By the Division of Banks
- APPLICABILITY AND SCOPE
This bulletin provides guidelines relative to the emergency temporary non-mandatory closing of banking offices pursuant to Massachusetts General Laws c. 167, s. 21 ("Section 21"). The bulletin also offers guidance on contingency plans where a bank or credit union envisions branch sharing during an emergency. The bulletin applies to any bank as defined in c. 167, s. 1.
Section 21 sets out three separate and independent authorities by which banks and credit unions may choose to close their banking offices due to various circumstances. The powers contained in the section are vested in the Governor, the Commissioner and the officers of each bank or credit union. However, in each instance of an emergency temporary non-mandatory closing the final determination to close rests with the bank or credit union itself.
- Closing by Officers
Pursuant to Section 21, whenever the officers of a bank or credit union are of the opinion that conditions exist which pose an existing or imminent threat to the safety or security of bank or credit union personnel or property generally or at any one or more offices thereof, they may close the bank or credit union or the office or offices affected by such threat.
The term "officers," as used in Section 21, is defined as the person or persons designated by the board of directors, board of trustees or other governing body of a bank or credit union to act for the bank or credit union in carrying out the provisions of Section 21, or in the absence of any such designation, the president or any other officer currently in charge of the operations of the bank or credit union or of the office or offices in question.
The conditions that may pose an existing or imminent threat to the safety or security of bank or credit union personnel or property include, but are not limited to, severe weather conditions, civil demonstrations and rioting 1, exposure or potential exposure to hazardous materials, including acts or threats of terrorism, and renovations, demolition, or construction in or around the office of the bank or credit union that jeopardizes the health and safety of employees and customers.
- Notification and Approval of Commissioner is Not Required
The closing of a bank or credit union office under Section 21 does not have to be reported to or approved by the Commissioner. Section 21 requires only that such closing be duly recorded in the records of the next meeting of the governing board with the cause and time of such closing.
It is the firm position of the Division of Banks that Section 21 authorizes the officers of a bank or credit union to make the decision to close their business offices when such conditions exist. Therefore, banks and credit unions may rely on that authority alone to make such a decision. The Division emphasizes that the safety of personnel may be assured and property made secure without prior approval or notice to the Division.
The Division wants to make it patently clear, however, that only the office(s) affected should be closed and that banks and credit unions have an obligation to remain open during their normal hours of operation if at all possible without jeopardizing the health and safety of the staff and clientele. It is important, therefore, that the emergency conditions requiring a temporary closing by officers be sufficiently documented.
- Public Notification
The Division expects that reasonable efforts will be made by any bank or credit union to notify the banking public of the emergency temporary closing of any of its business offices. At a minimum such notice should be posted at each affected banking office. Moreover, messages should be recorded on telephone-answering devices notifying callers of the closing. If possible, advance notice is preferable by means of postings in all banking offices, prominent placement on the bank or credit union web site, and news media announcements.
The Division would deem a public notification for an emergency temporary closing of a business office as satisfactory if it contains the reason for closing, the anticipated reopening date, and contact information for further inquiries. The wording of the reason for closing must not construe in any manner or form that the closing is due to the financial condition of the institution. Maintaining the public confidence in the bank or credit union and the banking system in general is vital.
- Internal Communication
It is incumbent on each bank or credit union to advise the appropriate personnel of the decision-making process within that bank or credit union and the manner in which any decision to close will be disseminated throughout the bank or credit union’s branch system or other offices.
- Disaster Recovery Contingency Plan
Banks and credit unions must develop a formal disaster recovery or business resumption contingency plan ("contingency plan") to address a temporary or prolonged closing of its offices under Section 21. Although a contingency plan does not require the approval of the Division, its adequacy and scope would be subject to examiner review and comment during the course of a regular safety and soundness examination.
- Shared Branch Facility Approval Required
Provisions of a contingency plan, when activated, calling for the resumption of business at the main or branch offices of other banks or credit unions would require the approval of the Division. In such cases the bank or credit union would be essentially operating a shared branch facility with a participating bank or credit union. Such a contingency plan provision calling for the temporary establishment of a shared branch facility requires the Division’s approval pursuant to General Laws c. 167C, s. 3 for banks and General Laws c. 171, s. 8 for credit unions2. As it would be highly impractical to withhold or delay such approval until an emergency actually occurs, banks and credit unions envisioning such a scenario in their contingency plans should seek the prior approval of the Division.
Banks or credit unions requesting the Division’s approval of a contingency plan which calls for establishment of a shared branch facility shall include with their request the written consent of any host bank or credit union and the addresses, telephone and facsimile numbers of all such temporary emergency offices.
On a final note, Section 21 pertains to the non-mandatory closing of banking offices. There are other laws authorizing the Governor, after declaring a general state of emergency for any disaster, to subsequently issue specific orders to regulate, among other things, the closing and opening of all businesses, including banks. Additionally, the Governor may declare a banking emergency when the banking system is at risk and thereby may order, through the Commissioner, that banks be closed.3
- Closing by Officers
- HISTORICAL NOTES
This bulletin is a rewrite of former Administrative Bulletin, Reference #25-1 of October 3, 1985. Administrative Bulletin 25-1 was rescinded upon publication of the Regulatory Bulletin Manual in March 1998. At that time it was decided that Administrative Bulletin 25-1 was no longer necessary due to the passage of time. Recent requests and acts of terrorism against the United States beginning on September 11, 2001 indicated a need for some clarification. The bulletin was revised on May 8, 2012.
G.L. c. 167, s. 21; G.L. c. 167C, s. 3; G.L. c. 171, s. 84; 209 CMR 47.07(3); and 209 CMR 50.06(3).
1Banks and credit unions should be aware of the provisions of Chapter 167D, § 36 concerning repayment of deposits at branches located in a foreign country, or deposits in currency of a foreign country when prohibited or blocked by an act of war, insurrection or civil strife, or action by a foreign government, or closure of a foreign branch in order to prevent harm to the bank's employees or property. The provisions of this section must be disclosed to retail customers subject to this section.
2The cited statutes generally require the written consent of the Commissioner before any main office, branch office, or depot may be established or closed or its location changed. Please refer to the statutes for additional provisions. Parallel authority to establish temporary branches also exists for banks and credit unions under their respective parity powers regulations [see 209 CMR 47.07(3)(a) and 209 CMR 50.06(3)(a) and (b)].
3The emergency powers referred to are set out, respectively, in special acts of the Legislature that became law as Chapter 639 of the Acts of 1950, providing for the safety of the Commonwealth during the existence of an emergency resulting from disaster or from hostile action, and Chapter 59 of the Acts of 1933 relative to banking emergencies.
4The full text of these statutes may be accessed by entering the chapter and section numbers at the following Internet site: http://www.state.ma.us/legis/laws/mgl/mgllink.htm