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A 9574

Relates to a deposit placement program for the Banking Development District Program

2025 Regular Session Introduced by Khaleel Anderson and 19 co-sponsors

Allows eligible banks in Banking Development Districts to redeposit state funds via a deposit placement program, using insured reciprocal deposits instead of traditional securities

REFERRED TO BANKS
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Bill Summary · A 9574

Summary of Bill A. 9574 (2025-2026) – New York

Purpose and Intent

  • The bill amends the state finance law to establish and govern a deposit placement program as part of the Banking Development District (BDD) program.
  • It authorizes use of a deposit placement mechanism as an alternative to traditional security for state deposits, with specific criteria to support participating banks that operate in BDDs and are minority depository institutions or have smaller asset sizes.

Key Provisions and Changes

  • Eligibility and Participating Banks (subdivision 3, new paragraph 7a):
    • Defines “participating bank” as a bank, trust company, or national bank that: 1) Is approved by the Department of Financial Services (DFS) to establish/operate a branch in a Banking Development District (BDD) created under Banking Law § ninety-six-d. 2) Is designated by the State Comptroller as a depository for the BDD program. 3) Is a minority depository institution (MDI) or has assets under $10 billion.
  • Deposit Placement Program as a Security Substitute (subdivision 3, new subparagraph 7b):
    • Allows a participating bank to arrange, at the discretion of the Comptroller and the Commissioner of Taxation and Finance, for redepositing state moneys via a deposit placement program instead of traditional security bonds or collateral.
    • Conditions for redeposit:
    • The bank deposits the state moneys into deposit accounts at one or more banking institutions (as defined by Banking Law § nine-r) and acts as custodian for the state with respect to these redeposited funds.
    • Any moneys pending redeposit that exceed FDIC/NCUA insurance amounts must be secured under other subdivision provisions.
    • The full redeposited amount (principal plus accrued interest, if any) must be insured by FDIC or NCUA.
    • Simultaneously, the participating bank must receive deposits from customers of other financial institutions through the program at least equal to the amount redeposited by the bank.
  • Rules and Regulations (subdivision 3, new subparagraph 7c):
    • The Comptroller may promulgate rules to govern the Deposit Placement Program, including contract requirements (duration, allowable moneys per institution), and reporting on how the program affects a participating bank’s lending activities and business.

  • Limitations and Purpose Alignment (subdivision 3, new subparagraph 7d):

    • The program cannot be used for deposits or purposes other than those expressly authorized by this subdivision and in connection with the BDD program.

  • Other Provisions:

    • The opening paragraph of subdivision 2 of section 105 of the State Finance Law is amended to clarify, by exception, the deposits process as applicable under this section.
    • The act takes effect immediately upon enactment.

Who Would Be Affected

  • Participating Banks: Banks, trust companies, or national banks meeting the eligibility criteria (approved to operate in a BDD, designated as a BDD program depository, and either an MDI or with assets under $10 billion) could participate in the deposit placement program.
  • State Agencies/Accounts: State funds deposited under the state finance law for deposits in state accounts could be redeposited through this program, rather than through conventional security arrangements, subject to federal insurance requirements.
  • FDIC/NCUA Coverage: Ensures that redeposited funds remain insured to the full amount redeposited, aligning with federal insurance protections.
  • Depository Institutions: Banks participating in the program would engage in a reciprocal deposit flow, receiving deposits from customers of other financial institutions to match redeposited state funds.

Procedural and Timeline Considerations

  • Implementation: The Act grants the Comptroller the authority to promulgate regulations and contract standards for the program, including duration limits and per-institution monetary limits.
  • Effective Date: Immediate upon enactment.
  • Oversight and Reporting: Regulations would include reporting on the impact of reciprocal deposits on lending activities and overall business operations of participating banks.

Practical Impact

  • Aims to strengthen banking activity within Banking Development Districts, particularly benefiting MDIs and smaller banks.
  • Provides an alternative mechanism for state fund security that leverages reciprocal deposits while maintaining FDIC/NCUA insurance protections.
  • Introduces regulatory oversight to ensure the program supports lending and economic development within BDDs, without diverting funds from their intended use.

If you’d like, I can add a brief comparison to existing state deposit security rules or provide potential risk considerations and implementation questions.

Compiled from official sources — confirm details with the bill’s official record.

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