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History
- Referred to banks
- Referred to banks
Full text
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Sponsor's memo
Title of bill
An act to amend the banking law, in relation to the opening of branch offices and public accommodation offices by banking organizations
Purpose
To prohibit a banking organization from opening a branch office on the premises of an affiliate which engages in commercial activities.
Summary of provisions
Section 29(1) of the Banking Law is amended to prohibit a banking organization from opening a branch office or public accommodation office, including an electronic branch, upon . the premises of an affiliate of such banking organization which engages in commercial activities other than real estate ownership or management that do not constitute banking.
Justification
When a banking organization wants to open a branch office, it is required to make an application to the Superintendent of Banks. This bill would restrict the opening of a bank branch on the property of an affiliate which engages in non-banking commercial activities.
Banking and commerce have traditionally been separated in this nation. This policy is important because it avoids conflicts of interest that would distort credit decisions. The banking system is predicated on the impartial allocation of credit. It also guards against a concentration of economic power and resources.
There are some states (but not New York) which make available an industrial loan charter, which essentially permits a commercial firm to operate a fully functional bank. Industrial loan companies (ILC) are able to operate like a bank, but also have parallel business activities and operations. However, an ILC would be able to escape certain regulations under the Bank Holding Company Act, and would also run contrary to the policy of separating banking from commerce.
The recent growth in the number of ILCs has raised a number of issues and questions that need to be reviewed and considered in regard to the longstanding policy of separating banking and commerce. In the meantime, this bill would prevent ILCs from using an out-of-state charter to open bank branch offices in commercial facilities in New York State.
Legislative history
S.5622/A.9110 in 2007-08: Referred to Banks
Fiscal implications
None.
Effective date
The 30th day after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.