Page 36 - July 18, 2024 Bulletin

BUSINESS PARTNERfeature article

Branch Closings:

Requirements

& Nuances

Erin Busse
JD - Associate General Counsel
Compliance Alliance

As I am sure we are all aware, regardless of a bank’s First, it is important to discern what exactly is considered
regulator or state jurisdiction, there are certain notice a “branch” under the guidelines to trigger the notice
requirements that apply when a bank will be closing requirements. Specifically, for the purposes of the branch
a branch under Section 42 of the Federal Deposit closing rules, a “branch” is considered to be a “traditional
Insurance Act (“Section 42”). To be exact, for any brick-and mortar branch, or any similar banking facility
closure would be subject to Section 42, the bank must other than a main office, at which deposits are received
provide 90 days prior written notice of any branch or checks paid or money lent”, and notice is required
closing to its primary Federal regulator, as well as to whenever any facility meeting this definition is intended
all branch customers to meet the applicable notice to be closed. However, the Joint Policy Statement
requirements. Further, the bank must also ensure that clarifies that, when closing other facilities that do not
a notice is physically posted at the branch site at least meet the requirements to be considered a “branch”, such
30 days prior to the intended date of closure to be in as “an ATM, remote service facility, or loan production
compliance with Section 42. office, or of a temporary branch”, which are, instead,
classified as “non-branch facilities” under the rules,
However, while this may seem straightforward, with the notice is not explicitly required under Section 42.
ever-evolving landscape of the banking industry and the
different types of exemptions under Section 42, figuring Further, it is important to note that, even if the facility
out when notice is required is not always expressly clear. would be considered a “branch”, not all closures
As such, it is critical that banks understand the nuances will require notice. For example, the Joint Policy
of the notice requirements, as discussed within the Statement suggests that certain branch relocations and
Joint Policy Statement of the Office of the Comptroller consolidations would not be considered a “closure”
of the Currency, Board of Governors of the Federal under Section 42. To be considered a “relocation” or
Reserve System, Federal Deposit Insurance Corporation, “consolidation” the guidance seems to indicate that
and Office of Thrift Supervision, Concerning Branch the change must be one which is within the branch’s
Closing Notices and Policies (the “Joint Policy “neighborhood and does not substantially affect the
Statement”) to ensure that they are meeting the nature of the business or customers served”. Considering
applicable notice requirements. this, it seems evaluating the proximity of any intended
moves may prove valuable in understanding the

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