Chapter 13: Problem 25

Which statement is true? (LO6) a) Most states allow only unit banking. b) Most states allow unlimited branching. c) Most banks have national charters. d) None of these statements is true.

Short Answer

Expert verified

The correct statement from the given options is: b) Most states allow unlimited branching.

Step by step solution

Understanding Unit Banking

Unit banking is a system in which a bank operates only from one banking office (i.e., no branch offices). This approach limits the size and reach of the bank.

Understanding Branching

Branching is the practice of opening and operating multiple bank offices (branches) in various locations. This can be done within the state in which the bank is chartered (intrastate branching) or across state lines (interstate branching).

Understanding National Charters

A national charter is a license issued by the Office of the Comptroller of the Currency (OCC) allowing a bank to operate under federal guidelines and regulations. Banks can also have state charters, which place them under the authority of their respective state banking regulators. Now let's examine each statement from the question:

Statement a: Unit Banking

Most states have moved away from unit banking restrictions in favor of allowing branching. This is primarily due to the increased efficiency and convenience that branching provides to both banks and customers. Thus, statement a is not true.

Statement b: Unlimited Branching

While most states now permit branching, it is important to note that there may still be limitations and regulations and may not be unlimited. However, we can consider statement b as a reasonably accurate generalization about current banking practices.

Statement c: National Charters

While national charters exist, not all banks have them. Many banks operate under state charters, and as a result, statement c is not true.

Statement d: None of these statements is true

As we have determined that statement b is a reasonably accurate generalization, statement d is not true.

Final Answer

The correct statement from the given options is: b) Most states allow unlimited branching.

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