Authorizes the New York state department of financial services to oversee the planned closing of bank branch offices by federally chartered banking organizations

Summary of provisions

Section one amends section 28-c of the banking law by authorizing the superintendent of the New York state department of financial services to obtain detailed information concerning the planned closing of branch offices by state-chartered and federally chartered banking organizations, the availability of alternative financial services within the general area served by such branch and the economic impact upon the community resulting from such closing, and to provide the superintendent with authority to conduct meetings with banking organizations and community groups in areas where a branch closing is planned.

Section two sets forth an immediate effective date.

Justification

Bank branches serve an essential role in creating and maintaining an economically vibrant community. A bank branch provides a convenient and safe place for local residents to deposit their money, accumulate savings and obtain home and small business loans. In addition, a bank branch serves to attract businesses to the local neighborhood since they can deposit business earnings at the end of the day without having to drive a long distance and easily access safe and trustworthy lending services. Furthermore, a local branch plays a critical role in the lives of senior citizens and individuals with limited transportation options.

For these reasons, a branch closure can have a severe impact upon the local community. The negative impacts are even more exacerbated in low and moderate income neighborhoods. According to a study conducted by the National Community Reinvestment Coalition, from 2007 through 2010, bank and credit union branches increased by 1,000 in middle- and upper-income neighborhoods while decreasing by 530 in low- and moderate-income neighborhoods across the country. In addition, branches increased in predominantly white neighborhoods by 598 while decreasing by 186 in minority neighborhoods where more than 50 percent of the residents are minority.

The disparity in branches and the negative impact resulting from a branch closure highlight the importance of ensuring that concerns and input of the local community are taken into consideration in the decision making process.

Currently, federally-chartered banking organizations are required to provide advanced notice to an appropriate federal agency and its customers. However, under the existing federal regulation, the

community does not have the meaningful input in the decision making process and the federal notice requirement does not go far enough in addressing the concerns of the community and protecting the interest of such branch customers.

In comparison to the federal regulation, New York state banking law imposes more stringent notice requirements upon state-chartered banking organizations planning to close a branch. Specifically, state law authorizes the superintendent of the department of financial services to obtain more comprehensive information, which includes availability of alternative financial services within the general area, economic impact upon the community resulting from such closing, and a description of any planned, limited or full service banking facility to be opened within such area. In addition, it allows the superintendent to conduct meetings with banking organizations and community groups in areas where a branch closing is planned.

This legislation purports to ensure that bank branches are accessible to all communities by requiring that not only state-chartered, but federally chartered bank organizations also comply with the relevant New York state banking law concerning the planned closing of branch offices.

Legislative history

None

Fiscal implication

None.

Effective date

This legislation shall take effect immediately.