On October 11, the New York Bankers Association filed a complaint in the U.S. District Court for the Southern District of New York to block a local ordinance that requires banks doing business with the city to report certain information about their banking and lending activities. In May 2012, the New York City Council approved, over the Mayor’s veto, an ordinance that establishes a Community Investment Advisory Board (CIAB) with authority to collect certain information from deposit banks. The information the CIAB is directed to collect relates to each deposit bank’s efforts to, among other things, (i) meet small business credit needs, (ii) conduct consumer outreach and other steps to provide mortgage assistance and foreclosure prevention, and (iii) offer financial products for low and moderate-income individuals throughout the city. The ordinance also directs the CIAB to (i) perform an assessment on whether such deposit banks are meeting the credit, financial, and banking services needs throughout the city, and (ii) publish the assessment and the information collected from each deposit bank. The results of these evaluations may be considered to determine whether a deposit bank is eligible to receive some of the city’s more than $6 billion worth of deposits.
The New York Bankers Association argues that in allowing the CIAB to collect information to assess the banking needs of certain residents and businesses, the ordinance grants the CIAB regulatory powers that are not relevant to the quality and pricing of the services that banks provide to the city. The Association argues that the ordinance converts the city from a market participant to an examiner and regulator of banks. As such, the ordinance conflicts with and is preempted by federal and state laws that exclusively regulate federal and state chartered depository institutions. The complaint asks the court to declare the ordinance invalid and preempted by state and federal law, and to enjoin the city from implementing the ordinance.