Relates to the imposition of fees for investigations and applications for banking institutions

Summary of provisions

Section 18-a of the Banking Law is amended to establish a lower application fee for smaller banks, thrifts and credit unions which are converting from a federal charter to a state charter.

Section 34 of the Banking Law is amended to provide that the Superintendent of Banks shall set the fee for service of process involving foreign banks, provided however that such fee shall not exceed the fee level established by the Legislature for service of process upon the Department of State pursuant to section 104-A(c) of the Business Corporation Law. The bill also provides that no fee shall be collected for process served on behalf of a municipality.

Justification

Section 18-a of the Banking Law was added in 2005 to set new fee levels for applications by banking institutions and financial service companies. These fee levels are intended to better reflect the Department's actual costs to investigate and process an application.

As a way to promote the state charter, this bill seeks to establish a lower application fee level for smaller banking institutions which may be considering a conversion from a federal charter to a state charter. Instead of the standard application fee of $12,500, this bill would set a $1,000 application fee for banking institutions which have less than $100 million in assets. Smaller entities are the ones which are most likely to factor the level of application costs (including the application fee itself) into their consideration of whether to change charters. Lowering the Department's application fee will help address this concern and eliminate one possible obstacle to a conversion.

It should be noted that both the Office of the Comptroller of the Currency (OCC), which regulates national banks, and the Office of Thrift Supervision, which regulates federal savings banks and savings and loan associations, charge lower application fees for an institution which is converting to a federal charter than for a new institution. This bill would establish a similar distinction in State law between these different types of applications.

Maintaining and increasing the number of state charters is important for preserving the State's role in regulating and overseeing the financial services industry. New institutions will also help support the Department's budget through the assessments they pay, thereby helping to spread the total regulatory costs among more institutions. Section 200 of the Banking Law currently requires foreign banking

corporations to appoint the Superintendent of Banks as their true and lawful attorney upon whom all process in any action or proceeding against them may be served. For each service of process, Section 34 of the Banking Law directs the Superintendent to collect a two dollar fee. This fee level has remained unchanged since at least 1892, and does not reflect the Banking Department's costs to process this paperwork.

This bill authorizes the Superintendent of Banks to establish a service of process fee which better reflects the Department's costs. However, the fee may not exceed the fee level authorized by the State Legislature under Section 104-A of the Business corporation Law for service of process upon the Secretary of State (this fee is currently $40). It is appropriate to give the superintendent of Banks the flexibility to set an appropriate fee level, but not to exceed a level which the State Legislature has determined is an appropriate fee level for the Department of State to charge for service of process. Also, the Business Corporation Law currently exempts municipalities from having to pay a service of process fee, and this bill would enact a similar exemption in the Banking Law.

Legislative history

S.4783 of 2008 Died in Committee S.4783 of 2007 Reported to Senate Calendar S.7528 of 2006 Reported to Senate Calendar S.3704 of 2010 Referred to Banks

Fiscal implications

None to the State. The Banking Department is fully funded by the regulated financial services industry. Each year, the Department receives varying amounts of revenue from the examination and application fees it charges, and then raises the remaining balance of its budget through assessments charged to the industry. Regardless of whether this bill results in slightly higher or slightly lower fee revenues, the Department's total budget remains unchanged. All that will vary is the remaining amount which the Department needs to raise through its assessments.

Effective date

Immediately.