Relates to the maximum amount of funds which the state comptroller and the commissioner of taxation and finance may deposit

BILL NUMBER:S2494

Title of bill

An act to amend the banking law, in relation to the community bank deposit program

Purpose

To permit participating banks to expand their usage of the community bank deposit program.

Summary of provisions

This bill amends subdivision 2 of section 87 of the Banking Law to cap the amount of funds which an individual bank may have on deposit to $20 million.

Justification

The community bank deposit program seeks to encourage the State Comptroller and the Commissioner of Taxation and Finance to consider placing State funds into local banks. This program recognizes that local banks are well-positioned to use their deposits to support economic activities in their communities. This bill seeks to expand the program to ensure additional availability of funds.

By encouraging the placement of State deposits in local banks, this program creates an opportunity for New York State to help stimulate local economic development. Currently, much of the State's funds may be placed in brokerage firms or in large banking institutions, many of which may be head quartered in another state. In either of those cases, the economic benefits of the State deposits may flow out of the state, and the resulting local economic benefit can be minimal.

In contrast, deposits in local community banks can have a significant impact within that particular community. The placement of state deposits would help enable these community banking institutions to meet the economic needs of their local communities. Because many small communities are home to small state and national banks, expanding the program would be of benefit to the economies of these small communities.

California has had a successful program for a number of years in which the State broadly deposits its funds into a large number of financial institutions and local communities. The intent of New York's law is to encourage the State to consider a similar approach by placing more of its funds in local community banks. While the Comptroller and the Commissioner are not required to make such deposits, they are encouraged to consider the benefits of such an approach. This would enhance the ability of small local banks to support the economies of their communities by making commercial loans to local businesses.

Legislative history

2011-12 S. 4927a Passed Senate/A. 8147a - Banks Committee.

Fiscal implications

This bill would have only a minimal fiscal impact, depending on the rate of return received on any deposits placed under this program.

Effective date

Immediate.