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STATE REGULATION OF BANKS-ILLUSTRATED BY NEW YORK.
1. Banking Department.
To the banking department is intrusted the enforcement of the law. It is conducted by a superintendent appointed by the governor. The superintendent grants an authorization certificate to a new bank when it has complied with the law. The bank must have it in order to do business. The capital must be fully paid in cash.
2. Private bankers.
Frequently, private bankers are not regulated. New York wishes to protect the customers of small private bankers but does not wish to interfere with the large private bankers engaged in investment banking.
Reports must be made four times a year as of dates specified by the superintendent.
The superintendent may permit a bank to open branch offices. This is a valuable privilege, especially in competition with national banks.
5. Taking possession.
The superintendent may take charge of a bank when it has violated the law or is in an unsound condition or has refused to submit to regulation. In some States, the officer must get an order from a court in order to take possession of a bank.
Five or more incorporators are necessary to start a bank. 7. Capital.
The amount of capital is dependent upon the population:
Not over 2,000
2,000 to 30,000
8. Length of charter.
The term of existence may be perpetual.
To insure obedience to the law, the bank must deposit $1,000 in New York or United States bonds.
The bank is permitted to:
a. Carry on discount operations.
b. Accept deposits.
Buy and sell exchange, coin, and bullion. d. Lend money on real or personal security.
Invest in United States bonds or New York State or municipal bonds.
Hold stock in safe deposit companies and in foreign banking corporations.
Hold stock in the Federal reserve bank.
Hold real estate for the conduct of its business or to secure debts.
j. Act in a trust capacity, when authorized.
Restrictions on loans.
Not more than 10 per cent of capital and surplus may be loaned to one borrower unless on bills of exchange or secured by collateral security. In this case, the total may be 25 or 40 per cent, depending on the location of the bank. The bank must not loan money to finance the purchase of its own stock. Loans to officers, directors, and employees require the written approval of the board of directors.
On demand deposits, population is the determining factor: Percentage of reserves. In places with population over two million .......18 per cent; at least 12 per cent on hand.
In places with population from one to two million..15 per cent; at least 10 per
cent on hand. .12 per cent; at least 4 per cent on hand.
If a bank is a member of the Federal reserve system, keeping the required reserve in the Federal reserve bank, it is exempt from this provision.
A surplus of at least 20 per cent of the capital must be paid in or accumulated from earnings.
14. Stockholders have double liability.
These must be citizens of the United States, and at least three-quarters of them must be residents of New York State. They must examine the bank twice a year.
16. Foreign banking corporations.
Concerns of this sort cannot do business within the State without a license from the superintendent.
Materials on Chapter XIV.
Selected Sections from the Banking Law of New York. $10. Banking Department; Superintendent; Appointment; Term of Office; Qualifications; Compensation; Oath; Bond.
There shall continue to be a banking department charged with the execution of the laws relating to the individuals, partnerships, unincorporated associations and corporations to which this chapter is applicable. The chief officer of such department shall continue to be known as the superintendent of banks. He shall have supervision of every such individual, partnership, unincorporated association and corporation, and shall exercise such powers and perform such duties as are conferred and imposed upon him by this chapter or by any law of this State.
The superintendent of banks shall be appointed by the governor, by and with the advice and consent of the senate, and after the termination of the term of office of the incumbent at the time this act takes effect shall hold his office for the term of three years, beginning on the first day of July succeeding his appointment and ending on the first of July in the third calendar year thereafter, provided that the term of office of the superintendent appointed to succeed the superintendent who was in office on the first day of January, nineteen hundred and fourteen, shall continue until the first day of July, nineteen hundred and seventeen, and that a vacancy in such office shall be filled only for the balance of the unexpired term.
The superintendent shall not, either directly or indirectly, be interested in any corporation to which this chapter is applicable, or engage in business as a private banker or personal loan broker. After the termination of the term of office of the incumbent at the time this act takes effect, the superintendent of banks shall receive an annual salary of ten thousand dollars, to be paid monthly. The superintendent shall, within fifteen days from the time of notice of his appointment, take and subscribe the constitution oath of office and file the same in the office of the secretary of state, and execute to the people of the State a bond in the sum of fifty thousand dollars, with two or more sureties to be approved by the comptroller and treasurer of the State, conditioned for the faithful discharge of the duties of his office.
$23. Investigation by Superintendent of Proposed Corporation, Private Banker or Personal Loan Broker; Refusal or Approval; Filing Certificate.
When any such certificate shall have been filed for examination, the superintendent shall thereupon ascertain from the best sources of in
formation at his command, and by such investigation as he may deem necessary, whether the character, responsibility and general fitness of the person or persons named in such certificate are such as to command confidence and warrant belief that the business of the proposed corporation, private banker or personal loan broker will be honestly and efficiently conducted in accordance with the intent and purpose of this chapter, and whether the public convenience and advantage will be promoted by allowing such proposed corporation, private banker or personal loan broker to engage or continue in business. .
$24. Authorization Certificate; When and to Whom Issued; Filing and Recording.
Before authorizing any corporation, private banker or personal loan broker to begin or continue business the superintendent shall be satisfied that such corporation, banker or broker has in good faith complied with all the requirements of law and fulfilled all the conditions precedent to commencing business imposed by this chapter. In the case of every stock corporation, he shall examine or cause an examination to be made in order to ascertain whether all of its capital stock has been fully paid. in cash. In the case of every personal loan broker and of every private banker, subject to all the provisions of article four of this chapter, he shall examine or cause an examination to be made in order to ascertain whether there has been invested in such business, or deposited in cash to be invested therein, the amount of permanent capital stated in the certificate of such banker or broker.
If satisfied that such corporation, banker or broker has in good faith complied with all the requirements of law and fulfilled all the conditions precedent to commencing business imposed by this chapter, the superintendent shall, within six months after the date on which such organization certificate or private banker's or personal loan broker's certificate was filed by him for examination, but in no case after the expiration of that period issue under his hand and official seal, in triplicate, an authorization certificate to the person or persons named in such organization certificate or private banker's or personal loan broker's certificate. Such authorization certificate shall state that the corporation, private banker or personal loan broker named therein has complied with the provisions of this chapter and with all the requirements of law, that it is authorized to transact within this State the business specified therein, and that such business can safely be intrusted to it. One of the triplicate authorization certificates shall be transmitted by the superintendent to the corporation, private banker, or personal loan