Relates to the authority of a bank's board of directors to issue capital notes and to receive mortgages without a duty to record or register such assignments

Title of bill

An act to amend the banking law, in relation to the powers of banks to engage in certain financial transactions

Purpose

This bill would reduce unnecessary regulatory burdens and restrictions on both the Banking Department and banking institutions in regard to the ability of banks and trust companies to issue capital notes or debentures

Summary

Section 96(4) of the Banking Law is amended to:

- allow a duly constituted committee of a bank's board of directors to issue capital notes or debentures;

- remove the requirement for approval of the Superintendent of Banks before capital notes or debentures may be issued;

- remove the requirement for approval of the Superintendent of Banks in order to receive mortgages or other property interests in payment for such notes and debentures; and

- remove the general requirement that assigned and conveyed mortgages and other property interests received in payment be registered or recorded.

Justification

This bill would reduce unnecessary regulatory burdens and restrictions on both the Banking Department and banking institutions in regard to the ability of banks and trust companies to issue capital notes or debentures

The current provisions, which have been in place since at least 1937, requires the approval of the Superintendent of Banks prior to any issuance of capital notes or debentures. In the Banking Department's experience, such review and oversight has proven unnecessary. Instead, the requirement simply imposes additional costs and paperwork on both the Banking Department and the banking industry.This bill would remove the requirement for the Superintendent's prior approval of such actions.

The bill provides greater flexibility in the issuance of capital notes and debentures. The existing restrictions have provided little real benefit or protections. This bill updates the law and streamlines and simplifies the process for issuing capital notes and debentures.

Fiscal impact

None.

Legislative history

Bill S.2857 of 2005-06: Passed by the Senate in 2005 and 2006.

Effective date

Immediately.