Banking and Finance Law Daily Wrap Up, STATE BANKING LAWS—New York proposes risk-based overhaul of bank investment filings, (Oct 23, 2026)
Additional investments worth no more than one percent of capital and surplus could avoid both prior approval and after-the-fact notice under specified conditions.
The New York Department of Financial Services has proposed repealing and replacing its current banking regulation governing investments in operating subsidiaries and other entities (3 NYCRR Part 14) with a risk-based framework for bank investments in operating subsidiaries and other entities. According to a regulatory impact statement, current Part 14 is outdated because it requires substantial filings regardless of transaction risk or the investing institution's condition and lags streamlined federal processes. The proposal would eliminate filings for qualifying additional operating-subsidiary investments and allow some well-managed, well-capitalized banks to establish subsidiaries for previously reported activities without a new filing. The Department says the overhaul would reduce regulatory burdens, clarify expectations, maintain competitiveness, and reduce staff-review time.
Outdated. The Department notes that Part 14 was last substantively amended in the 1990s. To begin addressing its outdated requirements, the Department says it issued a Wild Card Order on May 25, 2025, that allowed regulated entities to make simplified filings equivalent to those available to national banks. The proposal would incorporate that order's substantive provisions and rescind it upon adoption. The Department expects the new framework to reduce regulatory and staff-review burdens, improve service to regulated companies and the public, and help state-chartered and licensed entities remain competitive.
The proposal also would exclude four categories from the operating subsidiary definition and filings. These exclusions include: (1) certain subsidiaries holding shares acquired through foreclosure, compromise of a doubtful claim or avoidance of a loss on previously contracted debt; (2) specified securitization trusts and related entities; (3) subsidiaries holding approved or, when applicable, self-certified community-development investments; and (4) subsidiaries formed to own or operate property used as bank premises.
Reduced filing paths. Two additional investment paths use the same one percent threshold. An investment in an operating subsidiary previously approved or reported under Part 14 would require neither prior approval nor after-the-fact notice if its book value does not exceed 1 percent of the bank's capital and surplus and the subsidiary's activities do not change. The same no-filing treatment would apply to an additional investment in a previously approved entity other than an operating subsidiary or Edge Act subsidiary if the investment stays within that threshold and the bank meets the section's enumerated requirements.
A separate path would allow a well-managed and well-capitalized bank to establish an operating subsidiary without approval or notice if the subsidiary would engage only in activities the bank previously reported for another operating subsidiary and the bank met the proposal's enumerated requirements. If the subsidiary instead would conduct activities substantively the same as previously approved activities, the bank could use after-the-fact notice. The proposed approved-activities list contains 33 activities, drawing from current Part 14 and adding activities from OCC's current list. For after-the-fact treatment, the bank would need a management rating of 1 or 2—or a risk-management rating of 1 or 2 for a foreign-bank branch or agency—and a composite rating of 1 or 2. It would no longer have to be free of current enforcement orders.
For equity investments in entities other than operating subsidiaries or Edge Act subsidiaries, proposed Section 14.3 would require written notice no later than 10 days after the investment if the bank could make the required representations and certifications. Otherwise, the bank would have to seek the Superintendent's approval or a waiver.
Tax equity financing. Proposed Section 14.4 would establish specific treatment for tax equity financing. The proposal defines it as an equity-financing transaction that funds a project generating tax credits or other tax benefits and uses an equity structure to transfer those benefits to the bank. The Department says these transactions are equity investments for tax purposes but substantively loans to the facilities. If a financing met Section 14.4's conditions, the bank would need prior Part 14 approval only for its first transaction of a particular type. Subsequent transactions of a similar type would require notice to the Department rather than prior approval.
If adopted, new Part 14 would take effect immediately upon publication of a Notice of Adoption in the New York State Register. The public comment period for the proposal expires Dec. 21, 2026.
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