Federal Deposit
Insurance Corporation

Robert E. Feldman, Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th St., NW
Washington, DC 20429

RE: Notice of Proposed Rulemaking for “Interstate Banking; Federal Rate Authority” Published in the Federal Register on October 14, 2005

Dear Mr. Feldman:

SunTrust Banks, Inc. (SunTrust) hereby submits the following comments in response to the FDIC’s notice of proposed rulemaking regarding “Interstate Banking; Federal Interest Rate Authority” published in the Federal Register on October 14, 2005.

SunTrust, one of the nation’s largest commercial banking organizations, is a financial holding company with its headquarters in Atlanta, Georgia. SunTrust’s principal banking subsidiary, SunTrust Bank, a Georgia state-chartered bank, offers a full line of financial services for consumers and businesses through its branches located primarily in Florida, Georgia, Maryland, Tennessee, North Carolina, South Carolina, Virginia and the District of Columbia. In addition, SunTrust Bank’s wholly owned mortgage subsidiary, SunTrust Mortgage, Inc., currently conducts mortgage business in all 50 states and the District of Columbia. SunTrust is a member of the Financial Services Roundtable (Roundtable) and has worked with the Roundtable’s staff and other state chartered banks to promote the need for regulation in the area of parity for state chartered banks operating in interstate commerce. We fully support the conclusions of law and policy arguments presented in the Roundtable’s Petition as filed with the FDIC on March 4, 2005. SunTrust greatly appreciates the FDIC’s consideration of the requests made in that Petition. In general, SunTrust strongly supports the proposed rule and the attempt by the FDIC to provide limited parity to state chartered banks. SunTrust endorses the comments submitted by the Roundtable concerning the proposed rule in full and also wishes to make the following additional points.

Scope of the Proposed Rule

SunTrust appreciates this initial step by the FDIC to bring parity to the treatment of state banks, but also would like to point out that it does not believe the proposed rule goes far enough to address the current advantages national banks have over state banks in interstate operations. As a result, national banks are currently operating under a clear competitive advantage over state chartered banks which threatens the very existence of the dual banking system.

Specifically, SunTrust is disappointed that the proposed rule does not address parity for state chartered bank’s activities in states where they do not maintain a branch, as was requested in the Roundtable’s Petition. Perhaps the best way to illustrate this issue is to analyze SunTrust’s current mortgage operations as an example. As previously stated, SunTrust Bank maintain branches in a limited number of states, while SunTrust Bank’s subsidiary currently conducts mortgage business in all 50 states and the District of Columbia. The Bank wishes to offer products and services in states where it does not maintain a branch. The Bank, and to even a greater extent the subsidiary, is currently subject to compliance requirements in all jurisdictions in which it operates and employs staff to work full-time examining files for state law compliance, preparing for state examinations and audits, and maintaining licensing, lending and reporting requirements in each of these jurisdictions. National banks and their operating subsidiaries are exempt or preempted from state licensing requirements, the majority of state lending laws, as well as state-mandated disclosures and statements. This gives national banks a clear advantage over state-chartered banks and their operating subsidiaries in this area such as is the case with SunTrust. Additionally, even at the state level, certain states have provided for exemption and/or preemption as to certain requirements for national banks and banks chartered under the laws of their state, but have not extended such exemptions to banks chartered under the laws of another state regardless of whether such bank maintains a branch in that state.

The proposed rule fails to address these issues. As written, the proposed rule only addresses the application of home state law in states where state chartered banks have branches. As a result, SunTrust will still, at a minimum, have to comply with host state laws where it conducts its mortgage business and does not have a branch there. This results in a clear competitive advantage for national banks operating across state lines. These disparities must and need to be addressed at the federal level to ensure the health and survival of the dual banking system.

With respect to its interstate operations, SunTrust is currently exposed to significantly greater legal risk, cost and expense than national banks. Because SunTrust has to comply with a myriad of multiple laws in different jurisdictions, SunTrust must dedicate substantial resources to ensure both global as well as micro compliance, whereas national banks do not have this additional risk or cost. State-chartered entities, being subject to varying state laws, are constantly subjected to legal challenges under state-law theories. In addition, SunTrust is exposed to the legal risk of class action suits from multiple jurisdictions under different governing laws, whereas national banks are subject to one regulatory scheme and can manage that risk accordingly. Once again, the proposed rule does not address this issue with respect to SunTrust’s activities outside of its branching footprint.

Operating Subsidiaries

SunTrust would like to comment on the proposed Section 362.19(a)(4) and the proposed definition of “activity conducted at a branch.” SunTrust believes it would be advantageous to clarify that activities conducted though a state charted bank’s operating subsidiary in a host state would fall under this definition. Operating subsidiaries of national banks are already clearly afforded the advantages of federal preemption. This interpretation logically fits within the legislative history discussed in the notice of proposed rulemaking which states that the purpose of the legislation was to provide parity between state and national banks in the new interstate environment.

Scope of Application

With respect to the proposed rule, SunTrust would also like to specifically comment on the proposed Section 362.19(c). That section currently reads “A host State law does not apply to an activity conducted at a branch in the host State of an out-of-State, State bank to the same extent that a Federal court or the Office of the Comptroller of the Currency has determined in writing that the particular host State law does not apply to an activity conducted at a branch in the host State of an out-of-State, national bank (emphasis added).” SunTrust believes this language may be too restrictive. One can certainly anticipate a particular host state law that either has or would clearly be preempted under OCC interpretations but that has not been addressed in writing by the OCC or a Federal court. In such a case, state-chartered banks should be able to take advantage of this provision without the extra burden of obtaining a formal determination by the OCC or the Federal court system.

Sincerely,

Stephen Johnson