New York's state legislature passed a bill Monday to give regulators authority to keep state bank powers on par with national banks'.
The bill passed on the last day of 1997 session. Its chances had appeared slim in the Legislature's waning hours because several lawmakers opposed giving such broad authority to a state agency. As a compromise, they agreed to put a one-year "sunset" on the bill.
Any new powers granted during the next year would remain intact, however, even if the Legislature failed to reenact the measure.
The "wild card" law allows the banking superintendent to authorize for state banks any activity allowed to national banks. Boosting the state charter is particularly important in New York, where eight of the state's 10 largest banks hold a state charter, including Chase Manhattan Bank and Morgan Guaranty Trust Co.
"It's good news," said Michael P. Smith, president of the New York Bankers Association. "The state has taken a significant step forward in making sure state-chartered banks have parity."
New York's banking superintendent, Elizabeth McCaul, argued that state banks would switch to national charters to gain powers approved by the Office of the Comptroller of the Currency.
"We would have preferred that legislation be made permanent," Mr. Smith said. "But we have every reason to believe that it will be next year."
An agreement between bank and insurance industry groups in June helped make passage of the bill possible. Under that deal, bank insurance sales would be regulated by the state insurance department. However, banking regulators would be allowed to exempt state banks and trust companies from any insurance law that has been preempted for national banks.
Also, banks must disclose that insurance is not federally guaranteed. Banks also must tell borrowers that they may purchase insurance from another vendor.
Finally, separate documents must be used for credit and insurance transactions.
"We're very pleased," said Michael Barrett, lobbyist for the Independent Insurance Agents of New York. "These provisions really addressed our concerns."