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Banking Interpretations

NYSBL 227
            237

 

To:

 

Principal Examiner Gottlieb - RATA

 

From:

Megan Prendergast
Associate Attorney
Date:

September 14, 2007

Subject:


Application, pursuant to Banking Law Section 227, for approval of the Superintendent to continue to accept New Jersey governmental deposits and pledge assets for amounts deposited over that covered by FDIC insurance at New Jersey branches following the merger of Synergy Bank with and into [---]


Issue

Does the application submitted by [---] (“Bank”) to continue to accept New Jersey governmental deposits and pledge assets to secure amounts deposited over that covered by FDIC insurance at New Jersey branches of Synergy Bank ("Synergy") following the merger of Synergy with and into [---] meet the legal requirements set forth in Banking Law Section 227?

Recommendation

The Legal Division concludes that the application meets the legal requirements set forth in Banking Law Section 227. The safety and soundness aspects of the proposed activity should be evaluated by the operating division with responsibility for the Bank.

Background

The Bank is a New York State chartered savings bank and has submitted a separate application to merge with [---], a federally chartered stock savings bank in [---], New Jersey. The Bank wishes to continue to accept New Jersey municipal deposits at its New Jersey branches after the merger.

Reasoning/Conclusion

Banking Law Section 227 permits a New York State chartered institution that opens, occupies and maintains one or more branch offices in another state to exercise any power at such branches that is authorized for an out-of-state banking institution maintaining such branches with the type of charter most closely corresponding to that of the New York institution. The institution must obtain the prior approval of the Superintendent where the activity is not one authorized for the institution in New York. In addition, Banking Law Section 227 provides that the Superintendent shall approve any such request unless approval would be contrary to the declaration of policy contained in Banking Law Section 10.

Pursuant to New York Banking Law Section 237, a New York savings bank may not accept any deposit for credit to any municipal corporation. Further, a New York savings bank may not pledge assets to secure those deposits for any amounts over that covered by FDIC insurance. (New York commercial banks have this power pursuant to Banking Law Section 96(7)(c) but there is no corollary power for New York savings banks). As such, in order to accept these New Jersey municipal deposits and pledge assets to secure them at the New Jersey branches, the Bank must be authorized to do so pursuant to New Jersey law and the Superintendent must approve this activity for the Bank pursuant to Banking Law Section 227. An out of state savings bank with branches in New Jersey is specifically authorized by New Jersey Law to accept deposits from a New Jersey local governmental unit. (See Section 40A:5-14 and 17:9-41 of the New Jersey Annotated Statutes attached). The New Jersey Governmental Units Protection Act requires that assets be pledged by the depository for amounts deposited over that covered by FDIC insurance. Therefore, if the Bank has the ability to accept municipal deposits, it also needs to have the ability to pledge assets to secure the deposits.  New Jersey savings banks have authority to pledge assets to secure governmental deposits pursuant to New Jersey Annotated Statute 17:9A-26(2).

The Legal Division does not have any legal objection to the Superintendent approving the application based on the above-mentioned factors.

The determination/recommendation as to the safety and soundness of the proposed activity for the Bank, and whether it would be contrary to the policy contained in Banking Law Section 10, should be made by the Deputy Superintendent of the relevant operating division.

Noted: MEG

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