BILL NUMBER:S4927

TITLE OF BILL:

An act
to amend the banking law, in relation to the community bank deposit
program

PURPOSE OR GENERAL IDEA OF BILL:

To expand the funds available for the community bank deposit program
which seeks to encourage the State to place funds in local banks in
order to support and promote local economic activity.

SUMMARY OF SPECIFIC PROVISIONS:

This bill amends subdivision 2 of section 87 of the Banking Law to
increase the maximum amount of funds available, from $250 million to
$350 million, for the community bank deposit program. It also caps
the amount of funds which an individual bank may have on deposit to
$20 million.

JUSTIFICATION:

The community bank deposit program seeks to encourage the State
Comptroller and the Commissioner of Taxation and Finance to consider
              

placing State funds into local banks. This program recognizes that
local banks are well-positioned to use their deposits to support
economic activities in their communities. This bill seeks to expand
the program to ensure additional availability of funds.

By encouraging the placement of State deposits in local banks, this
program creates an opportunity for New York State to help stimulate
local economic development. Currently, much of the State's funds may
be placed in brokerage firms or in large banking institutions, many
of which may be headquartered in another state. In either of those
cases, the economic benefits of the State deposits may flow out of
the state, and the resulting local economic benefit can be minimal.

In contrast, deposits in local community banks can have a significant
impact within that particular community. The placement of state
deposits would help enable these community banking institutions to
meet the economic needs of their local communities. Because many
small communities are home to small state and national banks,
expanding the program would be of benefit to the economies of these
small communities.

California has had a Successful program for a number of years in which
the State broadly deposits its funds into a large number of financial
institutions and local communities. The intent of New York's law is
to encourage the State to consider a similar approach by placing more
of its funds in local community banks. While the Comptroller and the
Commissioner are not required to make such deposits, they are
encouraged to consider the benefits of such an approach. This would
enhance the ability of small local banks to support the economies of
their communities by making commercial loans to local businesses.


PRIOR LEGISLATIVE HISTORY:

This is new legislation.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

This bill would have only a minimal fiscal impact, depending on the
rate of return received on any deposits placed under this program.

EFFECTIVE DATE:
Immediately.