reglab/statecodes huggingface dataset:
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.1 - Acceptance of warrants to purchase stock of corporate borrowers

Current through Register Vol. 46, No. 28, July 10, 2024
A State bank requested confirmation that a proposed loan
				  transaction in which X, a New York business corporation, would issue warrants
				  to purchase its common stock to several banks for exercise over a five year
				  period would not violate any regulation or policy of the New York State Banking
				  Department. The bank stated that it would not exercise the warrants issued to
				  it in the transaction but that it intended to retain the warrants for its own
				  account. Its letter included the following discussion of New York law:
"Regarding the applicable provisions of the Banking Law, it
				  is submitted that the power to acquire warrants by a New York banking
				  corporation in the manner contemplated derives from Section 96-1, the general
				  banking powers clause, as an 'incidental power * * * necessary to carry on the
				  business of banking.' Acquisition of the warrants is not prohibited by Section
				  97 relating to acquisitions by banks of stock of any corporation, because
				  warrants are not 'stock'. The bank will not exercise such warrants, and will
				  thus never own stock in [X].
"Finally, the provisions of Section 108  of the Banking Law and Section 190.4 of
				  the Penal Law regarding interest rates do not prohibit the proposed
				  transaction. The warrants are in the nature of prepaid 'interest' as a 'charge
				  * * * incidental to * * * making any such loan,' but their present value,
				  together with the annual interest on the notes of 1/2% over the prime rate,
				  will be substantially below the 25% usury ceiling applicable to corporate
				  borrowers."
The bank was advised that the transaction as outlined did not
				  violate any present regulation or policy of the department. The bank was
				  further advised that the department agreed with its view of the applicable
				  provisions of the New York Banking Law.
The department stated its intention, however, to examine
				  carefully all significant credits involving the issuance of warrants to
				  purchase the common stock of a borrower, because equity arrangements of this
				  kind are frequently made with prospective borrowers of less than adequate
				  credit standing. In this regard, the department noted with satisfaction the
				  bank's express statement that the credit-worthiness of the borrower in the
				  proposed transaction and its ability to repay the principal amount of the loan
				  had been determined "without reference to any value of the warrants" to be
				  issued.
DATED: November 13, 1969
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.2 - Offer of free personal checking account to persons who maintain minimum savings deposits

Current through Register Vol. 46, No. 28, July 10, 2024
A State bank inquired whether the following offer would
				  violate Banking Board General Regulation Part 20, which limits the interest
				  rate which a bank may pay.
The bank would offer a free personal checking account to any
				  person who either purchases a $1000 certificate of deposit or maintains a
				  minimum balance of $1000 in a savings account with the bank. Interest would be
				  paid on the certificates of deposit and on the savings accounts at the highest
				  rate permitted by law.
The department observed that absorption by a bank of all or
				  part of its cost in servicing a checking account of its depositor has not been
				  deemed the payment of interest thereon in violation of the regulation which
				  prohibits the payment of interest on demand deposit accounts.
Applying the foregoing principle, the department concluded
				  that the bank's cost of the free personal checking account would not be
				  regarded as interest within the meaning of Part 20 of the General Regulations
				  and that the offer, therefore, did not violate the regulations.
DATED: March 25, 1970
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.3 - Trust company acting as agent of department of motor vehicles

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether it would be permissible,
				  under the New York State Banking Law, for a trust company to act as agent of
				  the Department of Motor Vehicles for the purpose of issuing vehicle
				  registration renewals.
The department responded that, in its opinion, under section
				  100-1 of the Banking Law it would be permissible for trust companies to engage
				  in such activities.
DATED: January 31, 1969
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.4 - Investments in the national corporation for housing partnerships and the national housing partnership

Current through Register Vol. 46, No. 28, July 10, 2024
A State bank inquired whether it would be permitted to invest
				  in:
(a) the common stock of the
				National Corporation for Housing Partnerships (the corporation) and (b) a
				limited partnership interest in the National Housing Partnership (the
				partnership)--both the corporation and the partnership to be formed pursuant to
				the Federal "Housing and Urban Development Act of 1968". The bank also asked
				what procedures it need follow in order to make such investments.
The department responded that each such investment was
				  permissible provided that the bank first obtain Banking Board approval. It was
				  noted that approval for investment in the common stock of the corporation is
				  required by section 97 (5)  of the Banking Law and
				  that approval for investment in real estate through the partnership vehicle is
				  required by section 98(1)(d).
The State bank was further advised that a single letter
				  application would suffice and that it would be unnecessary for the applicant to
				  do more than forward a copy of the prospectus and recite the dollar amount
				  which it intended to invest in each entity.
DATED: March 27, 1970
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.5 - Lending limit treatment of portions of letters of credit subject to participation agreements

Current through Register Vol. 46, No. 28, July 10, 2024
The department's opinion was requested as to whether a bank,
				  which was to issue a letter of credit, could for purposes of computing lending
				  limits under section 103 (1)  of the Banking Law,
				  exclude those portions of its obligation under such letter of credit for which
				  it held irrevocable participation agreements from other banking institutions.
				  The letters of credit which were the subject of the inquiry were used to back
				  up commercial paper issued by corporate borrowers.
The department noted that the primary purpose of the lending
				  limits requirement is to prevent undue exposure to the credit risk of any one
				  borrower, and that such exposure is effectively reduced by irrevocable
				  participation agreements.
Accordingly, the department concluded that the lending limits
				  need only apply to that part of a letter of credit commitment retained by the
				  "lead" bank or trust company provided (i) the participation agreements with
				  other banks are irrevocable and entered into at the same time as, or prior to,
				  the issuance of the letter of credit, and (ii) all participating banks are also
				  irrevocably committed to continue their participation in any "roll-over" of the
				  letter of credit that the lead bank is obligated to undertake.
DATED: October 2, 1972
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.6 - Trust company-imposition of service charges on unclaimed dividends

Current through Register Vol. 46, No. 28, July 10, 2024
A trust company inquired whether it was permissible to impose
				  service charges on dividends declared on its own capital stock but not claimed
				  by stockholders. The department responded that it found no statutory provision
				  allowing this practice. Moreover, a declared dividend is a debt owed by the
				  trust company to its stockholders and, absent specific contractual
				  authorization to reduce the debt by imposing charges, the trust company may not
				  do so. Characterizing the trust company, once it segregates the dividend
				  monies, as a trustee for the benefit of its stockholders does not alter the
				  conclusion that the practice is impermissible.
The department was not asked to, and did not, express any
				  opinion as to the legality of charges, by-law or other provision of prospective
				  application attempting to exact such charges on unclaimed dividends.
DATED: August 24, 1973
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.7 - Charitable contributions by credit card

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked by a charitable organization whether
				  credit cards issued by State banks could be used by the holders to make
				  charitable contributions.
Section 96 (1)  of the Banking Law
				  empowers such banks to "discount, purchase and negotiate ________ obligations
				  in writing to pay in installments or otherwise all or part of the price of
				  personal property or that of the performance of services ________" Retail
				  installment credit agreements, the type commonly entered into between credit
				  card holders and issuing banks, are defined in section 401 (8)  of the Personal
				  Property Law as those "pursuant to which the buyer promises to pay, in
				  installments, his outstanding indebtedness from time to time to a retail seller
				  ________ for one or more items of goods or services ________" (emphasis
				  supplied). Similar references to such agreements as intended for purchases or
				  leases of property or services from retail sellers are found in section 413(11)
				  of the same law.
The department observed that credit card transactions, other
				  than those effecting cash borrowings, which do not discharge an enforceable
				  indebtedness for goods or services would be improper under the quoted statutes.
				  However, the department also noted that courts in this State have held that
				  promises to contribute to charity may be enforceable--for example, where the
				  charity has incurred liability in reliance on the promise; thus payments by
				  credit card in respect of such obligations could be regarded as discharging
				  indebtedness. Moreover, for purposes of the Personal Property Law, the
				  department could see no grounds for opposing the further view, if the relevant
				  parties in interest chose to adopt it, that consideration for the promise to
				  contribute included not only reliance by the charity on receiving the amount
				  pledged but also the rendering of goods or services or both by the charity to
				  the objects of its beneficence, even if the same did not include the donor. It
				  was a persuasive analogy between such a characterization and the
				  enforceability, never questioned to its knowledge, of credit card obligations
				  incurred by one person, in advance, for a gift of goods or services to
				  another.
Thus the department concluded that it would interpose no
				  regulatory objection to the practice in question insofar as legally enforceable
				  promises to contribute to the rendering by charities of goods, services or both
				  were concerned.
DATED: February 1, 1974
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.8 - Writing covered call options on trust accounts

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked by a trust company whether, under
				  New York State Banking Law, it could write covered call options with respect to
				  securities held by it as a trustee.
By writing covered calls the trust company would grant to the
				  call's purchaser an option to buy from it a fixed number of shares at a fixed
				  price within a stated time period usually not exceeding nine months. As
				  consideration for the granting of this option the trust company would receive a
				  premium which would be credited to the particular trust account. The trust
				  company represented to the department that any sale by it of the underlying
				  security during the option period would be preceded or accompanied by the
				  purchase on an option exchange of a call option covering the same securities
				  and expiring at the same time as the original call so as to prevent the trust
				  account from being subject to an uncovered call at any time.
Under the above conditions, the writing of covered call
				  options would be permissible in the department's view provided, however, that
				  no option transactions of this nature would be effected for any account unless
				  previously authorized by the particular account party.
DATED: March 1974
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 1 - Banks and Trust Companies › Section LI 1.9 - Use of cash as consideration for an acquisition effected under section 143-a of the banking law

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether part of the consideration
				  given to a shareholder of a bank to be acquired pursuant to section 143-a of
				  the New York State Banking Law may consist of cash. Section 143-a reads, in
				  relevant part, as follows:
"Such plan shall be in form satisfactory to the
				  Superintendent, shall specify each corporation the stock of which is to be
				  acquired by the company and shall prescribe the terms and conditions of the
				  acquisition and the mode of carrying it into effect, including the manner of
				  exchanging the shares of each of the corporations for shares or other
				  securities of the company." (emphasis added)
The department noted that the language quoted above does not
				  refer to the payment of cash as consideration for any acquisition effected
				  pursuant to this section. However, the purpose of the sentence is to detail the
				  contents of the plan to be submitted to the Superintendent and not to prescribe
				  the form of consideration that may be used in the acquisition.
The legislative history of section 143-a indicates that its
				  purpose was to facilitate the acquisition of banks by the exchange of stock and
				  to eliminate the need for the use of "phantom bank" procedures. Nothing in the
				  legislative history of section 143-a suggests that the legislators intended to
				  limit the form of consideration which could be used. Indeed, the reference to
				  "other securities" would permit notes to be used, and there would be little, if
				  any, reason to distinguish between cash and short-term notes in this
				  context.
For the foregoing reasons, the department concluded that the
				  consideration to be paid to the shareholders of a banking institution to be
				  acquired pursuant to section 143-a  of the Banking Law may consist of
				  both cash and stock.
DATED: January, 1976
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.1 - Leeway investments

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether mutual savings institutions
				  may use the "leeway" investment authorization (Banking Law, § 235[29]) for
				  the purpose of making investments which are specifically authorized under one
				  of the other 28 subdivisions of section 235. The department took the position
				  that since the opening sentence of subdivision 29 explicitly states that the
				  "leeway" provision is applicable to "[i]nvestments which do not qualify under
				  any of the preceding subdivisions," such use of the authorization would be
				  improper. Thus, the department concluded that a savings institution may not,
				  for example, carry on its books, as a "leeway" investment, bonds and mortgages
				  or notes and mortgages on improved and unencumbered real property which would
				  satisfy the requirements of section 235 (6)  of the Banking Law,
				  or preferred, guaranteed or common stock of a corporation which would meet the
				  requirements of section 235(26).
The department was also asked whether "leeway" may be used
				  for investments which do not "qualify" under preceding subdivisions of section 235 
				  of the Banking Law because the limitation on the aggregate amount of the
				  investment, recited in the subdivision under which the investment would
				  otherwise be authorized, has already been met. The department stated that such
				  use of the "leeway" authorization, too, would be improper, because paragraph
				  (d) of subdivision 29 provides that "[t]his subdivision shall not be deemed to
				  alter any provision of this chapter limiting the aggregate amount which may be
				  invested in any class of loan or investment." Accordingly, the department
				  stated that a savings institution may not, for example, exceed the subdivision
				  (9)(a)(1) limitation on its bank premises account by carrying bank premises
				  real estate on its books as a "leeway" investment.
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.3 - Crediting dividends on date of deposit-date of withdrawal accounts

Current through Register Vol. 46, No. 28, July 10, 2024
A savings bank inquired whether section 245 (3)(b)  of the Banking
				  Law may fairly be read to allow the crediting of dividends on date of
				  deposit--date of withdrawal (DOD/DOW) accounts during, rather than after the
				  close of, business on the last day of the bank's regular dividend
				  period.
The department answered in the affirmative stating that the
				  above interpretation would not be inconsistent with the language of the statute
				  or the intent of the Legislature so long as the bank did not view the
				  interpretation as sanctioning grace days on DOD/DOW accounts. The department
				  observed that grace days are not permitted on DOD/DOW accounts, and cautioned
				  the savings bank that if it chose to avail itself of the advantages of this new
				  interpretation, it must be careful not to violate the grace day
				  proscription.
DATED: September 20, 1968
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.4 - Procedure for converting a regular savings account to a date of deposit-date of withdrawal status

Current through Register Vol. 46, No. 28, July 10, 2024
The department received a number of inquiries regarding the
				  proper procedure for savings banks and savings and loan associations to follow
				  in transferring accounts from regular savings status to date of deposit--date
				  of withdrawal (DOD/DOW) status. The department stated its position as
				  follows:
The proper procedure and the procedure which the department
				  recommends to all institutions requires the depositor to take some affirmative
				  action to precipitate an account change. A bank may take the initiative by
				  contacting its depositors either by means of a newspaper advertisement or by
				  letter, and advising them that it is prepared to make the account transfer if
				  it receives a written request to do so.
The department does not regard it as proper for a bank to
				  make an account transfer without notifying the depositor or after notifying a
				  depositor that the transfer will be made unless the bank is directed not to do
				  so. This approach is regarded as unsound because of possible breach of the
				  deposit contract and because of the risk of the bank finding itself with no
				  regular savings accounts (which accounts it is required to maintain under
				  section 245 [3-b] if it is to have DOD/DOW accounts).
DATED: March 18, 1970
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.5 - Savings bank investments in bank holding companies

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether section 235 (26)(c)  of the Banking
				  Law proscribed savings banks and savings and loan associations from investing
				  in common stock of bank holding companies.
The department responded that the purpose of section
				  235(26)(c) is to prevent savings banks from investing in institutions with
				  which they compete and that this legislative intent would be thwarted if
				  savings institutions were allowed to invest in bank holding companies.
				  Accordingly, the department expressed its view that such investments were
				  improper.
DATED: March 12, 1969
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.6 - Investment by a mutual savings institution in a mutual fund listed on a national securities exchange

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether a mutual fund which is
				  listed on a national securities exchange is an eligible investment for a mutual
				  savings institution. The department answered the question in the negative for
				  the following reason. There is a specific Banking Law provision dealing with
				  investments in mutual funds, section 235(26)(e). Under it savings banks are
				  authorized to invest in mutual funds only if such mutual funds are owned by
				  savings banks or savings and loan associations and invest only in investments
				  which are eligible for savings banks. This limitation was imposed because
				  savings banks may only invest in certain types of common stock which meet
				  certain quality standards, while mutual funds are not subject to such
				  restrictions. To read section 235(26)(e) as anything other than exclusive would
				  render that provision meaningless and authorize savings banks to do indirectly
				  that which they can not do directly.
DATED: January 2, 1970
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.7 - Conflict of interest-mortgage loans by savings bank on real estate sold by trustee of the savings bank

Current through Register Vol. 46, No. 28, July 10, 2024
The department was presented with the following facts: A
				  trustee of a savings bank is the owner of a real estate business (hereinafter
				  the company). Since his election to the board of trustees over two years ago,
				  one-third of all the mortgage loans made by the savings bank were made to
				  purchasers of properties sold by the company. The purchasers made their
				  mortgage applications to the savings bank at the suggestion of the trustee.
				  Neither the trustee nor the company received any commission or fee for the
				  placement of the mortgage.
On the above facts, it was asked whether a conflict of
				  interest problem existed because of the trustee's interest in the realty firm.
				  The department responded that for many years it had taken the position that
				  activity of the sort described above would be inconsistent with section 247 (2)(a)  of the Banking
				  Law and article 10, section 3 of the New York State Constitution. It stated
				  that the essential rationale for its position was that the only practical way
				  for the department to keep a savings bank trustee to the highest standard in
				  this area is by assuring that he does not place himself in a position where he
				  might have to explain away his acts. Continuing to believe that the above
				  reasoning was sound, the department concluded that, on the facts presented, a
				  conflict of interest existed.
DATED: August 1, 1969
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.8 - Contracts of employment for officers of savings banks-deferred compensation

Current through Register Vol. 46, No. 28, July 10, 2024
The department was presented with the following facts: A
				  savings bank was contemplating an agreement with one of its officers to provide
				  him with deferred compensation computed at a specified rate for a two year
				  period. The amount attributable to the deferred compensation was to be invested
				  in property or securities eligible for investment by savings banks. Any
				  appreciation or depreciation was to be reflected in the amount ultimately
				  payable to the officer and the deferred compensation was to be paid at a
				  predetermined rate until paid in full.
Two questions were asked:
(a) Would the deferred compensation
				constitute salary rather than retirement benefits? (b) Could the amount of the
				deferred compensation be considered in determining the amount of the retirement
				benefits to which the officer would be entitled?
The department stated its view that a contract of employment
				  with an officer of a savings bank may include a provision for deferred
				  compensation so long as the agreement was entered into with the approval of the
				  board of trustees and the deferred payment represented compensation for
				  services actually performed by the officer. Thus, the first question was
				  answered in the affirmative. In response to the second question, the department
				  stated that the salary on which the retirement benefits would be based could
				  include the portion of the salary deferred pursuant to the agreement. The
				  department noted, however, that a retirement plan may require contributions
				  based upon salary and if such contributions do not take into consideration the
				  amount of the deferred compensation, it is quite likely that the amount of
				  deferred compensation could not be included in determining the retirement
				  benefits under the formula set forth in section 250 (3)  of the Banking
				  Law.
Finally, the department called attention to its policy that
				  officer employment contracts either extend for no longer than one year or
				  authorize termination at any time by the board of trustees. The reason for the
				  policy was stated to be that the management of the business of the bank,
				  including the right to hire and fire officers, must remain in the hands of the
				  board. A contract of employment for more than one year which does not permit
				  the board to terminate the contract at will would violate that policy. The
				  department, therefore, recommended that the agreement be modified
				  accordingly.
DATED: November 18, 1969
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.9 - Investments in mortgages on real property located in possessions of the united states

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether a mortgage on real property,
				  otherwise qualifying as a permissible investment for savings banks and savings
				  and loan associations under section 235 (6) and
				  380 (1)(b)(1)  of the Banking
				  Law, is rendered impermissible by the fact that such real property is located
				  in the Virgin Islands.
The department replies that the investment is not permissible
				  under the sections cited, which allow investments secured by mortgages on real
				  property located in New York, adjoining States and, subject to regulation, "any
				  other state of the United States, the District of Columbia or the Commonwealth
				  of Puerto Rico ________". In reaching this conclusion the department duly noted
				  section 47  of the General Construction Law, which
				  provides as follows (emphasis supplied):
"The term State, when used generally to include every State
				  of the United States, includes also every territory of the United States and
				  the District of Columbia."
However, because the Legislature in enacting the Banking Law
				  provisions in question added to the word "state" specific references to the
				  District of Columbia and to one United States territory (Puerto Rico) but no
				  others, the department concluded that in this instance the term "state" was not
				  "used generally" in the sense contemplated by the General Construction Law.
				  That only Puerto Rico is a permissible territory for the purposes under review
				  was found to be further supported by the legislative history contained in 1966
				  New York State Legislative Annual 64, 73, pertaining to L. 1966 ch. 324, which
				  added the language in question to the Banking Law.
In this, as in other legal-investment opinions rendered by
				  the department which do not specifically indicate the contrary, no question was
				  asked nor answer given as to the legality of the investment under "leeway"
				  provisions such as sections 235 (29) and
				  379 (7)  of the Banking
				  Law.
DATED: January 31, 1974
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.10 - Payment of dividends upon conversion from a regular to a day of deposit-day of withdrawal account

Current through Register Vol. 46, No. 28, July 10, 2024
The department's opinion was requested as to whether
				  dividends could be paid by a savings bank from the beginning of the regular
				  dividend period in the event a regular savings account is converted to a Day of
				  Deposit-Day of Withdrawal account in mid-dividend period.
Section 245(3)(c) provides that a savings bank shall
				  not
"Declare any dividend on any deposit for a longer period than
				  the same has been on deposit or on any deposit withdrawn before the end of a
				  dividend period, except as provided in subdivisions three-a and three-b of this
				  section. . . "
Also, section 245 (3-a) provides that if funds are withdrawn
				  from a regular savings account before the end of a dividend period, dividends
				  for the time during which the funds were on deposit may be paid in two
				  circumstances:
If the withdrawal is made during the "grace days" --the last
				  three business days of any business period or the last four if one of the last
				  three days is a Saturday.
If the by-laws so provide, dividends may be paid at the rate
				  of the last dividend to the first day of the month during which the withdrawal
				  is made.
The preceding provisions indicate clearly that the only
				  dividends which may be paid are those which are mandated or permitted by
				  statute. No provision exists for the payment of dividends on a regular account
				  between the quarterly dividend date and the date of withdrawal other than as
				  provided in section 245 (3-a). Even though funds transferred from a regular to
				  a DOD/DOW account remain in the bank at all times, in fact and according to
				  law, two transactions occur: a withdrawal is made from the regular account and
				  a deposit is then made into a DOD/DOW account.
Accordingly, the department concluded there is no provision
				  of law to permit a bank to treat the withdrawal from the regular account any
				  differently from any other withdrawal from a regular account which is not
				  followed by a deposit into a DOD/DOW account. However, the department expressed
				  the hope that savings banks would not encourage transfers which result in the
				  loss of dividends to the depositor.
The department also expressed the opinion that under section 378  of the Banking Law as amended by chapter
				  704 of the Laws of 1974, a result opposite to the foregoing would be correct in
				  the case of accounts with savings and loan associations.
DATED: June 1, 1974
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.12 - Permissible solicitations with respect to savings bank life insurance

Current through Register Vol. 46, No. 28, July 10, 2024
The department received an inquiry as to the legal propriety
				  of newspaper, broadcast and direct-mail advertisement of savings bank life
				  insurance. Section 269 of the Banking Law provides that savings banks offering
				  life insurance "shall not employ solicitors of insurance, and shall not employ
				  persons to make house to house collections of premiums".
The department responded that it saw no inherent illegality
				  in the use of these techniques. It found that statutory and practical history
				  supported a straightforward reading of the term "employ solicitors" as banning
				  only the creation of an employer-employee relationship between the savings bank
				  and one whose duties and basis of compensation are substantially those of an
				  insurance salesman collecting commissions directly based on the number and
				  amount of policies he sells. The statute does not ban the usage of all outside
				  means of solicitation. The department would, of course, continue to monitor the
				  nature, accuracy and cost of such outside means to assure that they remained
				  consistent with the statutory purpose of affording quality protection at a cost
				  kept low in large part by the ban discussed herein on commissions and excessive
				  overhead.
DATED: May 15, 1973
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.13 - Years of service to mutual savings banks in computing allowable pensions

Current through Register Vol. 46, No. 28, July 10, 2024
Maximum allowable pensions in retiring savings bank employees
				  can under section 250 
				  of the Banking Law be increased, up to a stated limit, "for each year of
				  service" by such employee. The department was asked whether it would be
				  permissible to include years spent by the employee in service to other
				  institutions prior to his employment by the bank from which he is
				  retiring.
The department responded that it would regard it as within
				  the spirit as well as the letter of the law to permit inclusion of years of
				  prior service to other New York savings banks, as well as to institutions owned
				  in substantial entirety by one or more such banks during the entire period of
				  the employee's prior service. The department was not asked to pass on, and
				  reserved for future judgment on a case-by-case basis, the legal acceptability
				  of including prior service to savings banks in other States, commercial banks,
				  State or Federal savings and loan associations, entities not substantially
				  wholly owned by New York savings banks, and entities presently so owned but
				  served by the retiring employee before such ownership occurred.
DATED: October 25, 1973
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.14 - Legality of debentures of real estate investment trusts for investment by savings banks

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether debentures of a real estate
				  investment trust formed under Massachusetts law could be considered "corporate
				  interest-bearing securities" eligible as savings banks investments under
				  section 235 (21)(a)(2)  of the
				  Banking Law.
The department reiterated its long-standing view that such
				  debentures could not be considered "corporate" for purposes of the subdivision
				  concerned. First of all, both the Legislature and the Congress, particularly in
				  tax legislation but including, at the State level, such other examples as
				  section 81 of the Insurance Law, have shown themselves quite cognizant of the
				  existence of business entities similar but not identical in form to true
				  corporations. Express references to business trusts in some instances, and
				  allusions to "associations" as well as "corporations" in others, are entirely
				  lacking in the pertinent Banking Law subdivision; this led the department to
				  conclude that the Legislature intended "corporate" securities for these
				  purposes to be precisely that. Legislative history, indicating the origins of
				  this subdivision as a narrow and careful exception to the strict rules
				  theretofore prevailing, supported this conclusion, as did the department's
				  review of an explanation by Massachusetts counsel of some significant respects,
				  albeit usually more important to holders of equity than debt, in which
				  Massachusetts trust differ in legal attributes and consequences from
				  corporations in that Commonwealth.
In sum, the department felt it would need a clear legislative
				  mandate before it could allow REIT debentures to be considered "corporate"
				  under the legal-investment statutes.
DATED: February 27, 1973
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.15 - Deposits in savings banks by cooperative corporations

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked whether a savings bank could accept
				  the deposits of a cooperative corporation, organized under the Cooperative
				  Corporations Law, in view of section 237.2 of the Banking Law, which provides
				  that a savings bank may not accept deposits from any "partnership, corporation
				  or other organization for profit".
The department replied that section 237.2 has always been
				  understood to prohibit only deposits of corporations "for profit". General
				  Construction Law, section
				  65(c)
				  (3) provides that a cooperative corporation
				  is a corporation "formed other than for profit". Section 66.12 of the General
				  Construction Law defines a cooperative corporation as a corporation "to which
				  the cooperative corporations law is made applicable by a provision of such
				  law". Section 3 (d)  of the Cooperative
				  Corporations Law provides as follows:
"A cooperative corporation shall be classed as a non-profit
				  corporation, since its primary object is not to make profits for itself as
				  such, or to pay dividends on invested capital, but to provide service and means
				  whereby its members may have the economic advantage of cooperative action,
				  including a reasonable and fair return for their product and service."
In view of the foregoing statutory definitions, the
				  department is of the opinion that a cooperative corporation is not a
				  corporation "for profit" whose deposits would be excluded, and therefore a
				  savings bank may accept the deposit of a cooperative corporation.
DATED: October 1975
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.16 - Pooling of keogh retirement accounts into a general investment pool

Current through Register Vol. 46, No. 28, July 10, 2024
The Banking Department was asked whether §237(7) of the
				  Banking Law permits a savings bank to pool the Keogh retirement accounts for
				  which it serves as trustee into a combined "Keogh Fund". The assets of the Fund
				  would consist of various passbook accounts and time deposits issued by the
				  savings bank. The legislative history of § 237(7) indicates that the
				  legislature did not intend to permit savings banks which accept Keogh deposits
				  to exercise any investment discretion with respect thereto and that the duties
				  of the savings bank were to be strictly ministerial. In 1965, the Governor
				  vetoed a bill which would have permitted savings banks to act as trustees for
				  Keogh Retirement Plans which lacked any limitation on the investment which
				  could be made by the trustees of the Plans. Legislation empowering savings
				  banks to act as trustees for these accounts was enacted in 1966. The
				  departmental memorandum in support of the legislation indicated that the
				  trustee's functions would consist merely of depositing the employer's annual
				  contributions in a savings account and making such distributions from the
				  account as were directed by the trust instrument.
Implementation of the savings bank's proposal would result in
				  greater fiduciary responsibilities than contemplated by the Banking Law. The
				  administrator of the Fund would determine the nature and maturities of the
				  accounts in which the assets of the Fund were to be invested. In so doing, it
				  would be exercising the very type of discretionary power that was denied to
				  savings banks in 1965.
The 1966 legislation contemplated that a savings bank would
				  be a trustee in name only. The limited fiduciary power granted thereby was
				  intended to permit individuals eligible for a Keogh plan to place their pension
				  contributions in thrift institutions. Although called a trustee, the savings
				  bank was intended to serve solely as a custodian.
In light of the foregoing, the Department concluded that the
				  savings bank did not have the statutory authority to pool the assets of the
				  separate Keogh accounts into a combined fund for investment purposes.
DATED: August 31, 1976
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.17 - Supplemental pension benefits

Current through Register Vol. 46, No. 28, July 10, 2024
A savings bank inquired whether Section 250 (5)  of the Banking Law
				  requires its trustees to determine whether a supplemental benefit should be
				  paid for any given year in the year in question or whether the trustees may
				  adopt an automatic plan for supplemental benefits, the amount of which would be
				  determined on the basis of the applicable cost-of-living index as provided in
				  subdivision 5, without the necessity of making a specific determination for
				  each year for which benefits are to be supplemented.
The Department responded that the statute does not require a
				  bank's trustees to make an annual decision as to whether the supplemental
				  benefit should be paid for the year in question. The words "each calendar year"
				  appearing in the first sentence of the subdivision are intended to describe the
				  supplement as an annual payment, the maximum amount of which is to be
				  determined on the basis of the cost-of-living index figure for the year in
				  question. The words do not qualify the manner in which the trustees must act in
				  order to authorize the supplement. The grammatical sense of the language is
				  that (i) the trustees may, in their discretion, determine to supplement any
				  retirement benefit payable by a savings bank and (ii) such supplement may be
				  made "each calendar year", measured on the basis of the cost-of-living index
				  for each year. This interpretation is confirmed by the parallel language
				  contained in subdivisions 1, 2 and 3 of Section 250, where reference to "each
				  year of service" or similar language describes the benefits to be paid rather
				  than the manner in which the trustees must act.
Any interpretation of the subdivision which conditioned the
				  supplemental benefits upon an annual decision would make it impossible to fund
				  the benefits. By its nature, a funded program requires a continuing plan whose
				  future costs can be estimated and provided for on a current basis.
Requiring a new decision to be made each year and thereby
				  precluding the use of a funded program would contravene the intent of
				  subdivision 5, which was to permit pension benefits to be supplemented through
				  funding. Subdivision 5 provides for a supplement to any retirement benefit
				  payable "in accordance with the preceding subdivisions of this section".
				  Subdivision 3 expressly authorizes funded benefits, consequently, the
				  supplements contemplated by subdivision 5 include those provided in connection
				  with funded plans. An interpretation which made it difficult either as a matter
				  of law or as a practical matter, to fund these benefits would contravene the
				  intent of the Legislature.
DATED: October 20, 1976
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 4 - Savings Banks and Savings and Loan Associations › Section LI 4.20 - Interest rates on time deposits in savings banks and savings and loan associations

Current through Register Vol. 46, No. 28, July 10, 2024
The department was asked to review two situations wherein
				  thrift institutions have been offering different interest rates on time deposit
				  accounts of the same maturities. In the first situation, a thrift institution
				  with its principal office in City A and a branch in City B is offering a higher
				  rate at the branch in City B than at its office in City A. In the second
				  situation, a thrift institution offers to renew maturing time deposits at a
				  higher rate than it offers for new deposits of the same maturity.
Time deposits at thrifts are governed by contract between the
				  banking organization and its customer, as authorized by Banking Law, sections
				  234.1 -a and 378-a. S o long as the interest offered is within the limits set
				  by law, the rate of interest may be established by competitive market forces
				  and by agreement between the parties. It is the Banking Department's opinion
				  that there is no impediment in the Banking Law or in the department's
				  regulations to the payment of interest as proposed above.
The department has been informed by the Federal Deposit
				  Insurance Corporation that, in its opinion, interest rate differentials such as
				  those described above are not prohibited by the Federal Deposit Insurance Act
				  or by its implementing regulations.
New York Codes, Rules and Regulations › Title 3 - BANKING › Legal Interpretations › LI 5 - Credit Unions › Section LI 5.1 - Revolving credit loans under banking law, section 470

Current through Register Vol. 46, No. 28, July 10, 2024
A credit union inquired whether it had the power to approve
				  lines of credit for its members and whether it could, in effect, enter
				  revolving credit agreements with such members.
Relying on section 470  of the Banking Law, which requires that
				  each loan application to a credit union "must be made in writing and must state
				  the purpose for which the loan is desired and the security offered," the
				  department concluded that a credit union is foreclosed from issuing a "line of
				  credit" since the purpose of each advance will not be known to the credit
				  union, nor will its credit committee have the opportunity to pass on the wisdom
				  of granting each advance.
The department noted that the reason for the credit union's
				  requesting this authorization might have been related to the inconvenience
				  caused by the statutory requirement that the credit union's credit committee
				  pass on every loan. Therefore, the department pointed out that, to a meaningful
				  extent, this inconvenience has been eliminated by chapter 68 of the Laws of
				  1969 which authorized the credit committee of a credit union having shares in
				  excess of $50,000 to appoint loan officers, which officers are authorized to
				  make certain loans.
DATED: July 22, 1969