Banking Development District

Banking Commission Overview

The Comptroller is a member of the Banking Commission, along with the Mayor and Commissioner of Finance. The Banking Commission oversees the Banking Development District Program, (BDD).

Banking Development District Overview
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Neighborhood banks can encourage and help to sustain economic development in the communities that they serve. Unfortunately, there are communities in our City that either do not have a local bank or do not have a local bank branch with a sufficient deposit base to further the area’s economic development activity. As members of the New York City Banking Commission, the Mayor, the Comptroller and the Commissioner of Finance have established a Banking Development District program to authorize the deposit of City funds in bank branches located in Banking Development Districts. A BDD is an area that the New York State Banking Department has designated as under-banked. As with all City deposits, deposits at BDD branches will be fully collateralized to ensure their safety. The BDD program will permit the City to leverage its funds in a responsible manner to promote community development and the availability of community banking services.

BDD Statutory Requirements :

New York State Law Governing BDD

• New York State Banking Law 96-d creates a Banking Development District Program for the purposes establishing bank branches in geographic locations where there is a demonstrated need for banking services.
• Section 96-d, and related amendments to State General Municipal Law 10, authorize municipalities to deposit funds at below-market rates into bank branches located in a BDD, including branches of state or federally regulated saving banks and savings and loan institutions.

New York City Charter/Rule

The members of the Banking Commission are the Mayor, the City Comptroller, and the Commissioner of Finance, or their designees. Section 1524 of the New York City Charter authorizes the New York City Banking Commission to designate banks for the deposit of City funds. The rules relating to Designation of Depository Banks by the Banking Commission provide criteria for such designation.

The Banking Commission recently amended its designation rules to authorize the Banking Commission to designate such branches as depositories for City funds, provided that the branch was opened after establishment of the Banking Development District; or was the applicant to the New York State Banking Department for designation of the district and was opened on or after January 1, 1997.

Designation and Depository Process for BDD

Designation and Depository Overview

A bank or thrift institution, together with a local government entity, applies to the New York State Banking Department to have a specific geographical under-banked area designated a Banking Development District.

Simultaneously, the bank or thrift institution may submit an application to the appropriate regulator to open a new branch in the BDD (the branch application process insures that the bank overall meets regulatory banking standards such as capital, asset base, management, earnings and liquidity requirements).

New York City Depository Process for BDD

• The bank submits to the Banking Commission a copy of the approved BDD application or information to establish that a bank has opened a branch in a BDD.
• With the necessary supporting documentation, the bank branch applies to the Banking Commission to become recipient of City deposits.
• The Banking Commission verifies the documentation and determines whether a deposit is granted to the bank branch based on said criteria.
• The Comptroller’s Office and DOF receive the request for deposits from the Banking Commission.
• The bank places collateral with the Comptroller’s Office and DOF custodial bank.
• The Comptroller’s Office and DOF wire deposits to the bank.

The designation and depository 9-step process in more detail:

1. Bank submits branch application to regulator.
2. Bank branch application approved.
3. Bank/local government entity submits application for BDD to the Banking Department.
4. BDD approved.
5. If either the bank branch or the BDD application is denied, the process will not be able to proceed.
6. If approved, Banking Commission determines deposit amount.
7. Banking Commission forwards to Comptroller’s Office/Department of Finance for authorization of deposits.
8. Bank places collateral with custodial bank.
9. Comptroller and Department of Finance office wire deposit to bank.

* New York State Banking Department, Office of the Comptroller of the Currency or the Office of Thrift Supervision

Deposit and Collateral Policies and Procedures

Policies and Procedures Overview

Banking Development Districts Deposit and Investment Guidelines

I. The Below Market Rate Program:

The maximum deposit of City funds for any BDD branch is $10 million, subject to available funds and depending on the capital needs of the branch. The maximum initial term will be two years (with optional one-year renewals; the renewal to be determined by the Banking Commission) with the interest rate set at 50 basis points below market rate with a floor of 50 basis points. The market rate will be determined by using the three, six, nine or twelve-month certificate of deposit rate as determined by using BANZQUOTE five-day average for New York jumbo CDs (available on Bloomberg—BQN ).

The bank will be required to pledge collateral with the Comptroller’s and DOF fiscal agent in accordance with GML 10. The bank will submit a report on at least an annual basis to the Comptroller’s Office and the Department of Finance office that details the activity at the BDD branch.

II. The Market Rate Program:

The maximum initial deposit amount for any bank will be based on available funds. The maximum term will be five years, subject to annual renewal based on availability of funds. The interest rate will be set in rolling three, six, nine or twelve-month periods, based upon a market rate for other investment opportunities available to the Comptroller’s Office and the DOF. The bank will be required to pledge collateral with the Comptroller’s Office and DOF fiscal agent in accordance with GML 10 and the investment guidelines of the New York City Comptroller and the Department of Finance.

The bank will submit a report on at least an annual basis to the Comptroller’s Office and the Department of Finance that details the activity at the BDD branch.