Banking Interpretations

May 13, 2002

B. Beverly Towers
President and CEO
Hudson River Credit Union
312 Palmer Avenue
Corinth, N.Y. 12822

Dear Ms. Towers,

This is in response to your letter to me dated October 23, 2001, which concerns the recent adoption of Part 721 of the National Credit Union Administration's (NCUA) Regulations.  In your letter, you note that the new Part 721, which became effective September 5, 2001, makes major changes regarding the "incidental powers" of Federally chartered credit unions. You ask whether the Banking Department would interpret the applicable provisions of the Banking Law in a manner that would permit New York chartered credit unions to engage in the activities authorized for their Federal counterparts in Part 721.

Part 721 defines an "incidental powers" activity as "one that is necessary or requisite to enable [a credit union] to carry on effectively the business for which [it is] incorporated." That Part further states that an activity meets the definition of an "incidental powers" activity if it:

  1. is convenient or useful in carrying out the mission or business of credit unions consistent with the Federal Credit Union Act;

  2. is the functional equivalent or logical outgrowth of activities that are part of the mission or business of credit unions; and

  3. involves risks similar in nature to those already assumed as part of    the business of credit unions.

Section 454(34) of the New York Banking Law contains the "incidental powers" authority for New York chartered credit unions. That section states that a credit union has the authority to "exercise all other powers that are necessary or appropriate to enable it to carry out its purpose." Considering the broad language of this provision, as well as the intent of the New York legislature that New York chartered credit unions be given parity with their federal counterparts (as evidenced by the recent amendments to Section 451 and other sections of the Banking Law), it is the opinion of the Banking Department that the Department may, consistent with Section 454(34), in its judgment determine that New York chartered credit unions may exercise the same "incidental powers" authority as those available to Federal chartered credit unions under Part 721, absent any inconsistent provision of New York law.  Upon review of those powers, the Department has no objection to New York chartered credit unions engaging in those "incidental powers" activities which have been preapproved by the NCUA in Sections 721.3(a - k) of Part 721 as of the date of this letter, subject to any terms and conditions that may be imposed by that section on any such activity, with the reservation hereinafter mentioned.

The provisions of Sections 454(2), 454(3) and 455 of the Banking Law preclude the Banking Department from authorizing New York chartered credit unions to conduct some of the "incidental powers" activities specified in Section 721.3(l) ("Trustee or custodial services"). Sections 454(2) and 454(3) only authorize a credit union to act as a trustee for Keogh Plans and IRAs, respectively, and require that the credit union, as trustee, invest all funds in share accounts of insured state and Federally chartered credit unions. Therefore, a New York chartered credit union would be required to obtain trust powers under Section 455 of the Banking Law to engage in the additional fiduciary activities authorized for Federally chartered credit unions in Section 721.3(l). However, the Banking Department would have no objection to a New York chartered credit union acting in a custodial capacity to the extent authorized by Section 721.3(l).

To ensure that a credit union is engaging in an "incidental powers" activity in accordance with the preapproved list in Section 721.3, the Department requests that a letter detailing any such activity be sent to the Deputy Superintendent in charge of the Community Financial Services Division within 30 days of the commencement of any such activity.

Section 721.4 of Part 721 sets forth the procedure by which Federally chartered credit unions may apply to the NCUA to engage in "incidental powers" activities which have not been preapproved and consequently are not set forth in Section 721.3. In the case of New York chartered credit unions seeking such authority, a letter containing the information required by Section 721.4(a) should be sent to the Deputy Superintendent in charge of the Community Financial Services Division. That letter should also indicate whether the NCUA has approved the proposed activity of Federally chartered credit unions.  

I trust that this letter is responsive to your inquiries and sincerely apologize for the delay in responding to your letter.


Sara Kelsey
Deputy Superintendent and Counsel

cc: Deputy Calabrese
Mike Lanotte, NYS Credit Union League