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Banking Interpretations

NYSBL 128 and 225-b

Sharon Cherry/legal/NYSBD
10/06/2005 10:28 AM
To: [ ]
cc: Steven Barras/legal/NYSBD@NYSBD, Cheryl Lewis/legal/NYSBD@NYSBD
Subject: Advisory Opinion Request

Dear [ ]:

Your e-mail of May 11, 2005, addressed to Sara Kelsey, Deputy Superintendent and Counsel, has been forwarded to me for a response. You are Vice-President/Bank Counsel and Custodian of Records for [ ] , a multistate bank chartered in the state of New Jersey that operates branches in New Jersey, New York, Connecticut and Pennsylvania. According to your e-mail, [ ] currently maintains and follows a document retention schedule for each state in which it maintains a branch, as well as for applicable federal regulations. However, you have reviewed this practice and your research indicates that [ ] is not required to maintain separate schedules for each state in which it maintains a branch presence and is only required to retain its records in accordance with New Jersey and federal retention schedules. You are asking for an opinion as to whether [ ] would be in violation of any New York Banking Law, specifically Section 128 which requires ban s and trust companies to preserve its records of final entry for a period of at least six years, or any banking regulation if it revises its document retention policy to be in compliance with New Jersey and applicable federal retention schedules only.

In support of your position first you state that [ ] document retention policy and schedules are not "activities" of [ ] branch operations in New York as defined by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended, and is therefore not subject to host state regulation. Riegle-Neal defines an "activity to include "acquiring or retaining any investment." 12 U.S.C.A. Section 1831a(h).

In addition, you state that the retention policy of a multi-state bank relates to its corporate structure and is an internal policy which is not an "activity" of [ ] in New York. You state that host state regulation of such a retention policy is prohibited pursuant to the Conference of State Banking Supervisors' ("CSBS") State/Federal Supervisory Protocol (the "Protocol') and the Nationwide State-Federal Supervisory Agreement (the "Federal Agreement"), and the Nationwide Cooperative Agreement (the "Agreement") of which New Jersey and New York are signatories.)

We have reviewed the Agreement, the Protocol and the Federal Agreements. The Protocol which is incorporated by reference into the Federal Agreement, outlines the basic framework for supervising state-chartered banks with interstate branches. Pursuant to the Protocol " Home State" is defined to mean the state where a state-chartered, multi-state bank is chartered and " Host State" is defined as a state other than the Home State of a bank where the bank maintains a branch. Section IV.A.1 (Applicable Law) of the Protocol provides:

"Host state law shall apply generally to the operations of a branch of a multi-state bank in the Host State including: (i) antitrust law and deposit concentration limits; (ii) community reinvestment and similar laws; (iii) consumer protection laws, including lending and usury laws to the extent that laws or court decisions regarding the exportation of interest rates; (iv) fair lending or equal credit law; and (v) other operational matters where competitive equality with host state banks may be an issue."

Section IV.A.2
" Home State law shall apply generally to the corporate structure and internal policies and procedures of a multi-state bank including: (i) charter and bylaws; (ii) incorporation and dissolution; (iii) board of directors and management; (iv) capital; (v) loans, lending limits and investments; (vi) common trust funds; (vii) dividends; (viii) indemnification of directors and officers; (ix) stock and debt; and (x) structure of bank subsidiaries."

The Nationwide Cooperative Agreement, Revised December 1997, created a streamlined regulatory system for state-chartered banks that operate across state lines and according to CSBS this Agreement has been signed by every state banking department in the country. Specifically, Section 6.1 ( Host State Law) provides: "Host state law that applies to the operations of a branch established in the host state by an out-of-state national bank, shall apply to the operations of a host state branch of a multi-state bank, including: (i) antitrust law and deposit concentration limits; (ii) community reinvestment and similar laws; (iii) consumer protection laws, including lending and usury laws to the extent that laws or court decisions regarding the exportation of interest rates are inapplicable; and (iv) fair lending or equal credit laws.

Section 6.2 (Home State Law) of the Agreement provides: "To the extent that , based on the principles referred to in Section 6.1, host state law is determined to be inapplicable to particular operations of a host sate branch of a multi-state bank, such operations shall be governed by home state law. In addition, home state law shall apply generally to the corporate structure and procedures and internal policies of a multi-state bank including: (i) charter and bylaws; (ii) incorporation and dissolution; (iii) board of directors and management; (iv) capital; (v) loans and investments; (vi) common trust funds; (vii) dividends; (viii) indemnification of directors and officers; (ix) stock and debt; and (x) structure of bank subsidiaries."

We agree with your analysis that the record retention policy relates to the bank's structure and procedures and internal policies and are not the type of activities that are governed by host state regulation. Accordingly, the Banking Department hereby determines that [ ] is not required to comply with Section 128 of the New York Banking Law and we have no objection to [ ] revising its retention policy to only be in compliance with New Jersey and applicable federal retention schedules.

Sincerely,

Sharon Cherry
Associate Attorney

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