Banking Interpretations

NYSBL 105;


October 30, 2006

Dear Mr. [---]

Your letter of August 29, 2006, addressed to Superintendent Diana L. Taylor, has been forwarded to me for a response. [---] Savings Bank has submitted an application to establish a branch in the City of Lockport, Niagara County, New York.  Steven Kupfer, Economist, has advised you that because the principal office of [---] Commercial Bank is located in the City Lockport, New York, "home office protection" prevents [---] Savings Bank from establishing a branch in this area. You have requested that the Banking Department (the "Department") review this matter further.

Since [---] Savings Bank is a savings bank, the opening of branch offices is subject to Section. 240 (not Section 105) of the Banking Law and the relevant subsection provides as follows:

2(c) Except for the city or village in which its principal office is located, no branch office may be opened and occupied pursuant to paragraph (a) of this subdivision in any city or village with a population of fifty thousand or less and in which is located the principal office of a bank, trust company or national banking association, other than a bank holding company, if such bank holding company is a banking institution, or a banking subsidiary of a bank holding company, as such terms "bank holding company", "banking institution" and "banking subsidiary" are defined in article three-A of this chapter.

[---] Commercial Bank's application to change the location of its principal office from Troy, New York to [---] Lockport, Niagara County, New York, was approved by the Department to be effective on or after March 9, 2005. In approving this application the Superintendent found that there appeared to be no reasonable objection to such change of location. In addition, by letter dated April 11 2005, the Federal Deposit Insurance Corporation approved [---] Commercial Bank's application to relocate its principal office to Lockport, New York.

You are correct that [---] Commercial Bank is a bank formed for the purpose of accepting deposits. It is a "bank" and therefore it is a banking institution for purposes of Article III-A of the Banking Law. Its business of banking is to accept municipal deposits and that is the activity conducted at its principal office in the City of Lockport. Accordingly, [---] Commercial Bank is entitled to home office protection in the City of Lockport.

With regard to the other banks you mentioned that have offices in the City of Lockport, these offices were established prior to [---] Commercial Bank establishing its principal office there.

In addition, you stated that the intention of home office protection was not to harm the community of Lockport by restraining [---] Savings Bank from offering banking services in the community which would both improve the access to banking services and serve as a catalyst in this economically challenged community. On the basis of public policy, the Department is sympathetic to your view that the statute should be construed so as not to create an area entitled to home office protection.  It has been the Department's policy to narrowly construe the home office protection statute.  In fact, in the past the Department has sponsored legislation to repeal the home office protection statute.  However, the law still exists and the Department is required to enforce the home office protection provision.


Sara Kelsey
Deputy Superintendent and Counsel

cc: Steven Kupfer, Economist