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Adopted Regulations

New Part 6.9 (Mergers With Non-bank Affiliates)

June 28, 2006

Amendment to General Regulations of the Banking Board
Part 6


(Statutory Authority: Banking Law Sections 13.4, 14-g, 14-h)

Part 6 is amended by adding a new Section 6.9 to read as follows:

§ 6.9 Merger of a bank or trust company with a nonbank affiliate.

(a) The Banking Board hereby finds that the promulgation of this section is consistent with the policy of the State of New York as declared in section 10 of the New York Banking Law and thereby protects the public interest, including the interests of depositors, creditors, shareholders, stockholders and consumers and is necessary to achieve or maintain parity between banks and trust companies and national banks with respect to rights, powers, privileges, benefits, activities, loans, investments or transactions.

(b) The Banking Board hereby finds that Title 12, United States Code, Section 215a-3 and Title 12, Code of Federal Regulations, Section 5.33(g)(4) permit a national bank to merge with one or more nonbank affiliates of such bank.

(c) Definitions

For purposes of this Section 6.9:

(i) “Banking institution” means a banking organization as defined in Section 2(11) of the Banking Law, national bank, federal savings bank, federal savings and loan association, federal credit union, foreign banking corporation, or any bank, trust company, savings bank, savings and loan association or credit union organized under the laws of any other state.

(ii) “Company” means a corporation, limited liability company, partnership, business trust, association or similar organization.

(iii) “Control” shall be deemed to exist when:

  1. One company or shareholder, directly or indirectly, or acting through one or more other persons, owns, controls, or has power to vote 25 percent or more of any class of voting securities of the other company, or
  2. One company or shareholder controls in any manner the election of a majority of the directors or trustees of the other company;

provided, in either case, that no company shall be deemed to own or control another company by virtue of its ownership or control of shares in a fiduciary capacity.

(iv) “Nonbank affiliate” of a bank or trust company means any company (other than a banking institution) that controls, is controlled by, or is under common control with the bank or trust company.

(v) “Receiving corporation” means the bank or trust company which is to receive into itself the merging affiliate or affiliates.

(d) (i) With the approval of the Superintendent, a bank or trust company may merge with one or more of its nonbank affiliates, with the bank or trust company as the receiving corporation, in accordance with the provisions of this section 6.9, provided that the law of the state or other jurisdiction under which the nonbank affiliate is organized allows the nonbank affiliate to engage in such mergers. In determining whether to approve the merger, the Superintendent shall consider the purpose of the transaction, its impact on the safety and soundness of the bank or trust company, and any effect on the bank or trust company’s customers, and may deny the merger if it would have a negative effect in any such respect. The transaction may also be subject to approval by the Federal Deposit Insurance Corporation under the Bank Merger Act, 12 U.S.C. 1828(c).

(ii) A bank or trust company entering into the merger shall be subject to the requirements and follow the procedures set forth in Section 601 of the Banking Law and the regulations of the Banking Department thereunder as if the nonbank affiliate were a bank or trust company, except as otherwise provided herein.

(iii) A nonbank affiliate entering into the merger shall follow the procedures for such mergers set out in the law of the state or other jurisdiction under which the nonbank affiliate is organized.

(iv) The rights of dissenting shareholders and appraisal of dissenters’ shares of stock in the nonbank affiliate entering into the merger shall be determined in the manner prescribed by the law of the state or other jurisdiction under which the nonbank affiliate is organized.

(v) The corporate existence of each entity participating in the merger shall be continued in the receiving corporation, and all the rights, franchises, property, appointments, liabilities and other interest of the participating entities shall be transferred to the receiving corporation, as set forth in Section 602 of the Banking Law, in the same manner and to the same extent as in a merger between two corporations subject to the provisions of article three of this chapter, as if the nonbank affiliate were a bank or trust company.

(e) A merger authorized under subsection (d) shall not have the effect of enabling a bank or trust company to exercise any right, power, privilege or benefit that it could not lawfully exercise immediately prior to such merger.

(f) The authority provided by subsection (d) shall not limit any other authority contained in the Banking Law or regulations.

Explanatory All Institutions Letter

Department of Financial Services


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