Relates to certain provisions regarding foreign banking corporations

1 Co-sponsor

• Hugh T. Farley

BILL NUMBER:S4193A

Title of bill

An act to amend the banking law, in relation to certain provisions relating to foreign banking corporations

Purpose

To clarify and streamline the ability of foreign banking corporations to enter into merger and purchase transactions.

Summary of provisions

Section 1 of the bill amends Section 601-a of the Banking Law to clarify the authority of New York-chartered banking institutions to engage in an acquisition transaction with out-of-state banks. It also clarifies that New York licensed branches and agencies of foreign banks are considered banking institutions subject to the requirements of Section 601-a if they participate in an acquisition transaction involving a bulk transfer of fiduciary relationships authorized under Section 604-a. The bill also adds language to clarify the Superintendent's authority to authorize additional acquisition transactions, as well as to implement this provision through rulemaking.

Section 2 of the bill amends Section 604-a of the Banking Law to clarify that New York licensed branches and agencies of foreign banking corporations may engage in a transaction with another banking institution involving the transfer of all or substantially all of the assets of the transferor institution, in which the transferee institution agrees to assume all of the fiduciary relationships of the transferor institution, and in which the transferee files a certificate for approval and endorsement by the superintendent, indicating that the transferee has succeeded to all the rights and obligations of the transferor with respect to such fiduciary relationships.

Existing law

Section 601-a of the Banking Law enumerates the types of authorized acquisition transactions which may occur between two New York banking institutions as well as between New York banking institutions and other banking institutions.

Section 604-a of the Banking Law authorizes a bulk transfer of fiduciary relationships as part of a transaction between banking institutions in which the transferee corporation is assuming all or substantially all of the assets, as well as the deposit liabilities, if any, of the transferor corporation.

Justification

The Banking Law currently contains provisions which authorize banking institutions to enter into purchase and assumption agreements with

other institutions, and to transfer fiduciary relationships between institutions. This bill amends these laws to clarify and ensure that they apply to branches and agencies of foreign banking corporations.

The foreign banking community is a very important contributor to the economy of New York State and New York City, and to our reputation as the world's financial center. In fact, the vast majority of foreign banking corporations which have offices in the United States are subject to the regulatory jurisdiction of the New York State Banking Department. These regulated entities hold over 80% of the assets held by foreign bank offices located in the United States.

There has been some uncertainty about whether the existing laws regarding purchases and transfers apply to the branches and agencies of foreign banking corporations. This legislation will clarify and ensure that these institutions can enter into these types of transactions.

This will enhance the attractiveness of the New York license for foreign banking corporations seeking to operate in New York. Otherwise, these foreign banks would have to engage in additional lengthy and costly steps to undertake these types of business transactions. This measure improves the regulatory process, thereby helping to keep these institutions in New York and keeping them in the state charter system.

Fiscal implications

None.

Effective date

Immediately.