Banking Interpretations

NYSBL 10; 227

New York State Banking Department
Memorandum

To:        Principal Examiner Gottlieb 

From:    Assistant Counsel Christine M. Tomczak 

Date:     March 6, 2007 

Subject: Application for approval of the Superintendent pursuant to Banking law §227 for continued acceptance of New Jersey governmental deposits at New Jersey branches following merger [---]

Issue

Does the application of [---] (the "Applicant") to continue acceptance of New Jersey governmental deposits at the New Jersey branches of [---] (“[---] Fed”) following the merger of [---] Fed with and into [---] meet the legal requirements set forth in Banking Law §227?

Recommendation

The Legal Division has reviewed the application of the Applicant and concludes that the application meets the legal requirements set forth in Banking Law §227.

Background

The Applicant has agreed to acquire [---]Fed, a federally-chartered stock savings bank, through the merger of [---]Fed with and into the Applicant, a New York State chartered bank. This merger is subject to a separate application.

Currently, [---]Fed has a significant business in accepting local governmental deposits in the State of New Jersey that the Applicant would like to maintain after, the merger has been completed.  The Applicant believes that this business is an important part of [---] Fed franchise that it would like to maintain. On January 4. 2007, the Applicant submitted a letter application pursuant to Banking Law §227 for approval of Applicant's continued acceptance of these New Jersey governmental deposits at its New Jersey branches following the merger.

Reasoning

Banking Law §227 permits a New York State chartered Institution that opens, occupies and maintains one or more branch offices in another state to exercise any power at such branches that is authorized for an out-of-state banking institution maintaining such branches with the type of charter most closely corresponding to that of the New York institution. The institution must obtain the prior approval of the Superintendent where the activity is not one authorized for the institution in New York. In addition, Banking Law §227 provides that the Superintendent shall approve any such request unless approval would be contrary to the declaration of policy contained in Banking Law §10.

An out of state savings bank with New Jersey branch offices is specifically authorized by New Jersey law (see Applicant's January 4, 2007 letter application for specific citations) to accept deposits from a New Jersey local governmental unit. Applicant contends that approval of their application would not be contrary to the declaration of policy expressed in Banking Law §10 because it would not threaten the safe and sound conduct of the Applicant's business or the conservation of the Applicant's assets and would not lead to the hoarding of money or unsound and destructive competition among banking organizations. It further contends that approving this request would further the public interest and the interests of the Applicant's and [---]Fed’s depositors, creditors and stockholders.

The Legal does not have any objection to the Superintendent approving this application based on the above-mentioned factors.

Noted: _____
          GCB