Bill Text: NY S05565 | 2019-2020 | General Assembly | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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 17-0)

Status: (Introduced - Dead) 2020-08-07 - PRINT NUMBER 5565D [S05565 Detail]

Download: New_York-2019-S05565-Amended.html

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                STATE OF NEW YORK
        ________________________________________________________________________

                                         5565--A

                               2019-2020 Regular Sessions

                    IN SENATE

                                       May 7, 2019
                                       ___________

        Introduced  by Sens. SANDERS, JACKSON, SALAZAR -- read twice and ordered
          printed, and when printed to be committed to the Committee on Banks --
          recommitted to the Committee on Banks in accordance with  Senate  Rule
          6,  sec. 8 -- committee discharged, bill amended, 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:
    16    1. Bank. The term, "bank," when used in this chapter, unless a differ-
    17  ent meaning appears from the context, means any corporation, other  than
    18  a trust company, organized under or subject to the provisions of article
    19  three or three-C of this chapter.
    20    11.  Banking  organizations.  The  term, "banking organizations," when
    21  used in this chapter, means and includes  all  banks,  trust  companies,

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10967-04-0
        S. 5565--A                          2

     1  private bankers, savings banks, safe deposit companies, savings and loan
     2  associations,  credit  unions,  public  banks  organized  under  article
     3  three-C of this chapter, and investment companies.
     4    § 4. The banking law is amended by adding a new article 3-C to read as
     5  follows:
     6                                 ARTICLE 3-C
     7                                PUBLIC BANKS
     8  Section 156. Definitions.
     9          156-a. Sponsors and corporate structure.
    10          156-b. Governance.
    11          156-c. Public bank charter requirements.
    12          156-d. Financial and operations framework.
    13          156-e. Public benefit corporations.
    14          156-f. Insurance.
    15          156-g. Inconsistency with other laws.
    16          156-h. Owners not to be considered bank holding companies.
    17    § 156. Definitions. For the purposes of this article:
    18    1.  "Advisory board" means a board established pursuant to section one
    19  hundred fifty-six-b of this article.
    20    2. "Bank" means any  corporation,  other  than  a  trust  corporation,
    21  organized  under or subject to the provisions of this article or article
    22  three of this chapter.
    23    3. "Board" means a board of directors or board of managers of a public
    24  bank.
    25    4. "Deposit" means the placing of money with a public bank to be with-
    26  drawn upon the depositor's demand or under  the  rules  and  regulations
    27  agreed upon between the bank and the depositor.
    28    5.  "Independent"  means,  with respect to a member of a public bank's
    29  board of directors, board of managers, or advisory board, an  individual
    30  who:
    31    (a)  at  the  time  of  his or her election to the board of directors,
    32  board of managers, or advisory board of a public bank, is not  a  holder
    33  of any public office within the sponsor; and
    34    (b)  within the past five years has not been a holder of public office
    35  within such sponsor.
    36    6. "Public bank" means a not-for-profit corporation,  a  stock  corpo-
    37  ration  or  limited liability company that is chartered pursuant to this
    38  article as a bank.
    39    7. "Public bank application  documents"  means  a  business  plan  and
    40  application  to  be  submitted to the department pursuant to section one
    41  hundred fifty-six-c of this article for  the  purpose  of  chartering  a
    42  public bank.
    43    8.  "State  or  local authority" means a local government or agency, a
    44  group of two or more local  governments  or  agencies  acting  together,
    45  special  district,  a  group  of  two  or  more special districts acting
    46  together, state agency, or a group of two or more state agencies  acting
    47  together.
    48    9. "Sponsor" means one or more cities and/or counties within the state
    49  of New York.
    50    §  156-a.  Sponsors  and corporate structure.   A public bank may be a
    51  not-for-profit corporation, a limited liability company  or  corporation
    52  that  is  formed by a sponsor, subject to the following corporate struc-
    53  ture requirements:
    54    1. The sponsor shall be (a) the sole member of a not-for-profit public
    55  bank, (b) the majority and controlling member  of  a  limited  liability
        S. 5565--A                          3

     1  company public bank, and (c) the majority and controlling shareholder of
     2  a corporation public bank.
     3    2.  A  public  bank organized as a limited liability company or corpo-
     4  ration may have other members or shareholders but such other members  or
     5  shareholders shall only be passive members or shareholders and shall not
     6  have  any  consent or veto rights over any decisions, any removal rights
     7  of the sponsor, any rights to elect or choose the board  or  any  voting
     8  rights whatsoever.
     9    3.  Passive members or passive shareholders shall be allowed to invest
    10  capital into a public bank so long as such passive  members  or  passive
    11  shareholders  are  approved by the sponsor and the sponsor maintains the
    12  right to direct the public bank to purchase the interests of any passive
    13  members or shareholders at a market price determined by  an  independent
    14  third party selected by the sponsor at any time.
    15    4.  The  sponsor  shall  owe  no  fiduciary duty nor any other duty to
    16  passive investors. No passive investor may pursue legal  action  against
    17  the  sponsor  for  any  reason  other  than  failure to distribute funds
    18  required to be distributed pursuant to governing documents of the public
    19  bank.
    20    § 156-b. Governance. 1. The public bank shall be governed by a  board.
    21  Such board shall be composed of no fewer than five directors and no more
    22  than  eleven  directors.  Each  director shall live within the jurisdic-
    23  tional boundaries of the sponsor.
    24    2. The sponsor shall determine the public bank's  initial  board,  the
    25  term  of  the  board, the qualifications of the board and the method for
    26  replacing the board.
    27    3. A majority of the board shall be composed of independent  directors
    28  who  are  not  government  employees.  The chair of the board must be an
    29  independent director.
    30    4. The board shall set policy  for  the  public  bank;  provided  that
    31  neither the board nor any director shall be involved in day to day deci-
    32  sions  regarding  particular  instruments. Management decisions shall be
    33  made independently by bank management who  shall  be  appointed  by  the
    34  board consistent with bank policy.
    35    5. The board may establish one or more committees to manage the public
    36  bank.
    37    6.  The  board  shall  adhere to all reporting requirements under this
    38  chapter regarding the public bank's financial condition.
    39    7. A public bank shall form one or more advisory boards  in  order  to
    40  provide  advice  and  carry  out  any other duties, as determined by the
    41  public bank, including the following:
    42    (a) provide input to  the  board  regarding  ways  to  accomplish  its
    43  mission;
    44    (b)  ensure  that the board follows strict ethical standards as deter-
    45  mined by the sponsor in the public bank's governing  documents,  through
    46  the approval of bylaws to govern the board's management;
    47    (c) provide technical advice as needed; and
    48    (d)  provide an annual report to the public and the sponsor evaluating
    49  the public bank's performance in relation to its  mission,  its  ethical
    50  standards and its financial soundness.
    51    8.  The  sponsor will determine the initial advisory board membership,
    52  the term of its members, the qualifications of members  and  the  method
    53  for  replacing  its  members,  provided that a majority of each advisory
    54  board is made up of independent members who are not governmental employ-
    55  ees. The advisory board shall be composed of no fewer than five  and  no
    56  more  than  eleven  members. Any advisory board member shall live within
        S. 5565--A                          4

     1  the jurisdictional boundary of the public bank's sponsor or its  members
     2  or shareholders.
     3    9. Any action required or permitted by this chapter to be taken by the
     4  board or an advisory board may be taken at a duly called meeting of such
     5  board in accordance with its governing documents or without a meeting if
     6  the action taken is evidenced by one or more written consents describing
     7  the  action  taken  and  signed  by each member of the board or advisory
     8  board.
     9    § 156-c. Public bank charter requirements. 1. A proposed  public  bank
    10  shall  be chartered by the department upon submission of the public bank
    11  application documents that demonstrate the following:
    12    (a) the purpose of the proposed public bank  is  consistent  with  the
    13  purposes required under this article;
    14    (b)  minimum initial capitalization is no less than ten percent of the
    15  public bank's projected lending total for the first  year  of  operation
    16  after receipt of its charter;
    17    (c)  adequate  reserves and liquidity exist to cover the public bank's
    18  obligations relating to deposit withdrawals and defaulted loans;
    19    (d) the qualifications of the proposed directors;
    20    (e) the qualifications of the proposed  chief  executive  officer  and
    21  management team;
    22    (f) an organizational chart;
    23    (g) procedures for obtaining fidelity insurance;
    24    (h) sufficient internal audits and controls;
    25    (i)  a  pro  forma financial statement projecting assets, liabilities,
    26  income and expenses for no less than a three year period;
    27    (j) the impact of the public bank on the  sponsor's  financial  condi-
    28  tion;
    29    (k)  a  plan  to  comply  with the community reinvestment act and fair
    30  lending requirements, pursuant to section two  hundred  ninety-six-a  of
    31  the executive law;
    32    (l) a certificate of incorporation; and
    33    (m)  a  narrative  business plan describing the banking services to be
    34  provided.
    35    2. The public bank may but shall  not  be  required  to  collateralize
    36  deposits  from the sponsor or any other governmental entity with collat-
    37  eral determined by the public bank in its governing documents.
    38    3. The public bank application documents are not required  to  provide
    39  that the public bank will receive deposits in its initial three years of
    40  operation,  and  not  receiving  deposits  in the initial three years of
    41  operation shall not be a reason for disapproval by the superintendent.
    42    4. Public bank application documents are not  required  to  include  a
    43  market,  public  convenience and advantage, competitive impact or a bank
    44  premises analysis or address any other matters other than  those  listed
    45  in subdivision one of this section.
    46    5.  Public  bank  charter  applications  that do not conflict with any
    47  requirements expressly provided in subdivision one of this section shall
    48  be liberally granted by the superintendent,  and  any  decision  by  the
    49  superintendent  refusing  to  grant  permission  for  the operation of a
    50  public bank may be appealed by the sponsor to the governor within thirty
    51  days from the date of such decision, and the  governor  shall  have  the
    52  power  to affirm, reverse, or modify such decision by the superintendent
    53  in the governor's sole discretion.
    54    § 156-d. Financial and operations framework. 1. The  public  bank  may
    55  raise capital through:
    56    (a) sponsor equity contributions,
        S. 5565--A                          5

     1    (b) passive member or shareholder equity contributions,
     2    (c) donations, if the public bank is a not-for-profit corporation,
     3    (d) sale of corporate debt to sponsor,
     4    (e) sale of corporate debt to third parties, and
     5    (f) the receipt and leverage of deposits.
     6    2.  The  public bank shall have all the rights and powers conferred by
     7  articles three and fifteen of this chapter, which must be exercised in a
     8  manner consistent with its mission.
     9    3. Within the overall  underwriting  and  financial  policies  of  the
    10  public  bank,  the  public  bank  shall  maximize  and  prioritize loans
    11  supporting worker cooperatives, community land  trusts,  low-income  and
    12  affordable  housing, renewable energy, infrastructure development, small
    13  businesses and small farms, minority- and  women-owned  business  enter-
    14  prises,  and  other  initiatives that fulfill the public bank's mission,
    15  with a focus on serving underserved and under-banked communities.
    16    4. All lending and actions of the  public  bank  shall  abide  by  the
    17  United Nations declaration on the rights of indigenous peoples.
    18    5. The sponsor may prohibit investments and loans that may benefit any
    19  type  of designated business including the fossil fuel industry, weapons
    20  or gun manufacturers, military systems companies, private prisons, immi-
    21  gration detention facilities, companies engaged in offshore  tax  avoid-
    22  ance  or  exploitative business or labor practices or the tobacco indus-
    23  try, all as determined by the sponsor in  the  public  bank's  governing
    24  documents.
    25    6.  The  public bank shall be exempt from state, county, and municipal
    26  taxes and licenses, of any kind, including income,  capital  gain,  real
    27  estate and mortgage recording taxes.
    28    7.  The public bank shall not be sold to or merged with another entity
    29  unless such entity has a public bank charter.
    30    § 156-e. Public benefit corporations. 1. A public bank may, but is not
    31  required to, incorporate as a benefit corporation under  article  seven-
    32  teen of the business corporation law.
    33    2.  A public bank may, but is not required to, identify in its certif-
    34  icate of incorporation a specific public benefit,  consistent  with  the
    35  provisions of article seventeen of the business corporation law. Specif-
    36  ic  public  benefits within the meaning of this section include, but are
    37  not limited to,  strengthening  local  economies,  supporting  community
    38  economic  development,  addressing  infrastructure and housing needs for
    39  localities, and providing banking services to  unbanked  or  underbanked
    40  communities.
    41    §  156-f.  Insurance.  A public bank shall obtain and maintain deposit
    42  insurance consistent with section thirty-two  of  this  chapter  to  the
    43  extent  that  it  accepts  deposits  from any third party that is not in
    44  excess of two hundred fifty thousand dollars.
    45    § 156-g. Inconsistency with other laws. 1. A public bank shall  comply
    46  with  all  requirements of this chapter, the financial services law, the
    47  state finance law, the local finance law, the general municipal law, the
    48  not-for-profit corporation law, and all  other  relevant  provisions  of
    49  state  or  local  law, except to the extent that a requirement of any of
    50  those laws is inconsistent with a provision of this  article,  in  which
    51  case the provisions of this article shall prevail.
    52    2.  Notwithstanding  any  provision of state or local law, a county or
    53  other state or local authority may lend its credit to any public bank.
    54    3. Notwithstanding any provision of state or local law, any  state  or
    55  local authority may invest in commercial paper, debt securities or other
    56  obligations of a public bank.
        S. 5565--A                          6

     1    4.  Notwithstanding any provision of state or local law, a public bank
     2  shall be eligible to receive state and local authority money.
     3    §  156-h. Owners not to be considered bank holding companies.  For the
     4  purposes of section one hundred thirty-two of this chapter, any sponsor,
     5  person or entity, including a  state  or  local  authority,  that  owns,
     6  controls,  or holds an ownership interest in a public bank is not a bank
     7  holding company by reason of that ownership interest.
     8    § 5. Section 98 of the state finance law is amended by  adding  a  new
     9  subdivision 7-a to read as follows:
    10    7-a.  Commercial  paper, debt securities, bonds, notes, or other obli-
    11  gations of a public bank, as defined in article three-C of  the  banking
    12  law.
    13    § 6. Paragraph d of subdivision 1 of section 10 of the general munici-
    14  pal  law,  as  amended by chapter 623 of the laws of 1998, is amended to
    15  read as follows:
    16    d. "Bank" shall mean a bank or public bank as defined by  the  banking
    17  law or a national banking association located and authorized to do busi-
    18  ness in New York.
    19    § 7. This act shall take effect immediately.