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Adopted Regulations

Explanatory All Institutions Letter

June 28, 2006


Re: Adoption of New Part 6.9 of the General Regulations of the Banking Board (Mergers with Non-bank Affiliates)

The Banking Board has adopted the attached proposed new Part 6.9 of the General Regulations of the Banking Board, Title 3 NYCRR . The regulation became effective upon publication in the State Register, which occurred on June 28, 2006.

New Part 6.9 uses the authority granted by Section 14-g of the Banking Law, the so-called “wild card” authority, to permit New York State chartered banks and trust companies to merge with non-bank affiliates with the bank or trust company as the surviving entity, to the same extent as national banks.

Sections 600 and 14-e of the Banking Law permit state chartered banking institutions to merge with other depository institutions, whether affiliates, subsidiaries, or independent entities, but such section does not authorize a merger with a non-bank affiliate or subsidiary. The combination or consolidation may only be achieved by a purchase of assets of the subsidiary,

Under Section 6 of the National Bank Consolidation and Merger Act (12 U.S.C. 215a-3), national banks are authorized to enter into mergers with non-bank affiliates. Non-bank affiliates, pursuant to federal statute and regulation, are inclusive of both subsidiaries of a national bank and affiliates, the latter having common ownership with the bank.

The regulation remedies this disparity in powers by giving New York banks and trust companies the same power as a national bank to merge a non-bank affiliate into the bank. Similarly to the counterpart regulation of the Office of the Comptroller of the Currency (“OCC”) governing such mergers by national banks, (i) the authority to merge will not be automatic but will require approval of the Superintendent, (ii) the requirements and procedures for the merger are generally analogous to those for mergers between two banks, and (iii) the surviving entity must be the bank or trust company. The regulation also makes it clear that the bank or trust company cannot acquire powers by virtue of the merger that it could not previously have exercised.

While the OCC’s rule would allow mergers between a national bank and a non-bank affiliate where the non-bank affiliate is the resulting entity, given the significant additional issues presented by mergers of banks into non-banks, the new regulation only authorizes mergers in which the state-chartered bank or trust company is the resulting entity.

In addition to promoting the legislative objective of ensuring parity between banks and trust companies and national banks, the new regulation, by giving corporate groups that include a bank or trust company additional flexibility in organizing the structure of their operations, can be expected to help minimize the operating costs of such groups and thus facilitate their efficient operation.

Very truly yours,

Sam L. Abram
Secretary of the Banking Board


Department of Financial Services


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