The New York Bankers Association on Friday won its legal challenge to New York City’s Responsible Banking Act, with a federal judge striking down the city ordinance as unconstitutional in its attempt to preempt state and federal banking laws.
The controversial city ordinance — passed over the veto of then-Mayor Michael Bloomberg and implemented by current Mayor Bill de Blasio starting in 2014 — required banks that are eligible to hold New York City’s municipal deposits to disclose information about their lending decisions at a level more invasive than the Community Reinvestment Act. These results would be published and would factor into whether banks would remain eligible to hold city deposits.
The NYBA sought to overturn the ordinance in court, and ABA filed a friend-of-the-court brief in support. District Court Judge Katherine Polk Failla ruled that the Responsible Banking Act’s intent was to regulate depository institutions, noting that city council members believed that the mandated disclosures would change the practices of the banks subject to the ordinance. As a result, she found, the law is preempted by statutes that assign bank regulatory powers to federal and state agencies.
“This is an important decision for the banking industry with nationwide ramifications,” said NYBA President and CEO Michael Smith. “The banks in New York will continue to be supervised by state and federal regulators, and will continue to reinvest in the communities in which they operate.”