Branch Closings Requirements and Nuances As I am sure we are all aware, regardless of a bank’s regulator or state jurisdiction, there are certain notice requirements that apply when a bank will be closing a branch under Section 42 of the Federal Deposit Insurance Act (Section 42). To be exact, for any closure that would be subject to Section 42, the bank must provide 90 days prior written notice of any branch closing to its primary Federal regulator, as well as to all branch customers, to meet the applicable notice requirements. Further, the bank must also ensure that a notice is physically posted at the branch site at least 30 days prior to the intended date of closure to be in compliance with Section 42. However, while this may seem straightforward, with the ever-evolving landscape of the banking industry and the different types of exemptions under Section 42, figuring out when notice is required is not always expressly clear. As such, it is critical that banks understand the nuances of the notice requirements, as discussed within the Joint Policy Statement of the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, Concerning Branch Closing Notices and Policies (Joint Policy Statement) to ensure that they are meeting the applicable notice requirements. First, it is important to discern what exactly is considered a “branch” under the guidelines to trigger the notice requirements. Specifically, for the purposes of the branch closing rules, a “branch” is considered to be a “traditional brick-and-mortar branch, or any similar banking facility other than a main office, at which deposits are received or checks paid or money lent,” and notice is required whenever any facility meeting this definition is intended to be closed. However, the Joint Policy Statement clarifies that when closing other facilities that do not meet the requirements to be considered a “branch,” such as “an ATM, remote service facility, or loan production office, or of a temporary branch,” which are, instead, classified as “non-branch facilities” under the rules, notice is not explicitly required under Section 42. Further, it is important to note that even if the facility would be considered a “branch,” not all closures will require notice. For example, the Joint Policy Statement suggests that certain branch relocations and consolidations would not be considered a “closure” under Section 42. To be considered a “relocation” or “consolidation,” the guidance seems to indicate that the change must be one which is within the branch’s “neighborhood and does not substantially affect the nature of the business or customers BY ERIN BUSSE, JD Associate General Counsel, Compliance Alliance Understanding the nuances of branch closing regulations is essential for banks to remain compliant and maintain customer trust. Utah Banker 20
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