A state member bank (SMB) is required, by Section 42 of the Federal Deposit Insurance Act (Section 42), to submit a notice of any proposed branch closing, including closures resulting from mergers or other forms of acquisitions, to the appropriate Reserve Bank at least 90 days before the date of the proposed closing. The June 29, 1999 Interagency Branch Closing Policy Statement defines a branch and provides exceptions for certain relocations and consolidations. In general, the policy statement provides guidance on the requirements identified in Section 42 when a bank closes a branch:
- A bank must give written notice of the proposed closing to its federal regulator and branch customers at least 90 days before the closing and include a detailed statement of the reasons for the decision to close the branch and statistical or other information in support of such reasons;
- A bank must also post a notice to its branch customers in a conspicuous manner on the premises of the branches to be closed at least 30 days prior to the proposed closing;
- An interstate bank (defined in section 42 as a bank that maintains branches in more than one state) proposing to close a branch located in a low- or moderate-income area is required to include in its notice to customers the mailing address of the appropriate Federal banking agency and a statement that comments on the closing may be mailed to the agency; and
- As part of its CRA requirements, a bank is required to have a written policy for opening and closing offices.
Refer to the Short-Distance Branch Relocation/Consolidation section below to determine whether a proposal is exempt from the Branch Closing requirements.
Please note the Reserve Bank will evaluate the impact of a branch closing on the community in conjunction with the bank’s next CRA examination. Additionally, examiners will confirm whether the bank provided adequate notice of the branch closing to its customers and evaluate the bank’s branch closing policies and procedures. Refer to the Consumer Compliance Handbook - Branch Closing for details regarding branch closing policies, branch closing notices, content of the 90-day and on-site customer notices, compliance, examination considerations, and other considerations.
To the Reserve Bank
- Location of the branch to be closed.
- Proposed date of branch closing.
- Detailed statement of the reasons for the decision to close the branch.
- Statistical or other information in support of such reasons consistent with the institution’s written policy for branch closings.
To the Customers of the Branch to be Closed:
- A copy of the proposed notice to be sent to the branch customers at least 90 days prior to the branch closing, including the expected mail date of the notice. If the bank operates branches in multiple states and the proposed branch closure is in a low-to-moderate income census tract:
- The customer notices must contain the mailing address of the Reserve Bank and a statement that comments on the proposed branch closing may be mailed to the Reserve Bank.
- The customer notices must state that the Reserve Bank does not have the authority to approve or prevent the closing.
- A copy of the notice or a statement affirming that notice will be posted in the lobby of the branch to be closed at least 30 days prior to the closing.
If a notice provided to a state supervisory agency pursuant to state law contains the information outlined above, the bank may provide a copy of that notice to the Reserve Bank in satisfaction of the branch closing notice requirement, provided the notice is filed at least 90 days prior to the date of the branch closing.
Short-distance Branch Relocation/Consolidation
Section 42 does not apply when a branch is relocated or is consolidated with one or more other branches, provided the relocation or consolidation occurs within the immediate neighborhood and does not substantially affect the nature of the business or customers served. “Relocation” is when a branch is moved within the immediate neighborhood and its movement does not substantially affect the nature of the branch’s business or customers served. “Consolidation” is when a branch is consolidated with another branch within the immediate neighborhood and the consolidation does not substantially affect the nature of the business or customers served. The Branch Closing Policy Statement contains the following guidance regarding the distance of a move that may qualify as a relocation/consolidation:
- Generally, relocations/consolidations occur only when short distances are involved; for example, moves across the street, around the corner, or a block or two away. Moves of less than 1,000 feet will generally be considered to be relocations.
- The OCC’s definition of “Short-distance Relocation”, 12 CFR §5.3, which applies to national banks and federal savings associations, is generally used by Reserve Banks as guidance when considering relocations by state member banks and defines a short-dsitance relocation as one that moves the premises of a branch or main office within a:
- One thousand foot radius of the branch if located within a principal city of a Metropolitan Statistical Area (“MSA”);
- One mile radius of the branch if located within an MSA but not within a principal city (Refer to the Census Demographic Data on the FFIEC’s website. After entering the location of the branch, click on the Census Demographic Data button and refer to the Housing tab to determine if the specified location is inside a principal city); or
- Two mile radius of the branch if not located within an MSA (this is applied in rural areas).
- Various online tools are available to determine distances.
- In less densely populated areas or where neighborhoods extend farther and a longer move would not significantly affect the nature of business or customers served by branch, a relocation may occur over longer distances. In these instances, the Notificant may make a case that the specific facts and circumstances of the proposal warrant consideration as a relocation/consolidation. The Notificant must clearly document why the longer distance move does not substantially affect the nature of the business or customers served. The Notificant is encouraged to consult with the Reserve Bank prior to submitting a proposal that does not clearly meet bullets one and two above.
A SMB should submit a letter documenting that a proposal meets the relocation/consolidation criteria defined above, as well as the proposed date of the relocation/consolidation. This letter should be submitted to the Reserve Bank substantially in advance of the proposed consummation date to allow for the filing of a branch application and/or branch closing notice should it be determined that the proposal does not meet the qualifying criteria for a short-distance branch relocation/consolidation.
Temporary Branch Closures (Natural Disaster or Emergency)
A major disaster or emergency such as a fire, flood, tornado, or pandemic may lead an affected SMB or U.S. branch of a foreign banking organization to temporarily curtail or cease the operations of a branch or temporarily move some or all of a branch’s operations to alternate locations. The Branch Closing Policy Statement and Consumer Compliance Handbook clarify that branch closing requirements do not apply when a bank temporarily ceases operations at a branch due to events beyond the bank’s control, if the bank intends to restore branching services at the same location in a timely manner. In such instances, banks should advise the responsible Reserve Bank and the appropriate State banking agency of these temporary changes. The Reserve Bank does not require a notice for such temporary closings or relocations. However, once the bank or U.S. branch of a foreign banking organization determines its ultimate plans for the operations of a displaced branch, it should consult further with the responsible Reserve Bank concerning any application or notice requirements as soon as possible once its decision has been made.
- Section 208.6(e)(f) of Regulation H
- OCC Short-distance Relocation Definition, 12 CFR §5.3
- Interagency Statement of Policy Concerning Branch Closing Notices and Policies
- Section 42 of the Federal Deposit Insurance Act
- Consumer Compliance Handbook – Branch Closings
- SR Letter 13-6, CA Letter 13-3 (Supervisory Practices Regarding Banking Organizations and their Borrowers and Other Customers Affected by a Major Disaster or Emergency)
- SR Letter 20-4 / CA Letter 20-3 Supervisory Practices Regarding Financial Institutions Affected by Coronavirus