule would not constitute a determination by the FDIC that any specific host-state law is preempted. Rather, it would operate only after some other source of law or authority (e.g., the OCC, a court) establishes that a host-state law does not apply to an out-of-state national bank. Therefore, it is a choice-of-law rule, not an independent preemption tool.
• No change to loan interest-rate authority: Loan interest rates and exportation of those rates remain governed by section 27 of the FDI Act and the FDIC’s existing implementing regulations in 12 C.F.R. part 331.

Notably, the Proposed Rule is broader than a similar prior proposal by the FDIC. In 2005, the FDIC proposed a related rule implementing section 24(j), but that proposal was limited to activities conducted at branches of out-of-state state banks—if the bank had no host-state branch, the 2005 rule would not have applied. The 2005 proposal was never finalized. The 2026 Proposed Rule takes a materially broader approach, covering services provided in a host state whether or not the bank has a branch there. The FDIC notes that the 2026 Proposed Rule reflects the migration of banking activity to non-branch channels since 2005 and the “purpose and structure” of the statute, notwithstanding the statute’s textual limitation to branches.

3. Implications and Recommended Next Steps

Although the FDIC’s analysis focuses on state banks affected by the IFPA, the Proposed Rule has broader significance for any state bank serving out-of-state customers—particularly those with limited or no branch networks. State banks should assess which host-state laws currently apply to their out-of-state activities and how related compliance frameworks might change if section 24(j) parity is extended to nonbranch services. The FDIC specifically asks whether the proposal could affect settled applications of host-state laws in ways that create unintended consequences. Institutions are well positioned to identify such edge cases and should take the FDIC’s invitation to comment. Finally, for institutions evaluating new charters, particularly where the institution expects to provide services broadly without establishing branches, the Proposed Rule may affect the balance in evaluating whether a state or national charter is the best path forward.