By the Division of Banks
  1. APPLICABILITY AND SCOPE

    The purpose of this bulletin is to clarify the Division of Banks’ (Division) position regarding exclusive leases and other restrictive agreements. This bulletin applies to all state-chartered banks and credit unions.

  2. POLICY

    The use of exclusive lease agreements and other restrictive covenants affecting the location of competing bank or credit union offices is a matter of serious concern to the Division because such arrangements may hinder competition, and do not serve the public interest by providing convenience and advantage to bank or credit union customers. Prohibited restrictive arrangements include, but are not limited to, the following:

    1. An agreement by a landlord or lessor not to lease, consent to sublease or sell land or facilities to a competitor of a bank or credit union tenant or lessee, or the conditioning of any such competitive use on the prior consent of the bank or credit union tenant or lessee.
    2. The refusal of a bank or credit union as owner or lessor of any property, either directly or indirectly through affiliated companies, individuals, or trusts, to sell or lease such property on reasonable terms to another bank or financial institution of any kind.
    3. The inclusion of a restrictive covenant in the deed of any property sold by a bank or credit union prohibiting the buyer from selling or leasing the property to any bank, credit union or other financial institution.

    These illustrations only demonstrate the scope of the Division’s concern about restrictive arrangements and do not constitute an exhaustive list of such types of arrangements or understandings. However, this restriction does not apply to (a) branch offices of a state-chartered bank located or to be located in states other than Massachusetts which do not prohibit restrictive covenants, or (b) a branch office of a state-chartered bank or credit union located or to be located in a single store space which is part of a larger retail operation.

  3. DIVESTED BRANCH OFFICES

    The Division recognizes that one trend in the ongoing consolidation within the Commonwealth’s banking industry involves branch networks. The closing of overlapping branch offices after an acquisition or as part of a divestiture related to an acquisition results in the opportunity for other competing financial institutions to acquire turnkey banking facilities. The Division believes that this process is an effective means of mitigating certain adverse aspects of such consolidation. It is therefore essential that competing institutions be able to purchase or use such banking space without being precluded by restrictive covenants, leases, or other impediments. This turnkey process is important to preserve competition and allow another institution to augment its branch network for the greater convenience of the banking public in the Commonwealth.

    All banks and credit unions must cease and desist from entering into any such restrictive arrangement and must make every possible effort to eliminate at the earliest time any restrictive clauses or covenant in agreements to which they are currently a party.

  4. HISTORICAL NOTES

    This bulletin was last restated in 1992 as Administrative Bulletin 9-3. This bulletin also incorporates policies regarding divested branch offices which were reflected in the decisions by the Board of Bank Incorporation relative to the application of Sovereign Bancorp to acquire Seacoast (July 22, 2004) as well as the application of Bank of Boston Corporation to acquire BayBanks, Inc. (July 24, 1996). The bulletin was revised on October 2, 2012.

  5. AUTHORITY

    G.L. c. 167C, s. 3; G.L. c. 171, s. 8.