Add Art 17 §§250 - 265, amd §99-ii, St Fin L; rpld §16-ee, UDC Act
Enacts the New York state bank act creating the New York state banking authority and New York state bank to serve New York state residents and businesses currently underserved by banking institutions.
STATE OF NEW YORK
________________________________________________________________________
5978
2023-2024 Regular Sessions
IN ASSEMBLY
March 24, 2023
___________
Introduced by M. of A. BURDICK -- read once and referred to the Commit-
tee on Banks
AN ACT to amend the state finance law, in relation to enacting the New
York state bank act; to repeal certain provisions of the New York
state urban development corporation act relating thereto; and provid-
ing for the repeal of such provisions upon expiration thereof
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known and may be cited as the "New York
2 state bank act".
3 § 2. The state finance law is amended by adding a new article 17 to
4 read as follows:
5 ARTICLE 17
6 THE NEW YORK STATE BANK
7 Section 250. Legislative intent.
8 251. Definitions.
9 252. Creation of the New York state banking authority.
10 253. Purpose.
11 254. The New York state bank.
12 255. Board.
13 256. Capitalization.
14 257. Deposit of funds.
15 258. Investment requirements and regulations.
16 259. Financial regulation.
17 260. Reporting requirements.
18 261. Ethical requirements.
19 262. Fees and taxes.
20 263. Bank records.
21 264. Termination of operations.
22 265. Severability.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD07659-01-3
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1 § 250. Legislative intent. 1. The legislature finds that several
2 communities within the state have been adversely affected by a lack of
3 banking services to meet their financial needs. Low-income, inner city
4 and rural communities are often left out of the banking system. Further-
5 more, individuals without lawful immigration status have difficulty
6 accessing banking services, particularly when the process requires a
7 social security number or a form of government-issued identification.
8 The state of New York has an interest in ensuring that communities that
9 are underserved by banking institutions have access to banking services
10 such as low or no cost savings and checking accounts, loans and elec-
11 tronic banking platforms. Providing banking services to these communi-
12 ties will ensure they can safely and securely store their money and have
13 access to financing options that are legitimate alternatives to predato-
14 ry lending practices, such as high-interest pay-day loans.
15 2. The legislature finds that a group with insufficient access to
16 banking services is the cannabis industry. The federal classification of
17 cannabis as a Schedule I drug under the Controlled Substances Act of
18 1970 means most private banks and credit unions are unable to or refuse
19 to service bank accounts held by cannabis-related businesses due to
20 federal money laundering statutes and the bank secrecy act. As a
21 result, cannabis-related businesses are locked out of the banking
22 system, forcing them to rely entirely on cash to conduct transactions.
23 Being cash-oriented leaves cannabis-related businesses disproportionate-
24 ly susceptible to burglary of their property and makes their employees
25 targets of violent robbery. In addition, cash transactions are not
26 traceable by state and federal financial regulators, meaning cash-only
27 cannabis-related businesses can be used to launder money derived from
28 illegal activities. Therefore, the legislature finds that the exclusion
29 of cannabis-related businesses from the banking system constitutes a
30 public safety and financial transparency issue.
31 3. The legislature finds that the establishment of a publicly owned
32 and operated bank would alleviate issues of financial transparency and
33 public safety by providing a secure depository for the storage and lend-
34 ing of cannabis-related businesses funds and deposits from low-income
35 residents of the state.
36 4. The legislature finds that in addition to increasing public safety,
37 the provision of banking services to cannabis-related businesses would
38 facilitate sustainable economic growth in New York state. The legal
39 cannabis industry is projected to grow by tens of billions of dollars in
40 coming years. A state owned and operated bank can foster economic growth
41 and capital investment and spur job creation in the cannabis industry by
42 providing collateralized loans to communities underserved by banking
43 institutions, including eligible and registered cannabis-related busi-
44 nesses.
45 5. The legislature intends to establish the New York state banking
46 authority and the New York state bank to use a portion of the tax reven-
47 ue received from the sales of legal adult-use cannabis products to serve
48 low-income communities and cannabis-related businesses that are under-
49 served by banking institutions.
50 § 251. Definitions. As used in this article, the following terms shall
51 have the following meanings:
52 1. "Board" means the board of the New York state banking authority.
53 2. "Authority" means the New York state banking authority.
54 3. "Department" means the department of financial services.
55 4. "Superintendent" means the superintendent of the department of
56 financial services.
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1 5. "Cannabis" means all parts of the plant of the genus cannabis,
2 whether growing or not; the seeds thereof; the resin extracted from any
3 part of the plant; and every compound, manufacture, salt, derivative,
4 mixture, or preparation of the plant, its seeds or resin. It does not
5 include the mature stalks of the plant, fiber produced from the stalks,
6 oil or cake made from the seeds of the plant, any other compound, manu-
7 facture, salt, derivative, mixture, or preparation of the mature
8 stalks (except the resin extracted therefrom), fiber, oil, or cake, or
9 the sterilized seed of the plant which is incapable of germination. It
10 does not include hemp, cannabinoid hemp or hemp extract as defined by
11 section three of the cannabis law or any drug products approved by the
12 federal food and drug administration.
13 6. "State-chartered banking institution" means any bank, trust compa-
14 ny, private banker, savings bank, savings and loan association, foreign
15 banking corporation, or credit union. It does not include the New York
16 state bank.
17 7. "Comptroller" means the comptroller of the state of New York.
18 8. "Bank" means the New York state bank.
19 9. "Bank president" means the president of the New York state bank.
20 10. "Low-interest capital" means funds that are loaned by the New York
21 state bank to eligible and registered cannabis-related businesses.
22 11. "Low-interest loans" means funds that are loaned by the New York
23 state bank to qualifying low-income individuals.
24 12. "Low-income individual" means a resident of the state with an
25 income that does not exceed two hundred percent of the federal poverty
26 level.
27 13. "Cannabis-related businesses" are New York state registered busi-
28 nesses that contribute to the growth, production, transportation, and
29 distribution of products containing cannabis.
30 § 252. Creation of the New York state banking authority. 1. There is
31 hereby created the New York state banking authority. The authority shall
32 be a body corporate and politic constituting a public benefit corpo-
33 ration. The authority shall be governed by five trustees. One shall be
34 appointed by the speaker of the assembly, one by the temporary president
35 of the senate, one by the governor, one by the comptroller and one by
36 the attorney general. The trustees shall serve the following terms:
37 (a) The trustees appointed by the legislature shall each serve an
38 initial term of five years.
39 (b) The trustee appointed by the governor shall serve an initial term
40 of four years.
41 (c) The trustee appointed by the comptroller shall serve an initial
42 term of three years.
43 (d) The trustee appointed by the attorney general shall serve an
44 initial term of two years.
45 (e) After the initial terms of the trustees have been completed, all
46 trustees thereafter shall serve four year terms.
47 2. Each appointed trustee shall be a citizen of the United States and
48 a resident of the state.
49 3. Each trustee shall hold office until a successor has been appointed
50 and qualified. At the expiration of the term of each trustee and of each
51 succeeding trustee, a new trustee shall be appointed by the party which
52 appointed the outgoing trustee.
53 4. In the event of a vacancy occurring in the office of the trustee by
54 death, resignation or otherwise, a successor shall be appointed within
55 forty-five days for the remainder of the term by the party which
56 appointed.
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1 5. Three trustees shall constitute a quorum.
2 6. The trustees of the authority shall serve without salary or other
3 compensation, but each member shall be entitled to reimbursement for
4 actual and necessary expenses incurred in the performance of their offi-
5 cial duties.
6 § 253. Purpose. The New York state banking authority shall charter the
7 New York state bank.
8 § 254. The New York state bank. 1. The mission of the New York state
9 bank is to serve low-income individuals and cannabis-related businesses
10 that are underserved by private sector banking institutions. To this
11 effect, the bank shall be required to:
12 (a) Create banking opportunities for low-income individuals in the
13 state. This includes but is not limited to:
14 (i) offering eligible low-income individuals access to savings and
15 checking account services with nominal or zero minimum balance require-
16 ments and multiple options for proving identification; and
17 (ii) providing banking services to low-income individuals who do not
18 have access to bank accounts or products due to immigration status, lack
19 of literacy, high banking fees, or criminal records;
20 (b) Loan a portion of state tax revenue received from the sales of
21 legal adult-use cannabis products, pursuant to paragraph (c) of subdivi-
22 sion three of section ninety-nine-ii of this chapter, and deposits into
23 the bank from low-income individuals to provide eligible cannabis-relat-
24 ed businesses and low-income individuals access to low-interest capital
25 and loans;
26 (c) Do business with:
27 (i) businesses licensed and regulated in New York state;
28 (ii) businesses licensed outside of New York state only if the bank's
29 dealing with such entities does not violate federal and state financial
30 rules and regulations; and
31 (iii) state chartered and/or licensed financial institutions that
32 comply with paragraph (d) of this subdivision;
33 (d) Comply with the federal bank secrecy and anti-money laundering
34 acts, also known as the currency and foreign transactions reporting act,
35 and regulations and guidance relating to the cannabis industry issued by
36 the United States department of justice and federal regulatory bodies
37 including the financial crimes enforcement network or any successor
38 body. This includes, but is not limited to:
39 (i) establishing an effective anti-money laundering act compliance
40 program as prescribed by rule 3310 of the financial regulatory authori-
41 ty;
42 (ii) complying with customer due diligence obligations in a manner
43 prescribed by the financial crimes enforcement network;
44 (iii) reporting certain currency transaction reports to the financial
45 crimes enforcement network in a manner prescribed by its regulations;
46 and
47 (iv) filing quarterly suspicious activity reports with the financial
48 crimes enforcement network in a manner prescribed by its regulations;
49 (e) Comply with state regulations, including regulations from the
50 department of financial services, the office of the comptroller, the
51 office of cannabis management, and the authorities budget office; and
52 (f) Comply with all state laws, including the banking law, the public
53 authorities law, the cannabis law and the provisions of this chapter.
54 2. In achieving its objectives, the New York state bank shall adhere
55 to the following priorities:
56 (a) vigorous ethical, accountability and transparency standards;
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1 (b) institutional robustness;
2 (c) prudent financial and business practices;
3 (d) long-term solvency;
4 (e) sustained monetary returns on investments; and
5 (f) insulation from political influence.
6 § 255. Board. 1. The New York state banking authority board is
7 created as the primary governing authority of the bank. The board shall
8 consist of eleven members. The temporary president of the senate shall
9 appoint one member from each of the two largest caucuses of the senate.
10 The speaker of the assembly shall appoint one member from each of the
11 two largest caucuses of the assembly. The comptroller shall appoint
12 three members to the board with substantial managerial experience in
13 banking and finance operations. The trustees of the authority shall
14 jointly appoint four members with substantial community development
15 banking experience.
16 (a) The board members appointed by the temporary president of the
17 senate and the speaker of the assembly shall each serve initial terms of
18 two years.
19 (b) The board members appointed by the comptroller shall each serve
20 initial terms of three years.
21 (c) The board members appointed by the trustees of the authority shall
22 each serve initial terms of four years.
23 (d) After the initial terms of the board members have been completed,
24 all board members thereafter shall serve four year terms.
25 (e) Each board member shall hold their position until a successor has
26 been appointed. At the expiration of the term of each board member and
27 of each succeeding board member, a new board member shall be appointed
28 by the party which appointed the outgoing board member.
29 (f) In the event of a vacancy occurring on the board by death, resig-
30 nation or otherwise, a successor shall be appointed within forty-five
31 days for the remainder of the term by the party which appointed the
32 vacated board member.
33 2. Members of the board shall select the chair of the board from among
34 the members whom do not hold political office. The chair shall convene
35 the initial meeting of the board within sixty days after the effective
36 date of this section.
37 3. Members of the board shall be citizens of the United States and
38 residents of the state.
39 4. Members of the board that are appointed by the comptroller or the
40 trustees shall not hold elected office at the time of their appointment
41 to the board or have held elected office during the preceding three
42 years at the time of their appointment to the board.
43 5. The board shall develop and implement the following:
44 (a) A business plan for the bank that includes timelines for beginning
45 new functions and processes that transition functions and responsibil-
46 ities to the bank that were previously performed by other entities;
47 (b) Initial capitalization requirements of the bank using a portion of
48 the tax revenue from the sale of legal adult-use cannabis products,
49 pursuant to section two hundred fifty-six of this article;
50 (c) A plan to offer low or no cost access to checking accounts,
51 savings accounts and low-interest loans to low-income individuals;
52 (d) A plan to engage in community outreach and education necessary to
53 encourage low-income individuals to open accounts with the bank;
54 (e) A plan to explore and develop means of electronic banking that
55 comply with the requirements of paragraph (d) of subdivision one of
56 section two hundred fifty-four of this article;
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1 (f) A plan to commence bank operations by September first, two thou-
2 sand twenty-four; and
3 (g) Procedures that comply with all regulations and guidance issued by
4 federal and state regulatory bodies regarding the provision of financial
5 services to cannabis-related businesses, pursuant to paragraph (d) of
6 subdivision one of section two hundred fifty-four of this article.
7 6. The board shall make requests to the appropriate committees of the
8 legislature regarding any other items necessary to fulfill its require-
9 ments pursuant to section two hundred fifty-four of this article. Any
10 request shall include draft legislation for consideration by the legis-
11 lature.
12 7. Pursuant to subdivision two of section two hundred fifty-four of
13 this article, the board shall adopt rules regarding:
14 (a) Safety and soundness standards of the bank;
15 (b) Criteria for approving, monitoring and evaluating loans;
16 (c) Eligibility requirements for borrowing;
17 (d) Eligibility requirements for individuals who apply for checking
18 and savings accounts;
19 (e) Transparency requirements for bank operations including a plan to
20 issue quarterly reports to the comptroller and superintendent beginning
21 after September first, two thousand twenty-four;
22 (f) Ethics and conflict of interest requirements for the board and
23 officers and employees of the bank, including rules to ensure that they
24 perform their functions in compliance with the public officers law; and
25 (g) Other rules and procedures as needed for efficient administration
26 of the bank.
27 8. The board shall commence bank operations by September first, two
28 thousand twenty-four.
29 9. The board shall appoint a bank president with substantial experi-
30 ence in banking. The bank president shall serve at the pleasure of the
31 board, on such terms and conditions as the board determines.
32 (a) The bank president shall provide support to the board, carry out
33 bank policies and programs, and exercise additional authority as may be
34 delegated by the board.
35 (b) The bank president shall serve a term of five years.
36 (c) The bank president shall hold office until a successor has been
37 appointed and qualified by the board. At the expiration of the term of
38 each bank president and of each succeeding bank president, a new bank
39 president shall be appointed by the board.
40 (d) In the event of a vacancy occurring in the office of the bank
41 president by death, resignation or otherwise, a successor shall be
42 appointed within forty-five days for the remainder of the term by the
43 board.
44 (e) Subject to available funding and consistent with the rules adopted
45 by the board, the bank president may:
46 (i) employ such additional personnel as are necessary to the oper-
47 ations of the bank. Such employment shall be in accordance with the
48 civil service law; and
49 (ii) establish advisory committees and contract with public and
50 private sector experts who have special technical expertise if the
51 expertise is necessary to fulfill the requirements of this section and
52 section two hundred fifty-four of this article.
53 (f) The bank president shall, at their discretion, have the authority
54 to hire and terminate the employment of bank employees.
55 10. The board shall set policy for the bank; provided that neither the
56 board nor any board member shall be involved in day to day decisions
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1 regarding the functioning of the bank. Management decisions shall be
2 made independently by the bank president. The bank president may dele-
3 gate at their discretion management decisions to bank managers and other
4 employees.
5 11. Board members shall serve without salary or other compensation,
6 but they shall be entitled to reimbursement for the expenses incurred in
7 discharge of their duties under this article.
8 12. The trustees of the authority, pursuant to a unanimous vote which
9 all trustees are present for, may remove any board member or the bank
10 president for neglect or violation of the provisions of section two
11 hundred fifty-four of this article, or general misconduct in office as
12 defined by the trustees, after giving such member a copy of the charges
13 against them, and an opportunity to be heard, in person or by counsel,
14 in their defense, upon not less than ten days' notice. If any such
15 member shall be removed, the trustees shall file in the office of the
16 department of state a complete statement of charges made against such
17 member, and their findings thereon, together with a complete record of
18 the proceedings.
19 13. The bank president and the board members shall be exempt from the
20 provisions of title seven of article fifteen of the banking law.
21 14. Six members of the board shall constitute a quorum for the trans-
22 action of any business or the exercise of any power or function of the
23 authority.
24 § 256. Capitalization. The bank shall be capitalized with a portion of
25 the tax revenue derived from the sale of legal adult-use cannabis
26 products, pursuant to section ninety-nine-ii of this chapter, and with
27 deposits from low-income individuals whom open a savings and/or checking
28 account with the bank.
29 § 257. Deposit of funds. 1. (a) The bank shall serve as the depository
30 for the portion of the state tax revenue from the sale of legal adult-
31 use cannabis products that is necessary for the initial capitalization
32 of the bank. In addition, the bank shall serve as the depository for
33 deposits from cannabis-related businesses and low-income individuals
34 whom open a savings and/or checking account with the bank.
35 (b) The comptroller shall deposit into the bank the tax revenue from
36 the sale of legal adult-use cannabis products that is required for the
37 initial capitalization of the bank.
38 2. All deposits in the bank are guaranteed by the state of New York
39 and shall not be insured through the federal deposit insurance corpo-
40 ration.
41 3. All income earned by the bank on tax revenue from the sale of legal
42 adult-use cannabis products and other deposits that are deposited in or
43 invested with the bank shall be credited to and become a part of the
44 revenues and income of the bank.
45 § 258. Investment requirements and regulations. 1. Before initiating
46 operations, the bank president shall present an implementation plan and
47 any necessary items to the board, that:
48 (a) identifies the cannabis-related businesses that the bank plans to
49 target initially;
50 (b) identifies any existing state programs that the bank recommends be
51 transferred under its umbrella, and the steps and timelines for the
52 transitions;
53 (c) describes additional financing products and services the bank
54 plans to offer, the target markets, anticipated rates, terms and condi-
55 tions; and
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1 (d) demonstrates how the bank plans to maximize revenues while accom-
2 plishing its requirements pursuant to section two hundred fifty-five of
3 this article.
4 2. Wherever there is in any fund or in cash balances in the bank more
5 than sufficient to meet the current expenditures properly payable there-
6 from, the bank president is authorized to:
7 (a) Provide low-interest capital for the financing of, construction,
8 rehabilitation, and improvement of new and existing operations of eligi-
9 ble cannabis-related businesses. Before providing low-interest capital
10 to a cannabis-related business, the bank shall engage in rigorous
11 customer due diligence to evaluate the risks associated with offering
12 particular financial products and services and whether the bank has
13 sufficient capacity to manage such risks effectively.
14 (b) Provide low-income individuals access to low-interest loans pursu-
15 ant to paragraph (c) of subdivision five of section two hundred fifty-
16 five of this article; and
17 (c) Offer low or zero cost checking and savings bank accounts to low-
18 income individuals pursuant to paragraph (d) of subdivision five of
19 section two hundred fifty-five of this article.
20 3. When investing available funds, the bank president is prohibited
21 from:
22 (a) Buying, selling and/or accepting deposits of federal funds; issu-
23 ing letters of credit for public deposits; or providing a safekeeping
24 service for the United States treasury securities, federal agency secu-
25 rities, corporate bonds, tax-free bonds, money market investments, or
26 mortgage backed securities.
27 (b) Investing in certificates, notes, or bonds of the United States,
28 or other obligations of the United States or its agencies or of any
29 corporation wholly owned by the government of the United States.
30 § 259. Financial regulation. 1. The bank shall maintain capital
31 adequacy and other standard indicators of safety and soundness as
32 mandated by the board and the superintendent.
33 2. The superintendent shall examine the bank in the same manner as a
34 state-chartered banking institution. The bank shall pay the superinten-
35 dent for reasonable costs of examinations.
36 3. The bank shall undergo independent audits on the same basis as
37 state-charted banks.
38 § 260. Reporting requirements. 1. The bank president shall submit
39 quarterly reports to the board, comptroller and superintendent in a
40 manner and form prescribed by the board. Late reports shall be cause
41 for removal of the president of the bank.
42 2. The board, in conjunction with the bank president, shall make and
43 submit a report to the legislature on the affairs of the bank by Decem-
44 ber first of each year. Such report shall be made available for public
45 viewing and analysis on the website of the office of the comptroller.
46 The report shall be posted in a conspicuous place on the website and
47 shall be easy to access and shall be downloadable in several different
48 formats.
49 § 261. Ethical requirements. The bank shall not make a loan to any
50 board member, bank president, public officer or employee of the bank.
51 The bank president and employees of the bank shall follow any applicable
52 ethical requirements in rules, policies and procedures adopted by the
53 board.
54 § 262. Fees and taxes. The bank is exempt from the payment of all
55 fees and taxes levied by the state or any of its subdivisions.
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1 § 263. Bank records. 1. Certain bank business records and records of
2 the department relating to the bank are exempt from public disclosure
3 pursuant to article six of the public officers law as authorized by the
4 department.
5 2. Financial and commercial information and records submitted to
6 either the department or the board for the purpose of administering this
7 article may be shared between the department and the comptroller. Such
8 records may also be used in any suit or administrative hearing involving
9 any provision of this chapter.
10 3. The provisions of this section shall not prohibit:
11 (a) The issuance of general statements based on the reports of persons
12 subject to this article if the statements do not identify the informa-
13 tion furnished by any person; or
14 (b) The publication by the superintendent or the board of the name of
15 any person violating this article and a statement of the manner of the
16 violation of such person.
17 § 264. Termination of operations. Upon the determination by the board
18 that the private banking industry can adequately service the financial
19 needs of cannabis-related businesses and communities underserved by
20 banking institutions, it shall develop and execute a plan for the
21 dissolution of the New York state bank and the New York state banking
22 authority. In the event of the dissolution of these entities, the board
23 shall transfer all outstanding assets and liabilities of the bank to the
24 comptroller.
25 § 265. Severability. If any clause, sentence, paragraph, subdivision,
26 section or part of this article shall be adjudged by a court of compe-
27 tent jurisdiction to be invalid, such judgment shall not affect, impair
28 or invalidate the remainder thereof, but shall be confined in its opera-
29 tion to the clause, sentence, paragraph, subdivision, section or part of
30 this article directly involved in the controversy in which such judgment
31 shall have been rendered.
32 § 3. Paragraph (c) of subdivision 3 of section 99-ii of the state
33 finance law, as added by chapter 92 of the laws of 2021, is amended to
34 read as follows:
35 (c) Actual and necessary costs incurred by the office of cannabis
36 management [and], the cannabis control board, [and the urban development
37 corporation,] the New York state banking authority, and the New York
38 state bank related to the administration of incubators and other finan-
39 cial assistance to qualified [social and economic equity] applicants
40 including the administration, capitalization, and provision of low [and
41 zero] interest loans to such applicants pursuant to section [sixteen-ee
42 of the urban development corporation act] two hundred fifty-six of this
43 chapter. Such costs shall be paid out of revenues received, including,
44 but not limited to, from special one-time fees paid by registered organ-
45 izations pursuant to section sixty-three of the cannabis law.
46 § 4. Section 16-ee of section 1 of chapter 174 of the laws of 1968,
47 constituting the New York state urban development corporation act, is
48 REPEALED.
49 § 5. This act shall take effect immediately and shall expire and be
50 deemed repealed upon the dissolution of the New York state bank and the
51 New York state banking authority pursuant to section 264 of the state
52 finance law as added by section two of this act; provided that the state
53 comptroller shall notify the legislative bill drafting commission upon
54 the occurrence of such dissolution in order that the commission may
55 maintain an accurate and timely effective data base of the official text
56 of the laws of the state of New York in furtherance of effectuating the
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1 provisions of section 44 of the legislative law and section 70-b of the
2 public officers law. Effective immediately, the addition, amendment
3 and/or repeal of any rule or regulation necessary for the implementation
4 of this act on its effective date are authorized to be made and
5 completed on or before such effective date.
