Question

Each state issues licenses for private companies to operate savings banks within the state. For example, the NY State Banking Department issues licenses (also called "charters") that are mandatory to have before operating a savings bank within NY State. Separatelyanswering as parts A, B and C, give and explain three different legal requirements in NY State to have a license to operate a savings bank.

Answer 1

Licence(s) required to conduct banking services and activities that are covered

There is a dual banking system, so that either the Office of the Comptroller of the Currency (OCC) or a state government can charter a bank. Powers given to banks vary depending on the chartering authority. However, over the years there has been a convergence on the permissible powers of banks so that they are becoming standardised between the different authorities.

Application process for bank licences

Applications are made to one of the regulatory agencies which charters banks, such as the Office of the Comptroller of the Currency (OCC) or a state bank regulator. Deposit insurance requires an application to the Federal Deposit Insurance Corporation (FDIC). Central bank liquidity and borrowing privileges require an application to the Federal Reserve.

Legal requirements in NY State to have a license to operate a savings bank

• Organising group of five or more individual organisers or sponsors.

• Detailed biographical and financial information for each organiser, director, officer and shareholder including experience, familiarity with the business, and compliance and risk management record.

• The business plan, strategy and projections in light of the relevant market, feasibility, safety and soundness, risks, competition, and likelihood of success.

• Proposed compliance with regulatory, governance, community service and risk management requirements.

• Articles of association and bye-laws.

• Application to the FDIC.

• Financial resources to deal with organising expenses, minimal capital (ranging usually from US$2 million to US$10 million, depending on scope and state) and implementation of the business plan.

• Capital required to be "well capitalised".

• If issuing securities, compliance with disclosure rules.