The new PNC would be so large — 12.5 percent of all deposits held by the state's 234 banks — that it probably would trigger action by federal regulators in more normal economic times.

But federal intervention is not likely in this case, says University of Kentucky banking professor Don Mullineaux.

The federal government wants the $5.6 billion merger to occur — in fact, it is indirectly paying for it — because National City is a troubled bank that PNC can fix.

PNC is receiving a $7.7 billion loan from the U.S. Treasury, part of the $700 billion federal bailout of the financial services industry.

So Mullineaux thinks regulators might ignore the fact that PNC will have more than 10 percent of Kentucky's deposits, the national ceiling set by federal law in the 1990s.

"In normal times, they (PNC) would be selling off some branches to divest themselves of some deposits to get down to 10 percent," he said in a recent interview.

Mullineaux thinks there is a good chance PNC will be able "to stretch the process out and operate above that 10 percent ceiling."

There is even a movement in Washington to raise the ceiling, but no new limit has been proposed.

The powerful American Bankers Association has no position on the question, says spokesman Peter Garuccio. The ABA represents banks on both sides of the issue and there is no consensus.

Nevertheless, Mullineaux says, "whether it's 12 percent or 10 percent, that's still a lot of market share for a single institution. They will have quite a presence in a lot of markets (in Kentucky)."

Read the complete story at kentucky.com