Magazine article American Banker

Jersey Firm Seeks New York Charter; Horizon Bancorp's Request Is Second Out-of-State Application Received

Magazine article American Banker

Jersey Firm Seeks New York Charter; Horizon Bancorp's Request Is Second Out-of-State Application Received

Article excerpt

NEW YORK -- The New York State Banking Department has received its second application from an out-of-state bank holding company to establish a state-chartered consumer bank -- an institution that offers all banking services except commercial loans.

The request was filed by Horizon Bancorp of Morristown, N.J., which says New York City is "underbanked."

The application also is subject to the approval of the Federal Reserve, which regulates the activities of bank holding companies.

Another New Jersey bank holding company, First National State Bancorp. of Newark, earlier filed and received New York State approval to form a consumer bank in Manhattan.

News of the Horizon application came as Congress was preparing to adjourn without having acted on legislation that would close the loophole in the Bank Holding Company Act that enabled Horizon to file the New York application.

The rush to establish consumer banks began in March, when the Federal Reserve Board allowed U.S. Trust Corp. of New York to convert its Florida trust subsidiary into an institution that accepts consumer deposits and make commercial loans.

In that ruling, the Fed accepted U.S. Trust's argument that by not offering commercial loans, the Florida unit was not a bank for the purposes of the Bank Holding Company Act. That statute defines banks as institutions that both accept demand deposits and make commercial loans.

That meant that the U.S. Trust subsidiary was not subject to the Bank Holding Company Act's Douglas Amendment, which restricts the interstate banking activities of bank holding companies. …

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