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Banking Interpretations

NYSBL Misc.

July 24, 2009

[---]

Dear Mr. [---]:

Your letter of July 6th to Marjorie E. Gross, General Counsel of this Department, has been referred to me for a reply.

You inquire whether banks can refuse to open accounts for clients to whom the Surrogate's Court has issued Temporary Letters of Administration or Preliminary Letters Testamentary granting them the power to marshal, but not distribute, assets of a decedent.

Although this Department has no particular expertise in trusts and estates law, it appears from the Surrogate's Court Procedure Act (SCPA) that letters of administration and letters testamentary are conclusive evidence of the authority of the persons to whom they are granted. SCPA Sec. 703.

However, such letters may be granted limiting or restricting the powers of the holder thereof.  CPA Sec. 702. It does not appear from the SCPA that such letters generally constitute or evidence an order of the Surrogate's Court directing one or more banks to open accounts for the holder of the letter, and your letter does not suggest that this is the case. (Compare SCPA Sections 803 and 804, which provides a procedure whereby the court can direct that assets of an estate be delivered to a bank and, when a bank is serving as a fiduciary, can make an order directing the deposit of assets with that bank.)

Nor does your letter indicate whether the bank or banks in question are New York State chartered banks, which are regulated by this Department, or national banks regulated by the federal government. In either case, although banks have a general duty to be open for business to the public, we do not understand that to mean that they have a duty to open a deposit account for any intending customer.

Thus, for example, banks which are not comfortable that they have sufficient information about a prospective depositor and understand its source of funds may decline that customer's business. Banks whose business strategy is to focus on serving affluent clients may lawfully establish minimum deposit requirements. (Although, of course, in determining whether to open an account a bank may not engage in prohibited discrimination.)

Your letter does not set forth the reasons given by the bank or banks that declined to open the accounts in question. If, for example, a bank determined that the administrative costs associated with operating accounts for holders of letters of administration exceeded the profits to be earned on such accounts, it would be free to decline the business. Similarly, if it determined that its operating systems did not readily permit it to prohibit distributions from an account, or to distinguish between permitted and prohibited distributions, it would be free to decline the account and thus avoid putting itself at risk of potential legal liability.

I trust that the foregoing is responsive to your inquiry. However, if you have additional questions or would like to discuss this matter further, please feel free to contact the undersigned by telephone (212-709-1658) or email (sam.abram@banking.state.ny.us).

Very truly yours,

Sam L. Abram
Assistant Counsel

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