New York State Banking Department - Nature of State Regulation

Nature of State Regulation

Regulation by the Banking Department begins with chartering, in the case of banks, trust companies and thrifts, licensing in the case of most other entities, and registration in the case of mortgage brokers.

For all entities, it involves an evaluation of the character and fitness of incorporators (for chartered entities), directors and officers. For banking entities, it also involves requirements as to corporate governance and limitations on corporate powers.

For most entities, it also involves financial requirements, such as a requirement as to minimum net capital. Banking organizations are also subject to restrictions on payment of dividends as well as restrictions on transactions with affiliates and loans to any one borrower. For all entities, it involves the requirement to maintain accurate books and records of its financial condition and transactions, as well as regular examination by the Department’s examination staff, which ranges from continuous on-site examination for the largest entities, to discrete examinations at appropriate intervals.

Under the Banking Law, the Superintendent may require a regulated entity to appear and explain any apparent violation of law, issue an order directing a regulated entity to discontinue unauthorized or unsafe practices or to make good an impairment of capital or, in the case of a banking organization, required reserves, or to improve its recordkeeping.

The Superintendent may take possession of and liquidate a banking organization and may suspend or revoke a certificate or license to do business or certain activities of a regulated non-banking entity. It holds in trust any unclaimed assets of a liquidated bank.

Finally, under Section 44 of the Banking Law, following notice and a hearing, the Superintendent may impose penalties to be paid to the State.