This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

INDUSTRIAL DEVELOPMENT AGENCIES -- Powers and Duties (authority to deposit or invest funds with a State or federally chartered savings bank)

MUNICIPAL FUNDS -- Deposits and Investments (authority to deposit or invest with a State or federally chartered savings bank)

GENERAL MUNICIPAL LAW, §§10, 11; BANKING LAW, §2: The term "bank" as used in General Municipal Law, §§10 and 11 does not include State or federally chartered savings banks. The term "national banking association", as used in General Municipal Law, §10, does not include federally chartered savings banks.

You ask whether a municipality and an industrial development agency (IDA) may deposit or invest their funds with a State or federally chartered savings bank.

General Municipal Law, §10, as enacted by L 1992, ch 708, and General Municipal Law, §11, as amended by L 1992, ch 708, govern the deposit and investment of public funds of "local governments". For this purpose, a local government is defined to include municipal corporations, school districts, BOCES, district corporations, special improvement districts, public libraries and IDAs (General Municipal Law, §§10[1][a], 11[1]; see also General Municipal Law, §858-a[3] which states that General Municipal Law, §§10 and 11 are applicable to deposits and investments of funds for an agency's own use and account).

Section 10(2)(a) of the General Municipal Law requires the governing board of every local government to designate one or more "banks or trust companies" for the deposit of public funds, the disposition of which is not otherwise provided for by law. Section 10(3) sets forth requirements for the securing of public deposits. General Municipal Law, §11 provides, in pertinent part, that the governing board of a local government or, if the governing board so delegates, the chief fiscal officer or other officer having custody of moneys, may temporarily invest moneys not required for immediate expenditure (except moneys the investment of which is otherwise provided for by law) in special time deposit accounts in, or certificates of deposit issued by, a "bank or trust company." Section 11 also provides for the securing of such a time deposit account or certificate of deposit in the same manner as is provided for securing deposits of public funds by General Municipal Law, §10(3).

The term "bank," as used in sections 10 and 11, is defined to mean a "bank as defined by the banking law or a national banking association located and authorized to do business in New York" (General Municipal Law, §§10[1][d], 11[1]). The New York State Banking Law defines "bank" to mean "any corporation, other than a trust company, organized under or subject to the provisions of article three of this chapter" (Banking Law, §2[1]). In contrast, a "savings bank" is defined to mean "any corporation organized under or subject to the provisions of article six of this chapter" (Banking Law, §2[4]). Articles 3 and 6 of the Banking Law set forth the powers of "banks" and "savings banks", respectively (Banking Law, §§96, 234), and although the courts have recognized that a number of the distinctions between the two types of financial institutions have been blurred over the years, it remains clear that they are subject to separate statutory schemes (see New York State Bankers Association v Albright, 38 NY2d 430, 381 NYS2d 17). Of particular note is the fact that article 6 expressly prohibits savings banks from accepting deposits from municipal corporations (Banking Law, §237[2]). Based on these separate definitions and statutory schemes, it is our opinion that a savings bank, whether State or federally chartered, is not a "bank as defined in the Banking Law" for purposes of sections 10 and 11 of the General Municipal Law (see 1983 Opns St Comp No. 83-69, p 80; 1981 Opns St Comp No. 81-191, p 202; 20 Opns St Comp, 1964, p 250; see also People v Calandra, 164 AD2d 638, 565 NYS2d 467; lv. denied 77 NY2d 992, 571 NYS2d 918 and 77 NY2d 997, 571 NYS2d 923, in which the court discusses the inapplicability of provisions of the Banking Law to federally chartered banks).

As to whether a federally chartered savings bank constitutes a "national banking association," we note that sections 10 and 11 of the General Municipal Law do not define the term "national banking association." The Banking Law employs the term without providing a specific definition (see, e.g., Banking Law, §136[4], which states that: "[f]or purposes of ... this section the term 'national banking association' means one or more national banking associations.")

Under federal law, however, it is clear that a "national banking association" is a bank that has been organized under the National Bank Act (12 USC §21 et seq.). Such an association operates pursuant to a certificate of authority issued by the Comptroller of the Currency (12 USC §27). The Comptroller of the Currency is authorized to prescribe regulations governing national banking associations (12 USC §93a). Each national banking association is required to become a member of the Federal Reserve System (12 USC §§222, 321, 466).

In contrast, federal savings associations and federal savings banks are organized under the provisions of the Home Owners' Loan Act (12 USC §1461 et seq.). A federal savings association or federal savings bank operates pursuant to a charter issued by the Director of the Office of Thrift Supervision (12 USC §1464[a][1]). The Director of the Office of Thrift Supervision is authorized to prescribe regulations governing federal savings associations and federal savings banks (12 USC §1464[d]). Federal savings associations and federal savings banks must be members of the Federal Home Loan Bank System (12 USC §1464[f]).

Based on the distinct statutory schemes applicable to national banking associations and federal savings banks at the federal level, it is our opinion that the term "national banking association," as used in section 10 of the General Municipal Law, does not include federally chartered savings banks (see 1984 Opns St Comp No. 84-18, p 23).

Consequently, it is our opinion that municipalities and IDAs are not authorized to deposit or invest their funds with a State or federally chartered savings bank.

May 10, 1995
Joseph Mazzariello, City Comptroller
City of Troy