Source: http://www.dfs.ny.gov/legal/interpret/lo051020a.htm
Timestamp: 2017-11-19 19:55:40
Document Index: 112180164

Matched Legal Cases: ['art 6', 'arts 6', 'art 6', 'art 6', 'art 6', 'art 6']

NYS DFS - Banking Interpretations - Banking Law: Letter of October 20a, 2005
Banking Law 14-g and 14-h and 96(1) and 97(4-a) and 97(5) and 234(1) and 235(d) and 379(b) and General Regulations of the Banking Board Part 6
Re: General Regulations of the Banking Board Parts 6.3 and 6.4
Dear Ms. Manzur:
Your electronic mail message, on June 29, 2005, to Sam Abram, New York State Banking Department (the "Department"), has been referred to me for response. In your message you inquired as to whether there were any rules, letters or opinions, relating to the above-referenced regulations, issued by the Department within the past year, and whether the state legislature has acted or is expected to act in the near future.
For background purposes the current version of Part 6.3 became effective on December 9, 1998, and provides, inter alia, that:
(c) Banks and trusts companies located and doing business in any place the population of which does not exceed 5,000 inhabitants ... may act as the agent for any fire, life or other insurance company authorized by the authorities of the state in which the bank is located to do business.
Like Part 6.3, Part 6.4 (b) authorizes:
Savings banks and savings and loan associations [to] engage in the insurance business to the extent that banks and trusts companies may engage in the insurance business pursuant to section 6.3 of this Part.
As provided for in the above recited regulations, both commercial and savings banks are authorized to act as agents in the sale of insurance products. Also, the Department has previously opined that operating subsidiaries of banks can perform those activities that banks themselves may engage in. Therefore, operating subsidiaries of banks may also act as agents in the sale of insurance products. However, because of the 5,000 population limitation in place under Part 6.3 and 6.4, neither banks nor their operating subsidiaries were permitted to act as agents in places with more than 5,000 inhabitants. Nonetheless, non- operating subsidiaries of banks, which may be owned pursuant to Section 97 (5) of the Banking Law, are permitted to act as insurance agents in those places where banks and their operating subsidiaries cannot act as agents. See LETTER TO THE CHIEF EXECUTIVE OFFICER OF THE INSTITUTION ADDRESSED, dated September 30, 1996, by Neil D. Levin, Superintendent of Banks (copy attached).
Since the September 30, 1996 letter there have been no significant rules, letter or opinions promulgated or issued by the Department.
Part of the Banking Department=s statutorily prescribed mandate is to supervise the banking organizations it regulates in such a manner as to insure the safe and sound conduct of such businesses. Applications by banks and trust companies for permission to invest in corporate subsidiaries that will engage in insurance sales activities will be reviewed by the Banking Department in a manner consistent with the above-stated policy.
Tying arrangements. The Bank Holding Company Act generally provides that Abanks shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement. . . that the customer shall obtain some additional credit, property, or service from such bank [, a bank holding company of such bank or from any other subsidiary of such bank holding company] other than a loan, discount, deposit, or trust service.@ (12 U.S.C. ' 1972). It must be made clear to the customer that the bank=s deliberations with respect to a loan application are entirely divorced from the customer=s election to accept or reject insurance coverage from the corporate subsidiary. Banks and trust companies should formulate appropriate written disclosures to be furnished to each loan applicant explicitly stating that the two transactions are in no way linked. This statement should be provided to the customer no later than when the first solicitation by, or referral to, the corporate subsidiary occurs. Educational efforts will need to be undertaken so that staff at both the bank and the subsidiary are sensitized to the concerns raised by the anti-tying issue.
NEIL D. LEVIN- Superintendent of Banks