A federal judge has overturned a New York City law that would have required banks to make new disclosures regarding their investments in local communities.

The 2012 law was designed to pressure banks by asking them to provide a raft of data that went beyond what federal regulators collect under the Community Reinvestment Act. The information sought by New York City related to banks' small-business lending, their efforts to prevent foreclosures, their lending for affordable housing, and their branches in low-income communities.

The law applied to a list of 21 banks — including Bank of America, Citibank, JPMorgan Chase, and other large institutions — that are eligible to hold the Big Apple's municipal deposits. The city's Banking Commission was authorized to consider the new information when deciding where to park the New York's sizable base of deposits, which gave the banks an incentive to invest more in the city's neighborhoods.

Ex-New York Mayor Michael Bloomberg's administration concluded that the law was an overreach, since bank regulation is the exclusive purview of the state and federal governments, and declined to implement it.

But current Mayor Bill de Blasio's administration took steps this year to start collecting data from banks. That led to a legal challenge by the New York Bankers Association.

The 71-page decision by U.S. District Judge Katherine Polk Failla delved deep into the City Council's deliberations over the so-called Responsible Banking Act. She concluded that the local law was an impermissible attempt to regulate banks, writing that the law's structure "secures compliance through public shaming of banks."

"The legislators who sponsored and who spoke in support of this bill did so with one voice: federal and state laws were seen as ineffectual in terms of both the collection of information and the influence over bank conduct regarding community reinvestment in New York City," the judge wrote.

She found that the local regulatory regime "conflicts with federal regulations and the federal [Community Reinvestment Act], which provide national banks with more circumscribed directives."

The decision could establish an important precedent for other U.S. cities. Philadelphia, Cleveland, Los Angeles, Pittsburgh, Kansas City, San Diego, Seattle and Boston are among the cities with similar laws.

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