Skip to Content Portal State Agency Listing

Translate | Disclaimer

Department of Financial Services logo

Banking Interpretations

NYSBL 105(1)(b); 130;153
Supervisory Procedure 98


To: John Lindquist

From: Sam L. Abram, Legal Division

Date: August 3, 2004

Subject: [ ]- Shared Trust Officers and Offices

Whether [ ], a holding company which has both state- chartered and national banks in New York , may (1) have a single individual acting as a trust officer for more than one subsidiary bank, and (2) have a national bank subsidiary ("NBS") establish a "trust office" on the premises of a state-chartered bank subsidiary ("SBS").

As to the first question, the Banking Law permits a single individual to serve as an officer of multiple bank subsidiaries of a single holding company. The operating division should advise the institution regarding what safeguards it considers necessary or desirable to ensure that persons dealing with "double hatted" staff are clear on which entity he or she is representing in a particular instance, and that the documents involved and the records of the institution accurately reflect the person's role.

The answer to the second question depends on whether the objective is simply to enable NBS to solicit trust business at a location where SBS has a branch, or whether it is to enable NBS actually to engage in fiduciary activities at such a location.

It appears that under the Banking Law NBS could establish a registered representative office that can solicit banking business, including fiduciary business, for the bank. Although the question is not entirely free from doubt and there does not appear to be any direct precedent on the subject, it appears that such an office may be established at the same location as a branch of an affiliated banking institution, so long as the representative office designation requirements in Section 8.5 of Supervisory Policy G 8 are met. Thus, if[ ] objective is simply to solicit trust business at the location of an affiliated SBS, NBS should be able to accomplish that objective by establishing a representative office at that location. The operating division should advise the institution as to what safeguards it considers necessary to ensure compliance with Part 8.5 in these circumstances, as well as to ensure that the an arrangement is consistent with the protection of the public and the safe and sound operation of the institutions involved.

If, however, [ ]; objective is for NBS to be able actually to do a trust business at SBS branch locations, the question becomes more difficult. The Banking Law does not expressly prohibit one bank from being licensed to operate a branch at a location which is also an office of another bank, although it does not appear that such a license has ever been granted. Indeed, there would appear to be stronger policy reasons to avoid branch/branch "cross-licensing" arrangements than branch/representative office arrangements.

While the Banking Law does permit a bank to provide certain services for an affiliated bank's customers without being considered a branch of the affiliated bank, fiduciary services are not among those permitted. However, it should be noted that under Article 3-B of the Banking Law [ ] can establish a subsidiary trust company, to which fiduciary relationships of affiliated banks can be transferred. A subsidiary trust company can establish offices at any location where an affiliated state or national bank has a branch.

 [ ] is a bank holding company with two New York state chartered bank subsidiaries and two national bank subsidiaries headquartered in New York State. The trust business of each of its banks is small. [ ] wishes to have one of its national banks ("NBG") as the main provider of trust services. Where appropriate and possible, it will transfer trust assets from its other banks to NBG.

The other banks will retain their trust powers and handle trust assets not transferred. These trust assets will be administered by a "dual" trust officer who is also the trust officer of NBG or another of the other affiliated banks.

NBG would also propose to establish a trust office at selected branches of its affiliated banks "to seek additional fiduciary business within the sister bank's geographical operating area."

[ ] has asked for the Department's views on its plans. It has indicated that it is also seeking the views of the OCC. [ ] advises that it has not obtained formal legal advice on the specific questions presented.

"Dual" Trust Officer 
Banking Law Section 130(3) generally prohibits an executive officer of a bank or trust company from being an executive officer of another bank, trust company or national bank located in New York unless permission has been granted by the Banking Board. (Permissions granted pursuant to this section are found in Part 207 of the General Regulations. The Banking Board is empowered to determine who shall be considered an executive officer and has exercised this power in Part 70 of its General Regulations.)

Notwithstanding this general rule, Section 130(3) provides that an executive officer of a bank or trust company which is a subsidiary of a bank holding company may be an executive officer of the holding company and of one or more of its other banking institution subsidiaries. Thus, insofar as the New York Banking Law is concerned, a single individual may serve as a trust officer of multiple bank subsidiaries of a single bank holding company, either because the officer is not an "executive officer" to whom the basic interlock prohibition in Section 130(3) applies, or, if the officer is an executive officer, because of the exception to the prohibition for affiliated banking institutions.

Although having dual-hatted officers is not prohibited by the Banking Law, the operating division may wish to advise the institution of what safeguards it considers appropriate as a matter of safety and soundness to ensure that the capacity in which the officer is acting at any time is clear to third parties and properly reflected in each institutions procedures, documents and records.

Activites on Premises of Affiliated Bank

A. Solicitation of Fiduciary Business

As I understand it, it is the position of the Banking Department that a bank or trust company does not generally have the power to solicit business on behalf of affiliated banking organizations.

Supervisory Policy G 8 provides for the registration of representative offices of domestic banks, including national banks. The permitted activities of such offices are enumerated in the supervisory policy and include "solicitation of other banking business on behalf of the banking institution" and "other similar activities." Section 8.4(a). While solicitation of fiduciary business is not specifically mentioned, it would appear to come within the scope of the above-defined activities.

Section 8.5 of Supervisory Policy G 8 requires that a representative office be so designated in any office signage, telephone listing, stationery and advertising, and that a notice be prominently displayed at its office location that it is not a branch office of a bank and does not engage in general banking transactions at the representative office. Although there is no precedent on the subject, nothing in G 8 appears to prohibit a representative office from being established at the same location as a branch of an affiliated bank, so long as the requirements of Section 8.5 are met. (Cf. Supervisory Policy FB 2, which makes it clear that a branch, agency or other place of business of one foreign bank which solicits business for an affiliated foreign bank must be licensed as a representative office of that affiliated bank.) These requirements should minimize the possibilities for public confusion and unsafe operation, which in any event seem less in the case of branch/representative office co-location than in the case of branch/branch co-location.

The operating division should discuss with [ ] how it proposes to meet the Section 8.5 disclosure requirements in the context of a representative office of NBS which is co- located with a branch of SBS. It may well be considered desirable as a policy matter, as well as a legal matter, that the space occupied by the representative office be physically demarcated and distinct from the space occupied by the affiliate's branch.

B. Engaging in Fiduciary Activities

Banking Law Section 105(1)(a) sets forth the basic rule that "no bank or trust company may transact any part of its usual business of banking" at any place other than its principal office, except that it may open and occupy one or more branch offices so long as it has made the appropriate application to the Department under Section 29 and so long as home office protection does not apply.

On the face of the statute, nothing prohibits a bank wishing to share premises with another bank, as here proposed, from complying with Section 105(1) by obtaining a license to have a branch office at the same location as the other bank's branch office. (Contrast Banking Law Section 240(1), prohibiting a savings bank from "being located in the same room with or in a room connecting with" a bank or trust company.)

It has generally been the position of the Department that having one bank serve as an agent for another, or have operations on the premises of another, is prohibited by Section 105. See, e.g., June 5, 1953 memorandum from Attorney Clinch to Deputy Eller re State Bank of Ontario.

The Department has taken the same position even if the two banks involved are subsidiaries of the same holding company. July 14, 1972 memorandum from Associate Attorney Shanbron to Examiner Beckman regarding First Trust & Deposit Company; March 6, 1974 memorandum from Assistant Counsel Mark to Commercial Banks Division regarding Marine Midland Bank - New York; see also September 19, 1974 memorandum from Associate Attorney Gelman to the Commercial Banks Division regarding First Trust & Deposit Company.

It is noteworthy that in none of these instances has the Department suggested that the problem could be resolved by having one of the banks obtain a license to operate a branch at the location of the other bank's branch, although this may not have been a viable option in some instances (because of former prohibitions against branching across banking districts, for example). However, it is interesting that, to the best of my knowledge, "cross-licensing" of branch locations has not been permitted or, apparently, even offered as a possibility.

The Banking Law does contain several provisions permitting banks to operate at shared locations in ways that do not require "cross-licensing" of branch locations.

Section 105-a permits a bank or trust company to conduct a banking business at electronic facilities without such facilities being considered branches. As a consequence, banking institutions, whether affiliated or not, can share or otherwise give one another access to such facilities without raising the "cross-licensing" issue. See General Regulations of the Banking Board, Part 73.4.

Section 105(1)(b) provides that an office of bank can take and renew deposits, allow withdrawals, make and service loans and make payments on loans for customers of an affiliated bank without being deemed a branch office of the affiliated bank. Interestingly, trust services are not listed among the things that one affiliated bank can do as agent for another. (Likewise Article 4-A public accommodation offices, which are also not deemed branch offices, are not empowered to perform fiduciary functions.)

Section 105(1)(b) was enacted in 1996 as part of the Department's interstate banking package, and was specifically aimed at providing parity with interpretations by the OCC regarding affiliated national banks. While the Department stated that the relief was available to banks located within the state, presumably the principal objective was to permit ease of operation by multistate holding companies whose holdings included a New York bank. It is not clear whether "cross-licensing" of branches would have been a viable alternative for such holding companies, since it would presumably have raised structural issues, including interstate branching.

While it is thus not possible to state definitively that the Banking Law prohibits one bank from being licensed to conduct banking business at a location which is also a branch of another bank, there does not appear to be any precedent for this practice. Moreover, from a safety and soundness perspective, such "cross-licensing" would create obvious issues of potential consumer confusion and unsound practices.

It should be noted that Article 3-B of the Banking. Law contains a mechanism designed specifically to deal with the problem facing [ ]. That article permits a bank holding company to organize a "subsidiary trust company" and to apply to the courts to be substituted as fiduciary for the holding company's other trust company subsidiaries. Banking Law Section 153 specifically provides that, notwithstanding Sections 29 and 105 of the Banking Law, "a subsidiary trust company may open and occupy a trust office, including its principal office, at any one or more locations in the state of New York at which the owning bank holding company, any affiliated bank, any affiliated savings bank or any affiliated trust company has a banking office . . . ." An "affiliated bank" and "affiliated trust company" are defined to include an affiliated national bank (Section 150(4)). Thus, under the Banking Law, [ ] could establish a subsidiary trust company under state charter, which could operate at all of the locations where both its national bank subsidiaries and its state bank subsidiaries have offices.

Assuming that, as a matter of policy, the operating division does not feel that cross- licensing of branch locations among affiliated banking organizations is appropriate or desirable, it may wish to suggest that [ ]I consider the use of an Article 3-B subsidiary trust company as the vehicle for its fiduciary activities.