What's happening
This bill allows community banks in New York to invest in and utilize service corporations for a wide range of financial and related services.
Why it matters
Expands the operational flexibility of community banks. , allowing them to own or invest in service corporations that can provide a broad range of financial, real estate, insurance, and advisory services, which may help smaller banks compete with larger institutions.
Encourages collaboration and resource-sharing among community banks. by permitting joint ownership of service corporations, potentially reducing costs for specialized functions like disaster recovery, compliance, IT, and loan processing.
Imposes safeguards to prevent overexposure. , limiting a community bank’s investment in such corporations to no more than 5% of its assets, which aims to protect bank stability and depositor funds.
Defines “community bank” as institutions with assets not exceeding $8 billion. , ensuring that these expanded powers are targeted at smaller, locally-focused banks rather than large national or multinational institutions.
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Who cares
Headline styles
Allow Community Banks to Collaborate
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.1135
- Referred to banks
- Returned to senate
- Died in assembly
- Referred to banks
- Delivered to assembly
- Passed senateVote 55–7
- Ordered to third reading cal.1871
- Committee discharged and committed to rules
Show 1 earlier action
- Referred to banks
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
3755
2017-2018 Regular Sessions
IN SENATE
January 26, 2017
Introduced by Sen. SAVINO -- read twice and ordered printed, and when printed to be committed to the Committee on Banks
AN ACT to amend the banking law, in relation to community bank service corporations
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "community bank service corporation act".
§ 2. The banking law is amended by adding a new article 2-D to read as follows:
ARTICLE 2-D
COMMUNITY BANK SERVICE CORPORATIONS Section 88. Service corporations owned by community banks; authorized
activities of such corporations; investments therein.
§ 88. Service corporations owned by community banks; authorized activities of such corporations; investments therein. 1. A community bank may invest in the stock, capital notes and debentures of one or more service corporations organized under the laws of this state for the sole activities set forth in subdivision two of this section, to the extent and upon such conditions as are or have been authorized by the superintendent of financial services including but not limited to the following activities:
(a) providing services primarily for other financial institutions particularly accounting, auditing, clerical, compliance activities, consulting, data storage and process, investment advisory, research services, locator services, personnel training and support, marketing services, employee leasing services, and managerial;
(b) originating, investing in, purchasing, selling, servicing or otherwise dealing in directly or through participation, loans of any type which may be made by a community bank;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08456-01-7
S. 3755 2
(c) providing insurance brokerage or agency services, including but not limited to agency for sale of insurance, vehicle warranty programs, group purchasing programs and real estate settlement programs;
(d) providing real estate services including but not limited to brokerage, appraisal, inspection, property management, and leasing of excess property;
(e) leasing of personal property to customers;
(f) providing loan support services including but not limited to debt collection services, loan processing, service and sales, real estate settlement services, purchasing and servicing of non-performing loans and referral and processing of loan applications;
(g) record retention, security and disaster recovery services including but not limited to alarm-monitoring and other security services, disaster recovery services, microfilm, microfiche, optical and electronic imaging, CD-ROM data storage and retrieval services, provision of forms and supplies and record retention and storage;
(h) securities brokerage services;
(i) shared community bank branch operations;
(j) student loan origination, including the authority to buy and sell participation interests in such loans;
(k) travel agency and tax preparation services;
(l) providing courier services;
(m) trust and trust related services including but not limited to acting as administrator for prepaid legal service plans, acting as trustee, guardian, conservator, estate administrator or in any other fiduciary capacity and trust services;
(n) credit and loan origination;
(o) payroll processing services;
(p) issuing credit cards and engaging in credit card operations;
(q) issuing letters of credit; and
(r) sponsoring, organizing and advising open-ended mutual funds; provided that all of the stock of such service corporations is, or is to be, owned by one or more community banks; and provided further, that no community bank may make any investment under this section if its aggregate outstanding investment thereby, determined as prescribed by the superintendent of financial services, would exceed five per centum of its assets.
2. The activities of such service corporations, performed directly or through one or more wholly owned subsidiaries, shall consist of rendering such services to community banks and making such investments for itself and for community banks as are authorized services and investments for such community banks under the provisions of this chapter, as well as such activities as may be prescribed by the general regulation of the superintendent of financial services.
3. For purposes of this section, a community bank shall be defined as a bank or trust company organized under or subject to the provision of article three of this chapter or the comparable provision of the laws of another state or a national banking association or a savings bank, a savings and loan association or other savings institution chartered and supervised as such under federal or state law where average value of assets must not exceed eight billion dollars.
§ 3. This act shall take effect on the sixtieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the banking law, in relation to community bank service corporations
Purpose
To permit community banks to invest in and utilize service corporations to achieve economies of scale when complying with regulations.
Summary of provisions
Section 1 - state that this act shall be known as the "Community Bank Service Corporation Act"
Section 2 - amends the Banking Law by adding a new article 2-D, "Community Bank Service Corporations", Section 88 of which outlines the authorized activities and investment therein of such corporations.
Section 3 - specifies enactment sixty days after it becomes law.
Justification
Community banks have significant regulatory burdens. Banking laws and regulations are based on a "one size fits all" approach. The consolidation of banks in the community bank sector is in large measure driven by economies of scale when implementing regulations. These regulatory costs are more easily absorbed by larger banks. Compliance costs are significant for the Bank Secrecy Act, anti-money laundering and information technology requirements. In some cases it might be possible for community banks to work collectively to provide services using another bank, third party vendor or jointly undertaking the performance of such services.
The community bank service corporation is a vehicle which would permit community banks to use such corporation to provide shared services among member banks. This approach would enable community banks to achieve more scale when responding to regulatory requirements. For example, a single information technology platform which would serve multiple member financial institutions could provide savings.
Under banking law § 235-d, there is currently authority to form service corporations for savings banks. This authority was added to banking law in 1983. This legislative proposal would expand this concept to all community banks, including federal and state chartered banks and thrifts under $8 billion dollars.
This bill is directed at providing community banks with an option for meeting compliance requirements. The objective is to preserve community banks in New York State which play an important role in small business and agricultural loans.
Legislative history
S.5624 of 2015/16 Session - referred to Banks and passed Senate in 2016 Session
Fiscal implications
None to the State
Effective date
Sixtieth day after it has become law
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.