PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:
Proposed action:
Amendment of Part 73 of Title 3 NYCRR.
Statutory authority:
Banking Law, sections 14(1), 105-a, 240-a and 396-a
Subject:
Establishment of electronic banking facilities (i.e., ATMs, point-of-sale terminals, and similar facilities at which banking business may be conducted).
Purpose:
To streamline the application and approval process for banking institutions when establishing electronic facilities.
Text of proposed rule:
PART 73
ELECTRONIC FACILITIES
§ 73.1 — General statement.
A banking organization may conduct a banking business at electronic facilities that are either established (i.e., owned or rented by a single organization) or shared, on a transaction fee or similar basis, by such banking organization, subject to the provisions of this Part. Such facilities are not branches but are subject to the limitations contained in sections 28-b and 105(1)(ii), 240(2)(b) or 396(2)(b) of the Banking Law, as the case may be, as if they were branches. In addition to the requirements of this Part, automated teller machines must comply with the security measures and reporting requirements set forth in Article II-AA of the New York Banking Law and Part 301 of the Superintendent's Regulations.
§ 73.2 — Definitions.
For the purposes of this Part:
(a) Electronic facilities shall mean automated teller machines, point-of-sale terminals, and similar facilities at which the banking business may be conducted. Such term shall not include home banking terminals, telexes and similar equipment.
(b) Automated teller machines shall mean electronic devices, either on-line or off-line, which permit deposits, withdrawals, transfers of funds from one account to another, loan repayments or disbursements of funds pursuant to prearranged lines of credit. Except for facilities staffed for the purposes cited in section 73.7 of this Part, they shall not include staffed facilities.
(c) Point-of-sale terminals shall mean electronic devices, either on-line or off-line, whose function is to transfer funds or record transfers of funds in connection with the sale of goods or services but which may also be used to accept deposits and loan repayments, make cash withdrawals, and obtain funds pursuant to prearranged lines of credit. These terminals may be located only at bona fide checkout counters, cashier stations, customer convenience counters or other counters at which store functions are performed, or sales desks of other establishments, and may not be staffed by bank employees, with the exceptions noted in section 73.7 of this Part.
(d) Similar facilities shall mean electronic devices, either on-line or off-line, which may be used for making deposits, withdrawals, transfers of funds, loan repayments or disbursements of funds pursuant to prearranged lines of credit. Except as otherwise provided in section 73.7 of this Part, such facilities, if part of a store's bona fide customer convenience counter or other counter at which store functions are performed, or sales desks of other establishments, may be staffed but only by nonbank employees; if located anywhere else, they may not be staffed.
(e) Banking organizations shall mean banks, trust companies, savings banks, [and] savings and loan associations, and out-of-state state banks with one or more branches in New York.
§ 73.3 — Establishment or sharing of electronic facilities.
Any banking organization that has given the [s] Superintendent the notice described in section 73.6[(a) or (b)] of this Part [, as the case may be,] may establish or share an electronic facility upon receipt of written notification from the [s] Superintendent that he or she does not object to the establishment or sharing of such facility. The [s] Superintendent shall not object to the establishment or sharing of an electronic facility unless the banking organization submitting the notice fails to meet the requirements of Banking Law, section 28-b and Part 76 of this Title or the establishment or sharing of such facility is prohibited by the home office protection provisions of Banking Law, section 105(1)(ii), 240(2)(b) or 396(2)(b).
§ 73.4 — Sharing facilities.
To the extent consistent with law, banking organizations may share electronic facilities they have established with other banking organizations, banking institutions not subject to the provisions of this Part, and nonbanking entities, and may share electronic facilities established by other banking organizations, banking institutions not subject to this Part or nonbanking entities.
§ 73.5 — Facilities not requiring [prior] notification.
The following activities do not require [any prior] notification to the [s] Superintendent under this Part:
(a) the establishment by a banking organization of an electronic facility on the premises of one of its authorized, staffed banking offices or attached to the outer wall of such an office;
(b) the establishment or sharing of an electronic facility to the extent it is used solely to effect transactions among banking institutions, clearinghouses, clearing corporations, governmental institutions or governmental agencies, business firms or similar organizations, or between two or more of these types of organizations; and
(c) the sharing of an electronic facility when the customers [or] of the sharing institution may use the facility solely to obtain information about account balances, make cash withdrawals (including those that require transfers of funds among a customer's accounts), and obtain cash advances against credit lines.
§ 73.6 — Contents of notice.
[(a)] The notice to the [s]Superintendent [prior to] for the establishment or sharing of an electronic facility shall include the following:
([1]a) the complete [legal] address of the proposed facility, including [whether such location is in a city, village or unincorporated area] the name of the city, village, hamlet, or town in which the site is physically located (rather than that which is used in the mailing address, if different);
[(2) a certified copy of a resolution duly adopted by a majority of the banking organization's board of directors or board of trustees, as the case may be, authorizing the submission of the notice, which resolution may be a general resolution authorizing the submission of all such notices;]
([3]b) identification of the type of facility [to be established] and a [description of the activities to be performed initially] statement as to whether the facility will have deposit-taking capability;
([4]c) a statement as to whether the facility will be shared initially[, including the names of any initial sharing institutions];
[(5) an estimate of the total initial and annual operating costs of the facility; and]
([6]d) details of any transaction involving the establishment or initial sharing of the facility with an insider as defined in Part 11 of this Title or with any related interest of such a person[.]; and
(e) Any additional information which the Department may require on a case-by-case basis.
[(b) The notice to the superintendent prior to the sharing of an electronic facility shall include the following:
(1) the complete legal address of the facility, including whether such location is in a city, village or unincorporated area;
(2) a certified copy of a resolution duly adopted by a majority of the banking organization's board of directors or board of trustees, as the case may be, authorizing the submission of the notice, which resolution may be a general resolution authorizing the submission of all such notices; and
(3) identification of the type of facility to be shared and a description of the activities to be performed.]
§ 73.7 — Restrictions on electronic facilities.
(a) No electronic facility may be staffed by employees of a banking organization. However, employees of a banking organization may be used to demonstrate the equipment, to train nonbank employees for a reasonable period of time, to provide information, to repair and service the electronic equipment, or as security guards.
(b) All banking organizations shall take the necessary steps to protect their interests in the activities of their electronic facilities, including the acquisition of appropriate fidelity and other insurance coverage, and to safeguard the identity of bank customers in the use of such facilities.
(c) No new accounts may be opened at electronic facilities, and no cash, check, money order or draft of any kind may be taken with application forms if such forms are filled out and left at the electronic facility.
Text of proposed rule and any required statements and analyses may be obtained from:
Sam L. Abram, Secretary to the Banking Board, Banking Department, One State St., New York, NY 10004-1417, (212) 709-1658, e-mail: sam.abram@banking.state.ny.us
Data, views or arguments may be submitted to:
Same as above.
Public comment will be received until:
45 days after publication of this notice.
Regulatory Impact Statement
1. Statutory Authority. Section 14(1) of the Banking Law empowers the Banking Board to make, alter and amend rules and regulations not inconsistent with law. Section 105-a of the Banking Law authorizes a bank or trust company to conduct a banking business at automated teller machines, point-of-sale terminals and similar facilities subject to regulations which may be promulgated by the Banking Board. Sections 240-a and 396-a of the Banking Law provide comparable authorizations for savings banks and savings and loan associations, respectively.
2. Legislative Objectives. Sections 105-a, 240-a and 396-a of the Banking Law require that, prior to establishing electronic facilities, banks, trust companies, savings banks and savings and loan associations (hereafter “banking institutions”) make application to the Superintendent and receive a notice of no objection. The Superintendent's review and approval is intended to ensure banking institutions are in compliance with section 28-b, which establishes community reinvestment act criteria for banking institutions, “home office” restrictions set forth in sections 105, 240 and 396 of such law, and the safety and soundness standards prescribed in section 10 of such law.
The Legislature thus intended that banking institutions should not be allowed to expand their businesses through the use of electronic facilities if the institutions were not maintaining sufficient community reinvestment activity. It also intended, notwithstanding that the noted statutes expressly declare electronic facilities are not deemed to be branches, the establishment of such facilities should not be an alternate means by which banking institution may enter and conduct banking business in a community having a population of 50,000 or less where an independent bank, trust company or national bank was headquartered, thus subverting the statutory standards that prohibit banking institutions from branching into such communities. Finally, the intent of section 10 of the Banking Law is that all banking business should be conducted in a sound and safe manner so as to maintain the public confidence in such institutions. One aspect of any expansion of banking facilities for a regulator is consideration of whether such expansion may adversely affect an institution's safe and sound conduct of the banking business.
3. Needs and Benefits. The proposed rule is intended to facilitate the application process for electronic facilities by eliminating unnecessary information and data requirements that must be addressed in such applications. The information and data to be eliminated is not pertinent to the determination whether such banking institutions meet the intended legislative objectives. Thus, the proposed rule should reduce the regulatory burden upon affected institutions. The additional provision added by the proposed rule is intended to remind banking institutions that such electronic facilities must be operated in compliance with the ATM Safety Act and its accompanying regulatory provisions.
4. Costs. The proposal will significantly reduce the information required to be provided as part of a notice by a banking organization that it proposes to establish or share an electronic facility. (see Item 6, “Paperwork” below). This streamlining of the notice requirement should in turn significantly reduce the time and resources needed to give such notices.
5. Local Government Mandates. None.
6. Paperwork. The effect of this rule upon regulated parties will be to reduce the paperwork required. Among other things, electronic facilities notices will no longer be required to include a certified copy of a resolution of the banking organization's board of directors, the required description of the activities to be performed at the facility has been drastically curtailed, and the requirement for an estimate of initial and annual operating costs has been eliminated. The Department does, however, retain the right to require additional information on a case-by-case basis.
7. Duplication. None.
8. Alternatives. The Department could have left existing Part 73 unchanged. However, doing so would not have been consistent with the Department's broader effort to review the various regulations, supervisory procedures and application requirements relating to branches, public accommodation offices and electronic facilities for banks and trust companies, savings banks, savings and loan associations and credit unions. The objectives of this review include developing simplified application forms, eliminating outdated or unnecessary informational requirements and, to the extent possible, developing consistent or similar requirements among the different types of banking institutions.
The Department initially considered amending Part 73 so as to permit a banking organization with a CRA rating from the Department of “satisfactory” or better to give notice to the Department within 10 days after establishing or sharing an electronic facility. A comment in opposition to that proposal was received from the Chair of the Assembly Standing Committee on Banks and the Assembly Chair of the Administrative Regulations Review Commission. The commenters were concerned that eliminating the prior review requirement in Part 73 would result in the Department applying less stringent standards to an after the fact review and would undercut the provision in Banking Law Section 28-b which contemplates the possibility of a public hearing.
In response to the commenters' concerns, the initial proposal to amend Part 73 was withdrawn. The current proposal retains the requirement that all banking organizations wishing to establish or share an electronic facility provide prior notice to the Department.
9. Federal Standards. No federal standards apply to the establishment of electronic facilities by state-chartered banking institutions.
10. Compliance Schedule. The proposed rule will apply to applications to establish electronic facilities occurring on or after the effective date of the rule.
Regulatory Flexibility Analysis
The proposed rule making reduces the regulatory burden upon state-chartered banking institutions. The proposal imposes no mandates upon regulated parties, other small businesses, or units of local government. The proposal imposes no additional costs of any type upon regulated parties. The proposal, therefore, has no adverse impacts.
Rural Area Flexibility Analysis
The proposed rule making reduces the regulatory burden upon state-chartered banking institutions. The proposal will not adversely affect regulated parties, other business interests, local governments or consumers in rural areas of this state.
Job Impact Statement
The proposed rule making reduces the regulatory burden upon state-chartered banking institutions when making application to establish electronic facilities. This proposal therefore will have no adverse effect upon existing jobs or job opportunities within state-chartered banking institutions or other businesses in this state.
