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Industry Letters

Authority for Banks to Close Absent Governor’s Declaration


TO THE PRESIDENT OF THE INSTITUTION ADDRESSED:

RE: Authority for Banks to Close Absent Governor’s Declaration of Bank Holiday

Banking institutions may be closed in accordance with the provisions of General Construction Law Section 24-a in effect on the date hereof, which are set forth in further detail below. 

If an emergency affects the operations and functions of a bank’s office(s) that is not its principal office, Section 24-a(3)(b) provides that a non-principal office or offices may be closed, without the prior approval of the Superintendent, if: (i) it is determined that normal business cannot be conducted at a certain office or offices; (ii) the business functions conducted at the non-principal office or offices are relocated to the principal office or another office; and (iii) the Superintendent is immediately notified of the office closing. 

If the emergency affects the operations and functions of a bank’s entire principal office, Section 24-a(3)(c) provides that the principal office may be closed, without prior approval of the Superintendent, if: (i) the operations are relocated to another office; and (ii) the Superintendent is notified immediately.  However, if the operations of the principal office cannot be relocated to another office, the office may only be closed with prior approval of the Superintendent.

If the emergency affects the conduct of certain operations or functions of the bank’s principal office, Section 24-a(3)(d) provides that the bank must first attempt to relocate the operations or functions in question to a non-principal office.  If such relocation is not feasible, the bank may discontinue the operations or functions with the prior approval of the Superintendent.  If the organization is unable to obtain the prior approval of the Superintendent, it may discontinue the operations or functions in question only if a good faith effort has been made to contact the Superintendent to obtain approval to discontinue the affected operations or functions.  The bank must promptly notify the Superintendent upon the discontinuance of any operations or functions at the principal office.  Please note that in no case may the entire principal office be closed under Section 24-a(3)(d). 

With respect to the applicability of Section 24-a to a foreign bank maintaining office(s) in New York, we note that such a bank is considered a banking organization under that statute.  However, Section 24-a is unclear as to whether the rules applicable to principal offices are applicable to the New York office(s) maintained by a foreign bank.  The Department suggests that in an emergency, as a matter of practice, foreign banks with only one office treat it as their principal office and seek permission to close.  In those cases where a foreign bank maintains multiple branches, the branch which the bank, as a factual matter, treats as its “main” branch, should be considered by the bank as its principal office and seek permission to close. 

Please note that the Superintendent has delegated the ability to grant permission for or to receive notice of closings to all Deputy Superintendents. Accordingly, an institution should first attempt to call the Deputy of the Banking Division which supervises it, should the need arise. 

Very truly yours, 

Benjamin M. Lawsky
Superintendent of Financial Services

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