Title 10--BANKS AND BANKING DEPARTMENT OF BANKING [10 PA. CODE CH. 13] Limited Purpose Banking Offices--Statement of Policy [26 Pa.B. 5989] The Department of Banking (Department) adopts §§ 16.61--13.68 (relating to exception to definition of ''branch''--statement of policy). This statement of policy is published under sections 102 and 103 of the Banking Code of 1965 (act) (7 P. S. §§ 102 and 103) which was amended by the act of July 6, 1995 (P. L. 271, No. 39) (Act 39) and sections 201 and 202 of the Department of Banking Code (71 P. S. §§ 733-201 and 733-202).
Purpose of the Statement of Policy
Act 39 permits full interstate branching in this Commonwealth on a reciprocal basis. Consistent with creating a modern and responsive interstate branching environment in this Commonwealth, Act 39 also amended the definition of a ''branch'' office of a banking institution by removing several types of offices from the definition including: ''automated teller machines,'' ''loan production offices'' and ''any other office the Department may determine by rule or regulation does not constitute a branch.'' See section 102(h) of the act.
The Department has received numerous inquiries, from Pennsylvania State-chartered banking institutions and institutions chartered under the laws of other states, regarding whether offices of banking institutions which perform limited activities on behalf of those banking institutions are excepted from the definition of a ''branch'' under section 102(h)(vi) of the act. The Department has determined that the recognition of a ''limited purpose banking office,'' as an exception to the term ''branch'' under Commonwealth banking laws, is consistent with the purposes in section 103 of the act.
The Department has developed this statement of policy to provide guidance regarding: 1) the establishment of limited purpose banking offices located in this Commonwealth by banking institutions, as defined in § 13.61 (relating to definitions); and 2) the establishment of limited purpose banking offices located in other states by Pennsylvania State-chartered banking institutions.
The Department reserves the right to amend this statement of policy as needed.
Effective Date
The provisions of this statement of policy become effective immediately upon publication in the Pennsylvania Bulletin.
(Editor's Note: The regulations of the Department, 10 Pa.Code Chapter 13, are amended by adding a statement of policy at §§ 13.61--13.68 to read as set forth in Annex A.)
RICHARD C. RISHEL,
SecretaryFiscal Note: 3-34. No fiscal impact; (8) recommends adoption.
Annex A TITLE 10. BANKS AND BANKING PART II. BUREAU OF BANKS CHAPTER 13. LOANS EXCEPTION TO DEFINITION OF ''BRANCH''--STATEMENT OF POLICY Sec.
13.61. Definitions. 13.62. Application. 13.63. Permissible activities. 13.64. Impermissible activities. 13.65. Information required. 13.66. Designation as a limited purpose banking office. 13.67. Authority of the Department. 13.68. Application of other Pennsylvania laws. § 13.61. Definitions.
The following words and terms, when used in this section and §§ 13.62--13.68, have the following meanings, unless the context clearly indicates otherwise:
Banking institution--
(i) A bank, bank and trust company, trust company and savings bank, chartered under the laws of the Commonwealth.
(ii) A National bank
(iii) A bank, bank and trust company, trust company and savings bank which is not regulated by the Office of Thrift Supervision, chartered under the laws of another state or territory of the United States.
Pennsylvania banking institution--A banking institution chartered under the laws of the Commonwealth.
Non-Pennsylvania banking institution--A banking institution chartered under the laws of the United States, Puerto Rico or a state or territory of the United States other than the Commonwealth.
Limited purpose banking office--An office of a banking institution which performs limited activities, such as those in § 13.63 (relating to permissible activities), on behalf of the banking institution but which does not:
(i) Accept or pay out deposits.
(ii) Make loans.
(iii) Pay checks.
(iv) Accept or administer any type of accounts, including trust or other fiduciary accounts.
§ 13.62. Application.
Sections 13.61, 13.63--13.68 and this section address limited purpose banking offices located in this Commonwealth which are established by Commonwealth and non-Pennsylvania banking institutions, as defined in § 13.61 (relating to definitions). In addition, these sections address Pennsylvania banking institutions locating limited purpose banking offices in other states. The establishment and maintenance of a limited purpose banking office located in this Commonwealth by a non-Pennsylvania banking institution and the establishment in another state of a limited purpose banking office by a Pennsylvania banking institution may not be in violation of, or otherwise contrary to, the laws of the other relevant state.
§ 13.63. Permissible activities.
(a) The following activities may be conducted at a limited purpose banking office of a banking institution, if, in instances where another state is involved, the performance of the activities at the limited purpose banking office does not violate, and is not otherwise contrary to, the laws of the other relevant state:
(1) Loan production office activities, including:
(i) Soliciting loans, and, in connection therewith, assembling credit information.
(ii) Making property inspections and appraisals.
(iii) Securing title information.
(iv) Preparing applications for loans, including making recommendations with respect to action thereon.
(v) Soliciting investors to purchase loans from the banking institution.
(vi) Seeking to have the investors contract with the banking institution for the servicing of the loans.
(vii) Engaging in other similar agent-type activities.
(2) Representative office activities, including: representational functions, such as soliciting banking and trust business, marketing services or acting as a liaison with customers on behalf of the banking institution:
(i) A banking institution may only solicit fiduciary business or other types of trust business at the limited purpose banking office if the banking institution is authorized to engage in fiduciary and trust activities under its laws of incorporation.
(ii) A banking institution which is chartered by or is headquartered in a state other than this Commonwealth may not act as a fiduciary or establish an office to conduct a fiduciary business in this Commonwealth, beyond the activities permitted in §§ 13.61, 13.62, 13.64--13.68 and this section, in contradiction of section 106(b) of the act (7 P. S. § 106(b)).
(3) Clerical, back office type of activities of the banking institution.
(4) Administrative activities related to the premises or personnel of the limited purpose banking office.
(5) Other similar activities, subject to the Department written nonobjection.
(b) The activities in subsection (a)(1) represent those activities wich may be conducted by a loan production office, under section 102 (h)(v) of the act (7 P. S. § 102(h)(v)), and are consistent with the regulations of the Federal Reserve Board in 12 CFR 250.141 (h) (relating to member bank purchase of stock of ''operations subsidiaries'').
§ 13.64. Impermissible activities.
A limited purpose banking office of a banking institution may not:
(1) Make final business decisions, other than decisions relating to the premises or personnel of the limited purpose banking office, for the account of the banking institution it represents, including contracting for or accepting any deposit or deposit-like liabilities on behalf of the banking institution.
(2) Disburse loan funds, transmit funds, post loan repayments or be responsible for making the final decisions to approve loans.
(3) With respect to a banking institution which possesses fiduciary powers under its laws of incorporation, a limited purpose banking office of such a banking institution may not do any of the following: make final decisions regarding fiduciary account applications such as accepting fiduciary or other trust accounts, accept deposits for fiduciary or other trust accounts or administer fiduciary accounts. In addition, a non-Pennsylvania banking institution shall continue to satisfy the reciprocity and other requirements imposed by the Department under section 106(b) of the act (7 P. S. § 106(b)) to act as a fiduciary in this Commonwealth.
§ 13.65. Information required.
(a) A banking institution seeking to establish and maintain a limited purpose banking office under §§ 13.61--13.64, 13.66--13.68 and this section shall submit a prior notice to the Department's Manager of Corporate Applications in letter form. The Department may object to the establishment and maintenance of a limited purpose banking office within 20 business days of receiving the notice. If the Department objects to the notice, the banking institution may not establish or maintain the limited purpose banking office until the Department approves the action. The following information shall be included in the notice required under this section:
(1) The name and address of the principal office of the banking institution.
(2) The exact address and telephone number of the limited purpose banking office to be established.
(3) The name of the banking institution's officer responsible for the activities of the limited purpose banking office.
(4) A complete description of the activities to be performed at the proposed limited purpose banking office.
(5) With respect to a non-Pennsylvania banking institution seeking to establish a limited purpose banking office in this Commonwealth or a Pennsylvania banking institution seeking to establish a limited purpose banking office in another state, a legal opinion providing that the establishment and maintenance of the proposed limited purpose banking office does not violate, and is not otherwise contrary to, the laws of the other relevant state, including reference to the applicable statutory or regulatory authority, or both, of the other state.
(6) A statement providing that the banking institution has obtained the regulatory approvals required to establish and maintain the proposed limited purpose banking office.
(7) Other information which is deemed necessary by the Department.
(b) Changes in the information submitted to the Department shall be promptly reported to the Department.
§ 13.66. Designation as a limited purpose banking office.
Office signs, stationery, telephone listings or print advertisements related to a limited purpose banking office established under §§ 13.61--13.65, 13.67, 13.68 and this section shall clearly indicate that the office is a representative type of office and is not a branch of the banking institution.
§ 13.67. Authority of the Department.
(a) When deemed necessary by the Department, a limited purpose banking office established and maintained under §§ 13.61--13.66, 13.68 and this section shall be subject to supervision, regulation, examination and orders issued by the Department. The Department has determined not to assess a fee associated with the establishment or maintenance of a limited purpose banking office. The Department reserves the right to assess a fee associated with the establishment, examination, supervision or regulation of a limited purpose banking office established under §§ 13.61--13.66, 13.68 and this section when deemed appropriate by the Department.
(b) Failure of a banking institution to comply with §§ 13.61--13.66, 13.68 and this section may cause the limited purpose banking office to be viewed by the Department as a branch, causing the office to be subject to the requirements related to bank branch offices contained in the act. Accordingly, the Department may take any enforcement action it deems appropriate under these circumstances.
§ 13.68. Application of other Pennsylvania laws.
A non-Pennsylvania banking institution may be required to register with the Department of State to do business in this Commonwealth under 15 Pa.C.S. Chapter 41 (relating to foreign business corporations). The Department recommends that a non-Pennsylvania banking institution seeking to establish a limited purpose banking office in this Commonwealth contact the Department of State to determine whether the banking institution must register with that agency to do business in this Commonwealth.
[Pa.B. Doc. No. 96-2095. Filed for public inspection December 13, 1996, 9:00 a.m.]
