Includes credit unions and federal credit unions within the definition of bank, trust company or national bank for purpose of banking development district program

BILL NUMBER:S3654A

Title of bill

An act to amend the banking law, in relation to including credit unions and federal credit unions within provisions regarding banking development district program and providing for the repeal of certain provisions upon expiration thereof

Purpose

To enable state-chartered credit unions and federal credit unions to participate in the Banking Development District Program.

Summary of provisions

Section 1 amends subdivision 5 of section 96-d of the banking law to include credit unions and federal credit unions in the Banking Development District Program.

Section 2 amends Section 451(2) of the banking law to state that, for the purposes of section 96-d of this chapter, the credit union may include in its membership any person or organization located within a local community, neighborhood or rural district where there is a demonstrated need for banking services as determined by the superintendent.

Existing law

Currently, only commercial banks, trust companies, savings banks and savings and loan associations may participate in the Program.

Justification

Chapter 204 of the Laws of 1997 authorized the creation of a Banking Development District Program, which enables municipalities and New York state to offer certain economic incentives to encourage the establishment of commercial bank branches in areas where there is a demonstrated need for banking services. Chapter 526 of the Laws of 1998 amended the law to allow savings banks and savings and loan associations to participate in this program.

This legislation includes credit unions within the economic development program. Credit unions will be able to offer small business services, such as member business lending, similar to those currently offered by commercial banks and thrift institutions. By enabling credit unions to participate in this program, there will be more opportunities for municipalities to work with different types of banking institutions to encourage better banking services in developing areas.

Legislative history

S.3143 of 2005-06 S.2867A of 2007-08 S.4873 of 2009-10 S.3654 of 2011-12

Fiscal implications

If the State chooses to enter into an agreement with a particular credit union in which it would earn interest at a lower rate then the institution's posted 2-year CD rate, then the State would forgo interest income on those deposits. The State would also forgo a minimal amount of revenue by waiving the $750 application fee for establishing a branch.

Local fiscal implications

If a local government chooses to enter into an agreement with a participating credit union in which it would earn interest at a lower rate than the institution's posted 2-year CD rate, then the local government would forgo interest income on those municipal funds. Because the banking development district program is intended to. spur the development of a bank facility which would not otherwise exist, any branches established by credit unions should actually result in a net increase in property tax revenue. Such increase would grow each year as the partial property tax exemption declines.

Effective date

This act shall take effect immediately and shall be deemed to have been in full force and effect on or after January 1, 2012, provided however, that the amendments to subdivision 2 of section 451 of the banking law made by section two of this act shall expire and be deemed repealed on the same date as section 4 of chapter 526 of the laws of 1998.