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Marine decision imposes hardships on bank customers who could

no longer benefit from the proliferation and convenience of

shared ATMs.

Effect of S. 2898 on ATM networks

S. 2898 would reverse the Marine decision and would preserve the status quo under which the banks, the OCC and the Federal Reserve have been operating since 1976. The bill would prevent the dismantling of existing ATM networks and preserve the significant benefits provided by ATMs to consumers, participating financial institutions, and the economy in


For the consumers, shared ATM networks mean greater convenience as banks services are available in a larger geographic area and in more locations. No longer need the customer choose between a financial institution which is located either close to the home or the work place, but can have access to his/her financial institution even in the course of today's hectic and highly mobile life styles.

ATMs also provide greater time convenience to customers. They allow consumers to transact business with banks more quickly, and usually during more convenient and flexible hours as many ATMs offer 24-hour access.

Perhaps the greatest benefit to consumers from shared ATMs
The large

is that they result in bank services at lower cost.

number of network members and the large transaction volume creates economies of scale which, in turn, reduce the cost of financial services to the consumer. It is no wonder that consumers have quickly embraced the benefits of ATMs and demanded more.

ATMs also provide significant benefits to participating banks. The networks allow member banks to serve their

customers without investing in expensive brick-and-mortar branches or even in their own ATMs. This is especially important for small banks that often cannot afford the high front-end investment expense. Shared ATM networks also allow participating institutions to benefit from proportionately lower overhead costs as the volume of ATM use increases.

Effect of the proposed CSBS amendment

As you requested, I will also comment on the amendment proposed by the Conference of State Bank Supervisors (CSBS). This amendment would allow states to regulate the location, ownership, operation and permissible functions of ATM networks even when these networks are established by federally chartered


We do not support this amendment, as it

represents a step backwards for the bank customers. If

enacted, it would encourage more restrictive state regulation of ATMs in the future, a result clearly detrimental to bank


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The CSBS version would allow states to prohibit the participation of out-of-state banks in its networks instance, Kansas law already prohibits an out-of-state bank from participating in a network in that state. Second, a number of state laws impose restrictions on the kinds of services that customers may get through shared ATMs. Third, this amendment would allow states to regulate and supervise networks established by federally-chartered institutions. Needless to say, this would lead to red tape, duplicative expenses, and unnecessarily burdensome regulation, the cost of which ultimately will be borne by bank customers.

Finally, we believe the CSBS amendment would result in additional litigation and, therefore, delays in the development of ATM networks, because it states that a shared ATM is only presumed not to be established by a national bank. This presumption would place the entire issue back in the courts. The bill should clarify for the courts the Congressional intent with respect to ATMs, not invite the courts to ascribe motives to this Congressional measure.


In conclusion, both the consumers and the banking industry have benefitted from the advent of the ATM and shared ATM networks. Allowing the Marine decision to stand would mean a giant step backward for the American consumer. I urge Congress to preserve the status of existing ATMs and the ability of financial institutions to develop new shared networks by enacting S. 2898.

Senator GORTON. Thank you, Mr. Mancusi.
Mr. Malarkey, you may proceed.



[The complete statement follows:]

Mr. Chairman, members of the Subcommittee, I am John E. Malarkey, State Bank Commissioner for the State of Delaware, Vice President and Chairman of the Federal Legislation Committee of the Conference of State Bank Supervisors, on whose behalf I am testifying today.

The Conference of State Bank Supervisors (CSBS) is the professional organization of state officials who charter, regulate and supervise the approximately 10,500 state-chartered commercial and savings banks of the nation. Created in the early 20th Century as a clearing house for the ideas of the state bank supervisors on common problems, CSBS has evolved into the major champion of our decentralized American banking and bank regulatory structures.

We are pleased to have this opportunity to testify regarding S. 2898 and recent developments in the area of shared automated teller machine networks.

CSBS Policy

The Conference supports the use of unmanned electronic funds transfer systems to deliver better customer services. Toward this end, on October 31, 1980, our Board of Directors adopted a policy of encouraging enactment of state statutes embodying the following:



States should encourage the establishment of unmanned
electronic funds transfer (EFT) systems within the states
by banks or others which, by contract or agreement, will
enable customers of local financial institutions to obtain
financial services when customers are away from their banks.
This procedure will enable individual banks better to serve
their customers and retain their customer bases.

States should encourage the establishment and operation
of such EFT systems subject to reasonable requirements as
the state may choose, including the nature and geographic
scope of transactions to be offered.



States should supervise and examine state-chartered institutions providing EFT services for customers of institutions located elsewhere; and the Comptroller of the Currency or the Federal Home Loan Bank Board should supervise and examine respective federally chartered institutions.

Should an amendment to Section 36 (c) of the National Bank Act (The McFadden Act) be found necessary to enable national banks to make use of the state statutes proposed herein, the Committee recommends that CSBS either support, or alternatively, agree to the necessary Congressional action.

In essence, we sought to encourage state exceptions to structural constraints, with such conditions, both operational and geographic, as each state saw fit. To the extent that an exception was created, we felt that it should apply to national banks as well as state banks, so long as the conditions on those exceptions applied as well. Underlying these policies is a belief that a balance must be struck between public interest in the expansion of service provision and public interest in maintaining a competitive market for service needs. It is important to retain a desirable level of competition for service needs by safeguarding the competitive equality of local institutions and by avoiding concentrations of power. This is true even when dealing with shared ATM systems which maximize efficiency from both a bank and bank customer standpoint. High up front costs and large-scale efficiencies in ATM systems renders shared ATM systems both a mechanism to ensure local access and competitive equality and a mechanism susceptible to centralized control by a few large institutions. In the short term, competition for participants will guarantee access for smaller institutions and maximize user access. In the longer term, economies of scale may tend to concentrate and consolidate existing systems and limit entry of new competitors, absent safeguards such as now contemplated in many state statutes. Public interests in ATM location and function closely parallel public interest in bank branching, as embodied in

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