As noted above in the President’s Message, the State Senate and Assembly reached agreement on, and appears poised to pass legislation (A.3262, Zebrowski/S.6079, Sanders) to allow credit unions to enter the public deposits (state and/or municipal deposits) business.
IBANYS strongly opposed the legislation, testified against it, submitted memos in opposition and white paper position paper analyses and asked member banks to reach out to their local members of the State Senate and Assembly to urge their opposition as the bills. We believe the legislation would seriously impact community banks and the municipalities and customers they serve.
Nevertheless, at press time the Legislature – now dominated by heavy, downstate Democratic majorities – appeared pleased to approve the legislation. A.3262, Zebrowski/S,6079, Sanders allows credit unions, savings banks, savings and loan associations and federal savings associations to accept and secure deposits from municipal corporations.
IBANYS strongly opposes allowing tax-exempt credit unions to hold public deposits. The final legislation, as amended, did make some improvements over the initial proposal.
- Thrifts would no longer be required to form commercial bank subsidiaries in order to accept the deposits, as they currently must do under state law. IBANYS has long advocated for this result for savings banks and savings and loans.
- The final bill as amended does not immediately give full access to credit unions, but instead phases-in credit union participation, with scheduled steps of the total amounts of deposits they may hold. Thrifts have no such limitations.
- Credit unions will be required to adhere to at least some nominal new community reinvestment provisions, although nothing equal to a full CRA mandate.
- At the end of the pilot program, there will also be a study to determine the impact of their their involvement on community banks and local communities.
The Legislature is also pleased to approve S.3312, Sanders/A.3320, Zebrowski to permit credit unions to participate in the State Business Development District (BDD) Program. The BDD program was established in 1997 to provide incentives for banks to establish bricks and mortar branches in areas with a demonstrated need for banking services. The incentives include the ability to accept municipal deposits, and a real property tax exemption for ten years. IBANYS does not believe either incentive is appropriate to provide to tax-exempt credit unions. Read IBANYS’ Memo in Opposition.
If these bills are approved by the Senate and Assembly, IBANYS will continue our opposition by working with the Governor’s office to seek a gubernatorial veto.
As the session ends, IBANYS will be reviewing the full results of the final actions in the Legislature, and will provide an update once we have carefully assessed the impact on community banks.
We thank the members of our Government Relations Committee, and all our member banks, for their active participation in our legislative process at the state and federal level during 2019.