Bill Text: NY A09665 | 2019-2020 | General Assembly | Amended
Bill Title: Relates to establishing the New York public banking act; authorizes the lending of public credit to public banks and authorizes public ownership of stock in public banks for the purpose of achieving cost savings, strengthening local economies, supporting community economic development, and addressing infrastructure and housing needs for localities.
Spectrum: Partisan Bill (Democrat 32-0)
Status: (Introduced - Dead) 2020-08-17 - print number 9665e [A09665 Detail]
Download: New_York-2019-A09665-Amended.html
STATE OF NEW YORK ________________________________________________________________________ 9665--E IN ASSEMBLY February 4, 2020 ___________ Introduced by M. of A. ABINANTI, JEAN-PIERRE, KIM, FALL, EPSTEIN, L. ROSENTHAL, ARROYO, BURKE, TAYLOR, STECK, SEAWRIGHT, FRONTUS, RODRI- GUEZ, RICHARDSON, JACOBSON, REYES, GOTTFRIED, ENGLEBRIGHT, SIMON, ORTIZ, PERRY, NIOU, BICHOTTE, SOLAGES, BRONSON, DINOWITZ, HUNTER, DICKENS -- read once and referred to the Committee on Banks -- commit- tee discharged, bill amended, ordered reprinted as amended and recom- mitted to said committee -- again reported from said committee with amendments, ordered reprinted as amended and recommitted to said committee -- again reported from said committee with amendments, ordered reprinted as amended and recommitted to said committee -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- again reported from said committee with amendments, ordered reprinted as amended and recommitted to said committee AN ACT to amend the banking law, the state finance law and the general municipal law, in relation to establishing the "New York public bank- ing act" The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Short title. This act shall be known and may be cited as 2 the "New York public banking act". 3 § 2. It is the intent of the legislature that this act (i) authorizes 4 the lending of public credit to public banks and authorizes public 5 ownership of stock in public banks for the purpose of achieving cost 6 savings, strengthening local economies, supporting community economic 7 development, and addressing infrastructure and housing needs for locali- 8 ties; and (ii) codifies the common law interpretation of the New York 9 state constitution that cities, counties, and other municipalities may 10 own stock in and lend money to private corporations so long as such 11 actions are pursuant to a public purpose. 12 § 3. Subdivisions 1 and 11 of section 2 of the banking law, subdivi- 13 sion 1 as amended by chapter 684 of the laws of 1938 and subdivision 11 14 as amended by chapter 154 of the laws of 2007, are amended to read as 15 follows: EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD10967-14-0A. 9665--E 2 1 1. Bank. The term, "bank," when used in this chapter, unless a differ- 2 ent meaning appears from the context, means any corporation, other than 3 a trust company, organized under or subject to the provisions of article 4 three or three-C of this chapter. 5 11. Banking organizations. The term, "banking organizations," when 6 used in this chapter, means and includes all banks, trust companies, 7 private bankers, savings banks, safe deposit companies, savings and loan 8 associations, credit unions, public banks organized under article 9 three-C of this chapter, and investment companies. 10 § 4. The banking law is amended by adding a new article 3-C to read as 11 follows: 12 ARTICLE 3-C 13 PUBLIC BANKS 14 Section 156. Definitions. 15 156-a. Sponsors and corporate structure. 16 156-b. Governance. 17 156-c. Public bank charter requirements. 18 156-d. Financial and operations framework. 19 156-e. Public benefit corporations. 20 156-f. Insurance. 21 156-g. Deposit. 22 156-h. Permitted activities of the public bank. 23 156-i. Inconsistency with other laws. 24 156-j. Owners not to be considered bank holding companies. 25 § 156. Definitions. For the purposes of this article: 26 1. "Advisory board" means a board established pursuant to section one 27 hundred fifty-six-b of this article. 28 2. "Affiliate" means: 29 (a) in the case of a person (other than an individual), another person 30 that directly, or indirectly through one of more intermediaries, 31 controls, or is controlled by, or is under common control with such 32 person. 33 (b) in the case of an individual, (i) any member of the immediate 34 family of such individual, including parents, siblings, spouse and chil- 35 dren (including those by adoption) and any other person who lives in 36 such individual's household; the parents, siblings, spouse, or children 37 (including those by adoption) of such immediate family member, and in 38 any such case any trust whose primary beneficiary is such individual or 39 one or more members of such immediate family and/or such individual's 40 lineal descendants; (ii) the legal representative or guardian of such 41 individual or of any such immediate family member in the event such 42 individual or any such immediate family member becomes mentally incompe- 43 tent; and (iii) any person controlling, controlled by or under common 44 control with such individual. 45 (c) As used in this definition, the term "control," including the 46 correlative terms "controlling," "controlled by" and "under common 47 control with," means possession, directly or indirectly, of the power to 48 direct or cause the direction of management or policies (whether through 49 ownership of securities or any partnership or other ownership interest, 50 by contract or otherwise) of a person. Such control shall be presumed to 51 exist where a person owns a ten percent or greater ownership interest in 52 another person. 53 (d) "Person" shall be construed broadly and shall include, without 54 limitation, an individual, a partnership, a limited liability company, a 55 corporation, an association, a joint stock company, a trust, a jointA. 9665--E 3 1 venture, an unincorporated organization and a governmental entity or any 2 department, agency or political subdivision thereof. 3 3. "Bank" means any corporation, other than a trust corporation, 4 organized under or subject to the provisions of this article or article 5 three of this chapter. 6 4. "Board" means a board of directors or board of managers of a public 7 bank. 8 5. "Deposit" means the placing of money with a public bank to be with- 9 drawn upon the depositor's demand or under the rules and regulations 10 agreed upon between the bank and the depositor. 11 6. "Economically distressed communities" means those communities where 12 at least thirty percent of residents have incomes that are less than the 13 national poverty level or where the unemployment rate is greater than 14 the national unemployment rate; or economic opportunity zone designated 15 communities, excluding contiguity economic opportunities zones. 16 7. "Independent" means, with respect to a member of a public bank's 17 board of directors, board of managers, or advisory board, an individual 18 who: 19 (a) at the time of his or her election to the board of directors, 20 board of managers, or advisory board of a public bank, is not a holder 21 of any public office within the sponsor; and 22 (b) within the past five years has not been a holder of public office 23 within such sponsor. 24 8. "Local elected official" means any officer elected to a position 25 within a county, city, town, village, school district or district corpo- 26 ration, or any agency, department, division, board, commission or bureau 27 thereof; provided, that, such term shall not include any judge or 28 justice of a court. 29 9. "Public bank" means a not-for-profit corporation, a stock corpo- 30 ration or limited liability company that is chartered pursuant to this 31 article as a bank. 32 10. "Public bank application documents" means a business plan and 33 application to be submitted to the department of financial services 34 pursuant to section one hundred fifty-six-c of this article for the 35 purpose of chartering a public bank. 36 11. "Public funds" means funds of the sponsor. 37 12. "State or local authority" means a local government or agency, a 38 group of two or more local governments or agencies acting together, 39 special district, a group of two or more special districts acting 40 together, state agency, or a group of two or more state agencies acting 41 together. 42 13. "Sponsor" means one or more cities, towns, villages and/or coun- 43 ties within the state of New York. 44 § 156-a. Sponsors and corporate structure. A public bank may be a 45 not-for-profit corporation, a limited liability company or corporation 46 that is formed by a sponsor, subject to the following corporate struc- 47 ture requirements: 48 1. The sponsor shall be (a) the sole member of a not-for-profit public 49 bank, (b) the majority and controlling member of a limited liability 50 company public bank, and (c) the majority and controlling shareholder of 51 a corporation public bank. 52 2. A public bank organized as a limited liability company or corpo- 53 ration may have other members or shareholders but such other members or 54 shareholders shall only be passive members or shareholders and shall not 55 have any consent or veto rights over any decisions, any removal rightsA. 9665--E 4 1 of the sponsor, any rights to elect or choose the board or any voting 2 rights whatsoever. 3 3. Passive members or passive shareholders shall be allowed to invest 4 capital into a public bank so long as such passive members or passive 5 shareholders are approved by the sponsor and the sponsor maintains the 6 right to direct the public bank to purchase the interests of any passive 7 members or shareholders at a market price determined by an independent 8 third party selected by the sponsor at any time. 9 4. The sponsor shall owe no fiduciary duty nor any other duty to 10 passive investors. No passive investor may pursue legal action against 11 the sponsor for any reason other than failure to distribute funds 12 required to be distributed pursuant to governing documents of the public 13 bank. 14 § 156-b. Governance. 1. The public bank shall be governed by a board. 15 Such board shall be composed of nine directors or eleven directors. Each 16 director shall live within the jurisdictional boundaries of the sponsor. 17 2. The sponsor shall determine the public bank's initial board in the 18 following manner: 19 (a) the mayor, or head of the executive branch of government of the 20 sponsor or sponsors, shall select three members with at least one member 21 with banking or financial experience; 22 (b) the city council, or legislative branch of the sponsor or sponsors 23 shall select two members with at least one member with banking or finan- 24 cial experience; 25 (c) the treasurer, controller or elected official charged with over- 26 seeing the sponsor or sponsors' finances and the administration of 27 public funds shall select one member with banking or financial experi- 28 ence; and 29 (d) the board members selected pursuant to paragraphs (a) through (c) 30 of this subdivision shall, pursuant to a two-thirds majority vote, 31 select at their discretion either three or five additional board 32 members, with the sole purpose of maximizing board diversity to include 33 a variety of the sponsor's community constituents. For any sponsor that 34 is also a city with a population of one million or more, the board 35 members selected pursuant to paragraphs (a) through (c) of this subdivi- 36 sion may, pursuant to a two-thirds majority vote, select either seven or 37 nine additional board members to maximize board diversity. 38 3. At least two board members selected pursuant to each of paragraphs 39 (a) through (c) of subdivision two of this section shall be individuals 40 with experience in the finance industry or the business of banking with 41 an emphasis on community lending. 42 4. At least one board member selected pursuant to each of paragraphs 43 (a) through (c) of subdivision two of this section shall be an individ- 44 ual representative of at least one of the community stakeholders prior- 45 itized by the public bank's underwriting and financial policies as 46 reflected in section one hundred fifty-six-h of this article. 47 5. When a board member resigns or leaves office for any reason, the 48 individual selected to replace such board member shall be selected by 49 whatever branch of government or the board selected their predecessor 50 under paragraphs (a) through (d) of subdivision two of this section. 51 6. The sponsor and board will take all steps necessary to ensure that 52 the composition of the board reflects the composition of the population 53 in terms of people of color and women. 54 7. A majority of the board shall be composed of independent directors 55 who are not government employees. The chair of the board must be an 56 independent director.A. 9665--E 5 1 8. The board shall set policy for the public bank; provided that 2 neither the board nor any director shall be involved in day to day deci- 3 sions regarding particular instruments. Management decisions shall be 4 made independently by bank management who shall be appointed by the 5 board consistent with bank policy. 6 9. The board may establish one or more committees to manage the public 7 bank. 8 10. The board shall adhere to all reporting requirements under this 9 chapter regarding the public bank's financial condition. 10 11. A public bank shall form one or more advisory boards in order to 11 provide advice and carry out any other duties, as determined by the 12 public bank, including the following: 13 (a) provide input to the board regarding ways to accomplish its 14 mission; 15 (b) ensure that the board follows strict ethical standards as deter- 16 mined by the sponsor in the public bank's governing documents, through 17 the approval of bylaws to govern the board's management; 18 (c) provide technical advice as needed; and 19 (d) provide an annual report to the public and the sponsor evaluating 20 the public bank's performance in relation to its mission, its ethical 21 standards and its financial soundness. 22 12. The sponsor will determine the initial advisory board membership, 23 the term of its members, the qualifications of members and the method 24 for replacing its members, provided that a majority of each advisory 25 board is made up of independent members who are not governmental employ- 26 ees. The advisory board shall be composed of no fewer than five and no 27 more than eleven members. Any advisory board member shall live within 28 the jurisdictional boundary of the public bank's sponsor or its members 29 or shareholders. 30 13. Any action required or permitted by this chapter to be taken by 31 the board or an advisory board may be taken at a duly called meeting of 32 such board in accordance with its governing documents or without a meet- 33 ing if the action taken is evidenced by one or more written consents 34 describing the action taken and signed by each member of the board or 35 advisory board. 36 § 156-c. Public bank charter requirements. 1. A proposed public bank 37 shall be chartered by the department upon submission of the public bank 38 application documents that demonstrate the following: 39 (a) the purpose of the proposed public bank is consistent with the 40 purposes required under this article; 41 (b) minimum initial capitalization is no less than ten percent of the 42 public bank's projected lending total for the first year of operation 43 after receipt of its charter; 44 (c) adequate reserves and liquidity exist to cover the public bank's 45 obligations relating to deposit withdrawals and defaulted loans; 46 (d) the qualifications of the proposed directors; 47 (e) the qualifications of the proposed chief executive officer and 48 management team; 49 (f) an organizational chart; 50 (g) policies and procedures prohibiting any elected official, or 51 affiliate of such officials, from receiving a loan or other financial 52 assistance from the public bank; 53 (h) procedures for obtaining fidelity insurance; 54 (i) sufficient internal audits and controls; 55 (j) a pro forma financial statement projecting assets, liabilities, 56 income and expenses for no less than a three year period;A. 9665--E 6 1 (k) the impact of the public bank on the sponsor's financial condi- 2 tion; 3 (l) a plan to comply with the community reinvestment act and fair 4 lending requirements, pursuant to section two hundred ninety-six-a of 5 the executive law; 6 (m) a certificate of incorporation; and 7 (n) a narrative business plan describing the banking services to be 8 provided. 9 2. The public bank may but shall not be required to collateralize 10 deposits from the sponsor or any other governmental entity with collat- 11 eral determined by the public bank in its governing documents. 12 3. The public bank application documents are not required to provide 13 that the public bank will receive deposits in its initial three years of 14 operation, and not receiving deposits in the initial three years of 15 operation shall not be a reason for disapproval by the superintendent. 16 4. Public bank application documents are not required to include a 17 market, public convenience and advantage, competitive impact or a bank 18 premises analysis or address any other matters other than those listed 19 in subdivision one of this section. 20 5. Public bank charter applications that do not conflict with any 21 requirements expressly provided in subdivision one of this section shall 22 be liberally granted by the superintendent, and any decision by the 23 superintendent refusing to grant permission for the operation of a 24 public bank may be appealed by the sponsor to the governor within thirty 25 days from the date of such decision, and the governor shall have the 26 power to affirm, reverse, or modify such decision by the superintendent 27 in the governor's sole discretion. 28 § 156-d. Financial and operations framework. 1. The public bank may 29 raise capital through: 30 (a) the receipt and leverage of public deposits, including but not 31 limited to the general fund, reserve fund, special district or capital 32 fund, 33 (b) sponsor equity contributions, 34 (c) passive member or shareholder equity contributions, 35 (d) sale of corporate debt to sponsor, and 36 (e) sale of corporate debt to third parties. 37 2. The public bank shall have all the rights and powers conferred by 38 articles three and fifteen of this chapter, which must be exercised in a 39 manner consistent with its mission. 40 3. All lending and actions of the public bank shall abide by the 41 United Nations declaration on the rights of indigenous peoples. 42 4. The sponsor may prohibit investments and loans that may benefit any 43 type of designated business including the fossil fuel industry, weapons 44 or gun manufacturers, military systems companies, private prisons, immi- 45 gration detention facilities, companies engaged in offshore tax avoid- 46 ance or exploitative business or labor practices or the tobacco indus- 47 try, all as determined by the sponsor in the public bank's governing 48 documents. 49 5. The public bank shall be exempt from state, county, and municipal 50 taxes and licenses, of any kind, including income, capital gain, real 51 estate and mortgage recording taxes. 52 6. The public bank shall not be sold to or merged with another entity 53 unless such entity has a public bank charter. 54 § 156-e. Public benefit corporations. 1. A public bank may, but is not 55 required to, incorporate as a benefit corporation under article seven- 56 teen of the business corporation law.A. 9665--E 7 1 2. A public bank may, but is not required to, identify in its certif- 2 icate of incorporation a specific public benefit, consistent with the 3 provisions of article seventeen of the business corporation law. Specif- 4 ic public benefits within the meaning of this section include, but are 5 not limited to, strengthening local economies, supporting community 6 economic development, addressing infrastructure and housing needs for 7 localities, and providing banking services to unbanked or underbanked 8 communities. 9 § 156-f. Insurance. A public bank shall obtain and maintain deposit 10 insurance consistent with section thirty-two of this chapter to the 11 extent that it accepts deposits from any third party that is not in 12 excess of two hundred fifty thousand dollars. 13 § 156-g. Deposits. 1. The board shall develop a plan, subject to 14 approval by the advisory board, to accept and manage deposits. 15 2. The comptroller or chief financial officer of the sponsor shall be 16 authorized to deposit public funds in the public bank, provided that the 17 public bank's business plan permits the comptroller or chief financial 18 officer to meet the short or intermediate-term liquidity needs of the 19 sponsor. 20 3. The public bank may accept deposits, but shall be exempt from the 21 requirements of section one hundred five of this chapter. 22 4. The public bank may accept deposits from any source and funds from 23 any source, including federal funds. 24 § 156-h. Permitted activities of the public bank. 1. The public bank 25 shall have all the rights and powers conferred by articles three and 26 fifteen of this chapter, which shall be exercised in a manner consistent 27 with its mission. The public bank may limit and define its rights and 28 powers in the charter that it submits pursuant to section one hundred 29 fifty-six-c of this article, but it is the intention to grant any public 30 bank created under this law the full rights and powers that any bank 31 would be permitted to exercise under New York's banking laws, subject to 32 those limitations that will be approved by the department. 33 2. Within the overall underwriting and financial policies of the 34 public bank, the public bank shall maximize and prioritize loans 35 supporting worker cooperatives, community land trusts, low-income and 36 affordable housing, renewable energy, infrastructure development, small 37 businesses, small farms, minority- and women-owned business enterprises, 38 students in need of low-cost education financing or refinancing student 39 loan debts, and other initiatives that fulfill the public bank's 40 mission, with a focus on serving underserved and underbanked communi- 41 ties, as well as those within economically distressed communities. 42 § 156-i. Inconsistency with other laws. 1. A public bank shall comply 43 with all requirements of this chapter, the financial services law, the 44 state finance law, the local finance law, the general municipal law, the 45 not-for-profit corporation law, and all other relevant provisions of 46 state or local law, except to the extent that a requirement of any of 47 those laws is inconsistent with a provision of this article, in which 48 case the provisions of this article shall prevail. 49 2. Notwithstanding any provision of state or local law, a county or 50 other state or local authority may lend its credit to any public bank. 51 3. Notwithstanding any provision of state or local law, any state or 52 local authority may invest in commercial paper, debt securities or other 53 obligations of a public bank. 54 4. Notwithstanding any provision of state or local law, a public bank 55 shall be eligible to receive state and local authority money.A. 9665--E 8 1 § 156-j. Owners not to be considered bank holding companies. For the 2 purposes of section one hundred thirty-two of this chapter, any sponsor, 3 person or entity, including a state or local authority, that owns, 4 controls, or holds an ownership interest in a public bank is not a bank 5 holding company by reason of that ownership interest. 6 § 5. Section 98 of the state finance law is amended by adding a new 7 subdivision 7-a to read as follows: 8 7-a. Commercial paper, debt securities, bonds, notes, or other obli- 9 gations of a public bank, as defined in article three-C of the banking 10 law. 11 § 6. Paragraph d of subdivision 1 of section 10 of the general munici- 12 pal law, as amended by chapter 623 of the laws of 1998, is amended to 13 read as follows: 14 d. "Bank" shall mean a bank or public bank as defined by the banking 15 law or a national banking association located and authorized to do busi- 16 ness in New York. 17 § 7. This act shall take effect immediately.
