 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          5782
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 25, 2021
                                       ___________
 
        Introduced by M. of A. PICHARDO, JACKSON, FALL, MAMDANI -- read once and
          referred to the Committee on Banks
 
        AN  ACT  to amend the banking law, the state finance law and the general
          municipal law, in relation to establishing the "New York public  bank-
          ing act"
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Short title. This act shall be known and may  be  cited  as
     2  the "New York public banking act".
     3    §  2. It is the intent of the legislature that this act (i) authorizes
     4  municipal and other local governments to form and control  public  banks
     5  through the ownership of capital stock or other ownership interests, and
     6  to loan or grant public funds or lend public credit to such public banks
     7  for  the  public purposes of achieving cost savings, strengthening local
     8  economies, supporting community  economic  development,  and  addressing
     9  infrastructure  and  housing needs for localities; and (ii) codifies the
    10  common law interpretation  of  the  New  York  state  constitution  that
    11  cities, counties, and other municipalities may own stock or other owner-
    12  ship interests in, and lend or grant money to, public and private corpo-
    13  rations,  limited liability companies or not-for-profit corporations, so
    14  long as such actions are pursuant to public purposes.
    15    § 3. Subdivisions 1 and 11 of section 2 of the banking  law,  subdivi-
    16  sion  1 as amended by chapter 684 of the laws of 1938 and subdivision 11
    17  as amended by chapter 154 of the laws of 2007, are amended  to  read  as
    18  follows:
    19    1. Bank. The term, "bank," when used in this chapter, unless a differ-
    20  ent  meaning appears from the context, means any corporation, other than
    21  a trust company, organized under or subject to the provisions of article
    22  three or three-C of this chapter.
    23    11. Banking organizations. The  term,  "banking  organizations,"  when
    24  used  in  this  chapter,  means and includes all banks, trust companies,
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD01784-03-1

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     1  private bankers, savings banks, safe deposit companies, savings and loan
     2  associations,  credit  unions,  public  banks  organized  under  article
     3  three-C of this chapter, and investment companies.
     4    § 4. The banking law is amended by adding a new article 3-C to read as
     5  follows:
     6                                 ARTICLE 3-C
     7                                PUBLIC BANKS
     8  Section 156.   Definitions.
     9          156-a. Sponsors and corporate structure.
    10          156-b. Governance.
    11          156-c. Public bank charter requirements.
    12          156-d. Financial and operations framework.
    13          156-e. Insurance.
    14          156-f. Deposits.
    15          156-g. Permitted activities of the public bank.
    16          156-h. Inconsistency with other laws.
    17          156-i. Owners not to be considered bank holding companies.
    18    § 156. Definitions. For the purposes of this article:
    19    1.  "Advisory board" means a board established pursuant to section one
    20  hundred fifty-six-b of this article.
    21    2. "Affiliate" means:
    22    (a) in the case of a person (other than an individual), another person
    23  that  directly,  or  indirectly  through  one  of  more  intermediaries,
    24  controls,  or  is  controlled  by,  or is under common control with such
    25  person.
    26    (b) in the case of an individual, (i)  any  member  of  the  immediate
    27  family of such individual, including parents, siblings, spouse and chil-
    28  dren  (including  those  by  adoption) and any other person who lives in
    29  such individual's household; the parents, siblings, spouse, or  children
    30  (including  those  by  adoption) of such immediate family member, and in
    31  any such case any trust whose primary beneficiary is such individual  or
    32  one  or  more  members of such immediate family and/or such individual's
    33  lineal descendants; (ii) the legal representative or  guardian  of  such
    34  individual  or  of  any  such  immediate family member in the event such
    35  individual or any such immediate family member becomes mentally incompe-
    36  tent; and (iii) any person controlling, controlled by  or  under  common
    37  control with such individual.
    38    (c)  As  used  in  this  definition, the term "control," including the
    39  correlative terms  "controlling,"  "controlled  by"  and  "under  common
    40  control with," means possession, directly or indirectly, of the power to
    41  direct or cause the direction of management or policies (whether through
    42  ownership  of securities or any partnership or other ownership interest,
    43  by contract or otherwise) of a person. Such control shall be presumed to
    44  exist where a person owns a ten percent or greater ownership interest in
    45  another person.
    46    (d) "Person" shall be construed broadly  and  shall  include,  without
    47  limitation, an individual, a partnership, a limited liability company, a
    48  corporation,  an  association,  a  joint stock company, a trust, a joint
    49  venture, an unincorporated organization and a governmental entity or any
    50  department, agency or political subdivision thereof.
    51    3. "Bank" means any  corporation,  other  than  a  trust  corporation,
    52  organized  under or subject to the provisions of this article or article
    53  three of this chapter.
    54    4. "Board" means a board of directors or board of managers of a public
    55  bank.

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     1    5. "Community banking experience" means  current  or  past  employment
     2  experience  as  an  officer,  director  or executive, or current or past
     3  employment experience in a senior leadership role at any of the  follow-
     4  ing:
     5    (a)  a  community  development  financial institution that is a credit
     6  union, loan fund, minority depository institution, union controlled bank
     7  or locally based community bank; or
     8    (b) a credit union, loan fund, minority depository institution,  union
     9  controlled  bank  or  locally based community bank that otherwise serves
    10  low-income, rural or other underserved or economically distressed commu-
    11  nities.
    12    6. "Community development financial institution" means an entity  that
    13  has  been  certified  as meeting the eligibility requirements of section
    14  1805.201 of title 12 of the code of federal regulations.
    15    7. "Deposit" means the placing of money with a public bank to be with-
    16  drawn upon the depositor's demand or under  the  rules  and  regulations
    17  agreed upon between the bank and the depositor.
    18    8. "Economically distressed communities" means those communities where
    19  at least thirty percent of residents have incomes that are less than the
    20  national  poverty  level  or where the unemployment rate is greater than
    21  the national unemployment rate; or economic opportunity zone  designated
    22  communities, excluding contiguity economic opportunities zones.
    23    9.  "Independent"  means,  with respect to a member of a public bank's
    24  board of directors, board of managers, or advisory board, an  individual
    25  who:
    26    (a)  at  the  time  of  his or her election to the board of directors,
    27  board of managers, or advisory board of a public bank, is not  a  holder
    28  of any public office within the sponsor; and
    29    (b)  within the past five years has not been a holder of public office
    30  within such sponsor.
    31    10. "Local elected official" means any officer elected to  a  position
    32  within a county, city, town, village, school district or district corpo-
    33  ration, or any agency, department, division, board, commission or bureau
    34  thereof;  provided,  that,  such  term  shall  not  include any judge or
    35  justice of a court.
    36    11. "Minority depository institution" means any depository institution
    37  that is owned in any of the following manners:
    38    (a) a privately owned institution of which fifty-one percent is  owned
    39  by one or more individuals who are minorities;
    40    (b)  a  publicly  owned  institution of which fifty-one percent of the
    41  stock is owned by one or more minorities; or
    42    (c) an institution  otherwise  designated  as  a  minority  depository
    43  institution by the institution's applicable federal regulators.
    44    12.  "Minority"  means  citizens  or permanent resident aliens who are
    45  Black, Hispanic, Asian or American Indian.
    46    13. "Public bank" means a not-for-profit corporation, a  stock  corpo-
    47  ration,  including a public benefit corporation incorporated pursuant to
    48  article seventeen of the business corporation law, or limited  liability
    49  company  that is chartered pursuant to this article as a bank.  A public
    50  bank formed as a stock corporation or a not-for-profit corporation shall
    51  be a public corporation, and a public bank formed as a limited liability
    52  corporation shall be a public limited liability company.
    53    14. "Public bank application documents"  means  a  business  plan  and
    54  application  to  be  submitted to the department pursuant to section one
    55  hundred fifty-six-c of this article for  the  purpose  of  chartering  a
    56  public bank.

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     1    15. "Public corporation" means a stock corporation, including a public
     2  benefit  corporation  incorporated  pursuant to article seventeen of the
     3  business corporation law, or a not-for-profit corporation that is incor-
     4  porated, owned and controlled by a county, city, town or village.
     5    16. "Public funds" means funds of the sponsor.
     6    17.  "Public  limited  liability  company"  means  a limited liability
     7  company that is incorporated, owned and controlled by  a  county,  city,
     8  town or village.
     9    18.  "State  or local authority" means a local government or agency, a
    10  group of two or more local  governments  or  agencies  acting  together,
    11  special  district,  a  group  of  two  or  more special districts acting
    12  together, state agency, or a group of two or more state agencies  acting
    13  together.
    14    19.  "Sponsor"  means one or more cities, towns, villages and/or coun-
    15  ties within the state of New York with an  aggregate  population  of  at
    16  least one hundred thousand residents.
    17    §  156-a.  Sponsors  and corporate structure.   A public bank may be a
    18  not-for-profit corporation, a limited liability company  or  a  business
    19  corporation that is formed by a sponsor, subject to the following corpo-
    20  rate structure requirements:
    21    1.   If incorporated as a business corporation, a public bank may, but
    22  is not required to:
    23    (a) incorporate as a public benefit corporation under  article  seven-
    24  teen of the business corporation law; or
    25    (b)  identify  in  its  certificate of incorporation a specific public
    26  benefit, consistent with the provisions  of  article  seventeen  of  the
    27  business corporation law. Specific public benefits within the meaning of
    28  this  section shall include, but are not limited to, strengthening local
    29  economies, supporting community economic development, addressing infras-
    30  tructure and housing needs for localities and providing banking services
    31  to unbanked or underbanked communities.
    32    2. The sponsor shall be (a) the sole member of a not-for-profit public
    33  bank, (b) the majority and controlling member  of  a  limited  liability
    34  company public bank, and (c) the majority and controlling shareholder of
    35  a corporation public bank.
    36    3.  A  public  bank organized as a limited liability company or corpo-
    37  ration may have other members or shareholders but such other members  or
    38  shareholders shall only be passive members or shareholders and shall not
    39  have  any  consent or veto rights over any decisions, any removal rights
    40  of the sponsor, any rights to elect or choose the board  or  any  voting
    41  rights whatsoever.
    42    4.  Passive members or passive shareholders shall be allowed to invest
    43  capital into a public bank so long as such passive  members  or  passive
    44  shareholders  are  approved by the sponsor and the sponsor maintains the
    45  right to direct the public bank to purchase the interests of any passive
    46  members or shareholders at a market price determined by  an  independent
    47  third party selected by the sponsor at any time.
    48    5.  The  sponsor  shall  owe  no  fiduciary duty nor any other duty to
    49  passive investors. No passive investor may pursue legal  action  against
    50  the  sponsor  for  any  reason  other  than  failure to distribute funds
    51  required to be distributed pursuant to governing documents of the public
    52  bank.
    53    § 156-b. Governance. 1. The public  bank  shall  be  governed  by  the
    54  board.  Such  board shall be composed of nine directors or eleven direc-
    55  tors. Each director shall live within the jurisdictional  boundaries  of
    56  the sponsor.

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     1    2.  The sponsor shall determine the public bank's initial board in the
     2  following manner:
     3    (a)  the  mayor,  or head of the executive branch of government of the
     4  sponsor or sponsors, shall appoint three members, at least one  of  whom
     5  shall  have  community banking experience and at least one of whom shall
     6  be independent;
     7    (b) the city council, or legislative branch of the sponsor or sponsors
     8  shall appoint two members, at least one of  whom  shall  have  community
     9  banking experience and at least one of whom shall be independent;
    10    (c)  the  treasurer, controller or elected official charged with over-
    11  seeing the sponsor or  sponsors'  finances  and  the  administration  of
    12  public  funds  shall appoint one member who shall have community banking
    13  experience and be independent; and
    14    (d) the board members selected pursuant to paragraphs (a) through  (c)
    15  of  this  subdivision  shall,  pursuant  to  a two-thirds majority vote,
    16  appoint at their discretion and in accordance with subdivisions five and
    17  six of this section, either three or five additional board members, with
    18  the purpose of maximizing board diversity to include a  variety  of  the
    19  sponsor's  community  stakeholders,  including community-based organiza-
    20  tions, labor organizations and those groups prioritized  by  the  public
    21  bank's  underwriting and financial policies, as reflected in section one
    22  hundred fifty-six-g of this article. For any sponsor that is also a city
    23  with a population of one million or more,  the  board  members  selected
    24  pursuant to paragraphs (a) through (c) of this subdivision may, pursuant
    25  to  a  two-thirds majority vote, appoint either seven or nine additional
    26  board members to maximize board diversity.
    27    3. The board shall adopt bylaws, governing documents  or  their  func-
    28  tional  equivalents  as  required by the not-for-profit corporation law,
    29  business corporation law, or limited liability company law, as  applica-
    30  ble, based on the corporate structure of the public bank. Such governing
    31  documents shall include:
    32    (a) procedures to remove directors consistent with this article;
    33    (b)  a  provision  requiring  that  the  board membership of any board
    34  member who also serves as a public official or local elected official of
    35  the sponsor shall terminate immediately upon such board  member  ceasing
    36  to hold such public office; and
    37    (c)  appropriate  term limits for board members, consistent with para-
    38  graph (b) of this subdivision.
    39    4. At least one board member appointed pursuant to paragraphs (a)  and
    40  (b)  of subdivision two of this section shall be a representative of one
    41  of the community stakeholders prioritized by the  public  bank's  under-
    42  writing  and  financial  policies  as  reflected  in section one hundred
    43  fifty-six-g of this article.
    44    5. When a board member resigns or ceases to be a board member for  any
    45  reason,  the  individual appointed to replace such board member shall be
    46  appointed in accordance with the same selection criteria and process  by
    47  which  such departing member was appointed under subdivision two of this
    48  section.
    49    6. The sponsor and board will take all steps necessary to ensure  that
    50  the  composition of the board reflects the composition of the population
    51  in terms of people of color and women.
    52    7. A majority of the board shall be composed of independent  directors
    53  who  are  not  government  employees.  The chair of the board must be an
    54  independent director.
    55    8. The board shall set policy  for  the  public  bank;  provided  that
    56  neither the board nor any director shall be involved in day to day deci-

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     1  sions  regarding  particular  instruments. Management decisions shall be
     2  made independently by bank management who  shall  be  appointed  by  the
     3  board consistent with bank policy.
     4    9. The board may establish one or more committees to manage the public
     5  bank.
     6    10.  The  board  shall adhere to all reporting requirements under this
     7  chapter regarding the public bank's financial condition.
     8    11. A public bank shall form one or more advisory boards in  order  to
     9  provide  advice  and  carry  out  any other duties, as determined by the
    10  sponsor, including the following:
    11    (a) provide input to  the  board  regarding  ways  to  accomplish  its
    12  mission;
    13    (b)  ensure  that the board follows strict ethical standards as deter-
    14  mined by the sponsor in the public bank's governing  documents,  through
    15  the  approval  of  bylaws  or  a  code  of conduct to govern the board's
    16  management;
    17    (c) provide technical advice as needed; and
    18    (d) provide an annual report to the public and the sponsor  evaluating
    19  the  public  bank's  performance in relation to its mission, its ethical
    20  standards and its financial soundness.
    21    12. The sponsor will determine the initial advisory board  membership,
    22  the  term  of  its members, the qualifications of members and the method
    23  for replacing its members, provided that a  majority  of  each  advisory
    24  board is made up of independent members who are not governmental employ-
    25  ees.  The  advisory board shall be composed of no fewer than five and no
    26  more than eleven members. Any advisory board member  shall  live  within
    27  the  jurisdictional boundary of the public bank's sponsor or its members
    28  or shareholders.
    29    13. Any action required or permitted by this chapter to  be  taken  by
    30  the  board or an advisory board may be taken at a duly called meeting of
    31  such board in accordance with its governing documents or without a meet-
    32  ing if the action taken is evidenced by one  or  more  written  consents
    33  describing  the  action  taken and signed by each member of the board or
    34  advisory board.
    35    § 156-c. Public bank charter requirements. 1. A proposed  public  bank
    36  shall  be chartered by the department upon submission of the public bank
    37  application documents that demonstrate the following:
    38    (a) the purpose of the proposed public bank  is  consistent  with  the
    39  purposes required under this article;
    40    (b)  minimum initial capitalization is no less than ten percent of the
    41  public bank's projected lending total for the first  year  of  operation
    42  after receipt of its charter;
    43    (c)  adequate  reserves and liquidity exist to cover the public bank's
    44  obligations relating to deposit withdrawals and defaulted loans;
    45    (d) the qualifications of the proposed directors;
    46    (e) the qualifications of the proposed  chief  executive  officer  and
    47  management team;
    48    (f) an organizational chart;
    49    (g)  policies  and  procedures  prohibiting  any  elected official, or
    50  affiliates of such officials, from receiving a loan or  other  financial
    51  benefit from the public bank;
    52    (h) procedures for obtaining fidelity insurance;
    53    (i) sufficient internal audits and controls;
    54    (j)  a  pro  forma financial statement projecting assets, liabilities,
    55  income and expenses for no less than a three year period;

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     1    (k) the impact of the public bank on the  sponsor's  financial  condi-
     2  tion;
     3    (l)  a  plan  to  comply  with the community reinvestment act and fair
     4  lending requirements, pursuant to section two  hundred  ninety-six-a  of
     5  the executive law;
     6    (m) a certificate of incorporation;
     7    (n)  a  narrative  business plan describing the banking services to be
     8  provided; and
     9    (o) such other information as the department may require.
    10    2. The public bank may but shall  not  be  required  to  collateralize
    11  deposits  from the sponsor or any other governmental entity with collat-
    12  eral determined by the public bank in its governing documents.
    13    3. The public bank application documents are not required  to  provide
    14  that the public bank will receive deposits in its initial three years of
    15  operation,  and  not  receiving  deposits  in the initial three years of
    16  operation shall not be a reason for disapproval by the superintendent.
    17    4. Public bank application documents are not  required  to  include  a
    18  market,  public  convenience and advantage, competitive impact or a bank
    19  premises analysis or address any other matters other than  those  listed
    20  in subdivision one of this section.
    21    5.  Public  bank  charter  applications  that do not conflict with any
    22  requirements expressly provided in subdivision one of this section shall
    23  be liberally granted by the superintendent,  and  any  decision  by  the
    24  superintendent  refusing  to  grant  permission  for  the operation of a
    25  public bank may be appealed by the sponsor to the governor within thirty
    26  days from the date of such decision, and the  governor  shall  have  the
    27  power  to affirm, reverse, or modify such decision by the superintendent
    28  in the governor's sole discretion.
    29    § 156-d. Financial and operations framework. 1. The  public  bank  may
    30  raise capital through:
    31    (a) the receipt and leverage of public deposits,
    32    (b) sponsor equity contributions,
    33    (c) passive member or shareholder equity contributions,
    34    (d) sale of corporate debt to sponsor, and
    35    (e) sale of corporate debt to third parties.
    36    2.  The  public bank shall have all the rights and powers conferred by
    37  articles three and fifteen of this chapter, which must be exercised in a
    38  manner consistent with its mission.
    39    3. All lending and actions of the  public  bank  shall  abide  by  the
    40  United Nations declaration on the rights of indigenous peoples.
    41    4. The sponsor may prohibit investments and loans that may benefit any
    42  type  of designated business including the fossil fuel industry, weapons
    43  or gun manufacturers, military systems companies, private prisons, immi-
    44  gration detention facilities, companies engaged in offshore  tax  avoid-
    45  ance  or  exploitative business or labor practices or the tobacco indus-
    46  try, all as determined by the sponsor in  the  public  bank's  governing
    47  documents.
    48    5.  The  public bank shall be exempt from state, county, and municipal
    49  taxes and licenses, of any kind, including income,  capital  gain,  real
    50  estate and mortgage recording taxes.
    51    6.  The public bank shall not be sold to or merged with another entity
    52  unless such entity has a public bank charter.
    53    § 156-e.  Insurance. A public bank shall obtain and  maintain  deposit
    54  insurance  consistent  with  section  thirty-two  of this chapter to the
    55  extent that it accepts deposits from any third  party  that  is  not  in
    56  excess of two hundred fifty thousand dollars.

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     1    §  156-f.  Deposits.  1.  The  board  shall develop a plan, subject to
     2  approval by the advisory board, to accept and manage deposits.
     3    2.  The comptroller or chief financial officer of the sponsor shall be
     4  authorized to deposit public funds in the public bank, provided that the
     5  public bank's business plan permits the comptroller or  chief  financial
     6  officer  to  meet  the short or intermediate-term liquidity needs of the
     7  sponsor.
     8    3. The public bank may accept deposits, but shall be exempt  from  the
     9  requirements of section ten of the general municipal law.
    10    4.  The public bank may accept deposits from any source and funds from
    11  any source, including federal funds.
    12    § 156-g. Permitted activities of the public bank. 1.  The public  bank
    13  shall  have  all  the  rights and powers conferred by articles three and
    14  fifteen of this chapter, which shall be exercised in a manner consistent
    15  with its mission.  The public bank may limit and define its  rights  and
    16  powers  in  the  charter that it submits pursuant to section one hundred
    17  fifty-six-c of this article, but it is the intention to grant any public
    18  bank created under this law the full rights and  powers  that  any  bank
    19  would be permitted to exercise under New York's banking laws, subject to
    20  those limitations that will be approved by the department.
    21    2.  Within  the  overall  underwriting  and  financial policies of the
    22  public bank,  the  public  bank  shall  maximize  and  prioritize  loans
    23  supporting  worker  cooperatives,  community land trusts, low-income and
    24  affordable housing, renewable energy, infrastructure development,  small
    25  businesses, small farms, minority- and women-owned business enterprises,
    26  students  in need of low-cost education financing or refinancing student
    27  loan debts,  and  other  initiatives  that  fulfill  the  public  bank's
    28  mission,  with  a  focus on serving underserved and underbanked communi-
    29  ties, as well as those within economically distressed communities.
    30    § 156-h. Inconsistency with other laws. 1. A public bank shall  comply
    31  with  all  requirements of this chapter, the financial services law, the
    32  state finance law, the local finance law, the general municipal law, the
    33  not-for-profit corporation law, and all  other  relevant  provisions  of
    34  state  or  local  law, except to the extent that a requirement of any of
    35  those laws is inconsistent with a provision of this  article,  in  which
    36  case the provisions of this article shall prevail.
    37    2.  Notwithstanding  any  provision of state or local law, a county or
    38  other state or local authority may lend its credit to any public bank.
    39    3. Notwithstanding any provision of state or local law, any  state  or
    40  local authority may invest in commercial paper, debt securities or other
    41  obligations of a public bank.
    42    4.  Notwithstanding any provision of state or local law, a public bank
    43  shall be eligible to receive state and local authority money.
    44    § 156-i. Owners not to be considered bank holding companies.  For  the
    45  purposes  of section one hundred forty-one of this chapter, any sponsor,
    46  person or entity, including a  state  or  local  authority,  that  owns,
    47  controls,  or holds an ownership interest in a public bank is not a bank
    48  holding company by reason of that ownership interest.
    49    § 5. Section 98 of the state finance law is amended by  adding  a  new
    50  subdivision 7-a to read as follows:
    51    7-a.  Commercial  paper, debt securities, bonds, notes, or other obli-
    52  gations of a public bank, as defined in article three-C of  the  banking
    53  law.
    54    § 6. Paragraph d of subdivision 1 of section 10 of the general munici-
    55  pal  law,  as  amended by chapter 623 of the laws of 1998, is amended to
    56  read as follows:

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     1    d. "Bank" shall mean a bank or public bank as defined by  the  banking
     2  law or a national banking association located and authorized to do busi-
     3  ness in New York.
     4    § 7. This act shall take effect immediately.
Establishes the "New York public banking act"

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