36 (c) national banks can establish A national banking association may, if such establishment and op- Of course, in order to secure the IBAA v. Smith, 534 F2d 921, 948-949 2. You mentioned in your testimony that in your state, Delaware, you have a lenient attitude toward ATMs of national banks, but that you require national banks to file reports What is Delaware's with the state on their ATM activities. legal authority under the McFadden Act for requiring such reports from national banks? Response: My testimony on this point was that "We do require national banks to submit certain reports. We require them to have the same record retention schedule that state banks do. When we went to the ATM part, we dealt only with the state chartered banks." With regard to national banks, we require only the filing of their quarterly call report and what current time and savings deposit plans they have. Generally, the bases for state statutes regarding electronic facilities include the right of states to regulate commerce within its borders, the general reservation of "powers and jurisdiction" to states over banks, bank holding companies and subsidiaries thereof found in Section 7 of the Bank Holding Company Act, the general police power of the states and state authority under the McFadden Act. As to the authority of the states under the McFadden Act, the Supreme Court has held that "a 'branch' may be established [by a national bank] only when, where, and how state law would authorize a state bank to establish and operate such a branch." The Supreme Court has further said that the McFadden Act "has incorporated by reference the limitations which state law places on branch banking activities by state banks." This is so because "Congress had deliberately settled upon a policy intended to foster 'competitive equality'" between national and state banks. (First National Bank in Plant City v. Dickinson, 396 U.S. 122, 130-31 (1969)) These holdings relevant to bank branching are equally relevant to the establishment and operation of ATMs, where such state ATM laws constitute an exception to state branching laws, as set forth in my response to your first question, referencing the case of IBAA v. Smith. Where an exception to state branching law is made conditional, any institution, state or federal, must meet those conditions in order to qualify for the exception. 3. If national banks were subject to state jurisdiction with respect to "ownership, operation and permissible functions" of ATMs, as in your proposed amendments to S. 2898, what would be the additional regulatory and reporting burden to national banks, on a state by state basis? To what extent would this generate redundant reporting and application procedures with respect to ATMS shared by several national banks? Response: National banks are now subject to state jurisdiction in the above-mentioned areas by virtue of their need to qualify for the state exceptions to the McFadden Act as discussed above. National banks, as state banks, must meet conditions precedent in order to qualify for such exceptions. As I testified, to the best of my knowledge, national banks now do comply with state law in these areas. It appears that such compliance is probably based on the legal advice of their counsel, relying on the court decisions in IBAA v. Smith and Plant City, discussed above. Therefore, my response must be that no additional regulatory or reporting burden would be placed on national banks by CSBS language which simply affirms the existing provisions of the McFadden Act. CSBS policy is clear on the following two relevant points: 1. States should encourage the establishment and 2. operation of such EFT systems subject to reasonable requirements as the state may choose, including the nature and geographic scope of transactions to be offered. States should supervise and examine state- Little redundancy could be expected, save to the extent the availability of certain information is necessary for state officials to protect valid state and public interest in the establishment and operation or use of ATMs. To the extent that such redundancy is necessary, it would parallel only to some small degree the redundancy in examination, supervision and reporting to which state-chartered banks are now subjected in order to satisfy federal interest in the banking system. The most significant feature of duplication and redundancy in bank supervision is the double track that each statechartered institution must follow in regulation and examination, as well as in control of market entry and expansion. Almost step for step, a state-chartered bank has to follow a similar and largely redundant track with either the FDIC or the FRS. In contrast, national banks are regulated by only a single entity, the Comptroller of the Currency. Although all national banks are insured by the FDIC and all are required by law to be members of the FRS, neither the FDIC nor the FRS routinely is involved in the supervision and regulation of national banks. The FRS and FDIC basically accept the recommendations, opinions and examination findings of the Comptroller in meeting their responsibilities. States generally believe that the FRS and FDIC should accord them the same recognition as the Comptroller in carrying out their functions. This would mean a stepping back by these specialized federal agencies from their involvement in examination, regulation and the approval process of applications for state-chartered banks and some increase in their regulatory presence with national banks. Respectfully submitted, Jahm Malarkey John E. Malarkey Vice President and Chairman JEM: drj Thank you very much for testifying on S.2898 on Wednesday, I believe Senator Gorton mentioned the possibility that there would be additional written questions submitted to you. The questions are attached. Because of the time deadlines involved, I would appreciate your written responses by Monday, October 1, 1984. Once again, thank you for taking the time to appear on this important legislative matter. 1. In your testimony, you stated several times that IBANYS v. Marine Midland involves only an intrastate issue. Since the court clearly concluded that the Marine Midland ATM was a "branch" of Marine Midland, why does this not indicate that banks participating in interstate ATM networks have violated the McFadden Act, in your opinion? |