[Federal Register Volume 60, Number 118 (Tuesday, June 20, 1995)] [Notices] [Pages 32206-32209] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-15060] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency [Docket No. 95-10] Preemption Determination AGENCY: Office of the Comptroller of the Currency, Treasury. ACTION: Notice. ----------------------------------------------------------------------- SUMMARY: The Office of the Comptroller of the Currency (OCC) is publishing its response to a written request for the OCC's determination of whether Federal law preempts the application of a Texas regulation that prescribes certain requirements relating to the signs and advertising used to identify branch banking facilities located in Texas. The OCC has determined that Federal law does not preempt the application of this regulation to national banks located in Texas. Section 114 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the Riegle-Neal Act) requires publication of opinion letters concluding that Federal law preempts certain State statutes and regulations. While publication is not required for opinion letters concluding that Federal law does not preempt the State law, the OCC has decided to publish this letter in order to disseminate broadly its conclusions on preemption issues covered by the Riegle-Neal Act's publication requirements. FOR FURTHER INFORMATION CONTACT: Sue E. Auerbach, Senior Attorney, Bank Activities and Structure Division, 250 E Street, SW, Eighth Floor, Washington, DC 20219, (202) 874-5300. SUPPLEMENTARY INFORMATION: Background Section 114 of the Riegle-Neal Act, Pub.L. 103-328 (12 U.S.C. 43), generally requires the OCC to publish in the Federal Register a descriptive notice of certain requests that the OCC receives for preemption determinations. The OCC must publish this notice before it issues any opinion letter or interpretive rule concluding that Federal law preempts the application to a national bank of any State law regarding community reinvestment, consumer protection, fair lending, or the establishment of intrastate branches (four designated areas). The OCC must give interested persons at least 30 days to submit written comments, and must consider the comments in developing the final opinion letter or interpretive rule. The OCC must publish in the Federal Register any final opinion letter or interpretive rule that concludes that Federal law preempts State law in the four designated areas. It may, at its discretion, publish any final opinion letter or interpretive rule that concludes that State law in these areas is not preempted. The Riegle-Neal Act also provides certain exceptions, not applicable to the present request, to the Federal Register publication requirements. Specific Request for OCC Preemption Determination On March 10, 1995, the OCC published in the Federal Register (60 FR 13205) notice of a request for the OCC's determination of whether Federal law preempts the application of Texas Rule 3.92, 7 Tex. Admin. Code Section 3.92 (Rule), ``Naming and Advertising of Branch Facilities,'' in its entirety, to national banks. The Rule was adopted by the Texas State Finance Commission on August 19, 1994, pursuant to Texas Civil Statutes section 342-917, ``Identification of Facilities,'' which generally provides that a bank may not use any form of advertising that implies or tends to imply that a branch facility is a separate bank. The Rule, like the statute, prohibits advertising of a branch facility in a manner which implies or fosters the [[Page 32207]] perception that a branch facility is a separate bank. The Rule is more explicit than the statute in identifying prohibited signage and advertising and provides specific guidance in certain situations. Comments The comment period closed on April 10, 1995. The OCC received two comments in response to the March 10, 1995, notice. One commenter, a law firm representing certain national banks, believed that Federal law preempted the Rule because the national banking laws provide the OCC with exclusive authority over the corporate affairs of national banks and further because compliance with the Rule would be burdensome. The other commenter, an association of state bank regulatory officials, believed that Federal law did not preempt the Rule because (1) the Rule does not conflict with any provision of Federal law; (2) legislative history of the national banking laws indicates that Congress believed there to be little federal supervisory interest in national bank names; and (3) the Rule is not burdensome. OCC Determination The OCC, after carefully considering the comments, believes that Federal law does not preempt the application of the Rule to national banks located in Texas. As discussed in the opinion letter, not only is there no actual conflict between Federal law and the Rule, but certain amendments to the national banking laws provide evidence that Congress intended questions regarding bank names to be settled primarily by reference to State law. In addition, there is no evidence that compliance with the Rule will be burdensome such that it will frustrate the ability of national banks to exercise any of their authorized powers. The Rule therefore is applicable to national banks in Texas. The Riegle-Neal Act requires publication of opinion letters which conclude that Federal law preempts State statutes or regulations. While the Riegle-Neal Act does not require publication of letters concluding that State law is not preempted, the OCC has decided to publish its letter in order to disseminate broadly its preemption determinations under the Riegle-Neal Act, and in this case also to provide national banks located in Texas with notice and information regarding their obligations under the Rule. The OCC's letter appears as an appendix to this Notice. Dated: June 9, 1995. Eugene A. Ludwig, Comptroller of the Currency. Appendix June 9, 1995 Mr. Everette D. Jobe, General Counsel, Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705-4294. Re: Proposed Branch Advertising and Naming Rule/7 Tex. Admin. Code Sec. 3.92 Dear Mr. Jobe: This is in response to your inquiry, raised in your letters of June 17, 1994, to Randall Ryskamp, and October 24, 1994, to Dean Marriott (respectively, the District Counsel and Deputy Comptroller of the OCC's Southwestern District Office), and subsequently discussed in telephone conversations with OCC legal staff, whether federal law preempts the application to national banks of a state regulation relating to the signs and advertising used to identify branch banking facilities located in Texas. In our opinion, for the reasons discussed below, we believe that the regulation in question is not preempted by federal law and is applicable to national banks. Background On August 19, 1994, the Texas State Finance Commission adopted Rule 3.92 (``Rule'') entitled ``Naming and Advertising of Branch Facilities.'' 1 The Rule was adopted pursuant to Texas Civil Statutes Sec. 342-917, ``Identification of Facilities,'' which generally provides that a bank may not use any form of advertising that implies or tends to imply that a branch facility is a separate bank.2 The preamble to the Rule states that the Texas legislature, in regulating identification of branch facilities, had two substantive purposes. One was the possibility that unfair and misleading competition could result if a failed bank is taken over by another institution which continues to represent and advertise the resulting branch as the original failed institution. The second was that depositors could exceed the limits of Federal Deposit Insurance Corporation insurance coverage by unintentionally depositing excess amounts in two branches of the same bank in the mistaken belief that they were two different banks. The Rule, which was published for public comment, states that enforcement authority with respect to national banks is vested in the OCC. \1\ Your letter to Mr. Ryskamp referred to the ``revised proposed rule'' that was then scheduled for publication in the June 28th issue of the Texas Register. Since that time, the Rule has been published and adopted by the State Finance Commission. It became effective on September 13, 1994. \2\ Sec. 342-917 provides: A bank may not use a form of advertising, including a sign or printed or broadcast material, that implies or tends to imply that a branch facility is a separately chartered or organized bank. A sign at a branch facility and all official bank documents, including checks, cashier's checks, loan applications, and certificates of deposit, must bear the name of the principal bank and if a separate branch name is used must identify the facility as a branch. --------------------------------------------------------------------------- The Rule, like the statute, prohibits advertising of a branch facility in a manner which implies or fosters the perception that a branch facility is a separate bank. However, it is longer and far more explicit than the statute in identifying prohibited signage and advertising and provides specific guidance in certain situations characterized as misleading. While the Rule applies to all state and national banks domiciled in Texas, its provisions and prohibitions would most directly affect those banks that have what might be termed a generic name followed by a geographic modifier (e.g., First National Bank of Dallas, Second State Bank of Austin), rather than what the Rule terms a ``unique legal name'' such as ``Jones National Bank'' or ``Smith Bank.'' The principal provisions of the Rule include the following: 1. Upon acquisition of one bank to serve as a branch of another bank, use of the prior name of the extinguished bank to identify the acquired bank facility is prohibited. This prohibition applies to signs, advertising, and bank documents. 2. A sign directing the public to a branch facility must contain either the legal name of the bank or a unique logo, trademark or service mark of the bank. If a separate identifying name is used for the branch facility that either contains the word ``bank'' or does not contain the word ``branch'' and further does not identify the facility as a branch, then an additional sign at the branch facility must identify the legal name of the bank and identify the facility as a branch. This additional sign could, for example, consist of lettering on the entrance door or any other lettering visible to the public. 3. The legal name of a bank is the full bank name as reflected in its charter, except that in signs and advertising a bank may omit terms which are either indicators of corporate status (N.A., Inc., Corp., L.B.A.) or geographic modifiers. However, where a bank without a unique legal name proposes to establish a branch facility (other than one within the city of domicile) within the same city as or within a thirty-mile radius of a pre-existing facility of a bank with the same or substantially similar legal name, the bank must either include the geographic modifier on its signs, disclose the city of its domicile on all signs directing the public to the branch, or else put up a separate sign notifying the public that the facility is a branch. For example, a bank called First National Bank of Austin could put up branches within the city of Austin with signs saying merely ``First National Bank.'' However, if the bank wishes to open a branch in San Antonio, and another bank called First National Bank of San Antonio already exists, then the First National Bank of Austin would be required under the Rule to have signs reading either ``First National Bank of Austin'' or something like ``First National Bank, San Antonio Branch.'' Alternatively, it could have a sign that said merely ``First National Bank'' provided that another sign, or lettering on the door, or anywhere visible to the public, clearly identified the facility as a branch or gave the domicile of the bank, or both. In this case, the second sign might say ``San Antonio branch'' or ``a branch of First National Bank of Austin.'' However, the bank would be in violation of the Rule if it only had signs saying ``First National Bank'' or ``First [[Page 32208]] National Bank, San Antonio'' because there is no disclosure to the public that the facility is a branch. 4. If a bank without a unique legal name chooses not to place the signs as described in the foregoing paragraph, then the Rule requires that it provide notice to all pre-existing bank facilities of other banks within the same banking market as the proposed branch location that have the same or substantially similar legal name, disregarding geographic modifiers, specifically advising the recipient of the name to be used in connection with the proposed branch facility. Banks so notified then have the opportunity to file a protest regarding the name of the proposed branch. For example, if a bank called First National Bank of Austin did not wish to put up the requisite signs (as discussed above) for its branch in San Antonio, it would, under the Rule, be required to search the San Antonio banking market and provide notice of its proposed branch to other banks named ``First National Bank'' or ``First National Bank of San Antonio.'' The banks so notified would then have the opportunity to file a protest with your office (for state banks) or with the OCC (for national banks). You have indicated your expectation that few banks will choose the notification alternative. It is your view, and in fact the goal of the Rule, that banks in Texas will choose to put up clarifying signs to identify for the public which bank facilities are branches. 5. While banks in Texas are permitted, like other businesses, to operate under an assumed or professional name, they may not use an assumed name to evade the Rule. The Texas Assumed Business or Professional Name Act, Texas Business and Commerce Code, Chapter 36, permits banks and other businesses to operate under a business or assumed name provided certain documents are filed with appropriate Texas authorities. However, permission to operate under an assumed name would not dispel a bank's obligation under the Rule to identify its branch facilities to the public. Therefore, even if the above-mentioned First National Bank of Austin had properly assumed the name ``First National Bank,'' it would still, with respect to its branches, be required under the Rule to put up the signs discussed in para. 3, supra, or provide the notification described in para. 4, supra. 6. The Rule does not prescribe such specifics as number, size, or location of signs, size of lettering, and so on. Further, it does not require that branch names, signs, or advertising be approved by any regulatory authority. You have stated that the goal of the Rule is simply that the public be advised which bank facilities are branches, and that any signs, or combination of signs, reasonably making such identification will be permissible. Discussion The question of the extent to which national banks are subject to state laws has existed since the inception of the first National Bank Act in 1863. Under the dual banking system, all banks, including national banks, are subject to the laws of the state in which they are located unless those state laws are preempted by federal law or regulation. The basic premise, expressed numerous times by the United States Supreme Court, is: that the national banks organized under the Acts of Congress are subject to state legislation, except where such legislation is in conflict with some Act of Congress, or where it tends to impair or destroy the utility of such banks, as agents or instrumentalities of the United States, or interferes with the purposes of their creation. Waite v. Dowley, 94 U.S. 527, 533 (1877). See also Davis v. Elmira Savings Bank, 161 U.S. 275 (1896); Anderson National Bank v. Luckett, 321 U.S. 233, 248 (1944). Banking is the subject of comprehensive regulation at both the federal and state level and the valid exercise of concurrent powers is the general rule unless the state law is preempted. State law applicable to national banks will generally be presumed valid unless it conflicts with federal law, frustrates the purpose for which national banks were created, or impairs their efficiency to discharge the duties imposed upon them by federal law. National State Bank, Elizabeth, N.J. v. Long, 630 F. 2d 981, 987 (3d Cir. 1980); see, generally, Michie on Banks and Banking, Vol. 7 para. 5 (1989 Repl.) This principle applies to substantive state regulations as well as state statutes, since it is well established that a rule or regulation of a public administrative body, duly promulgated or adopted in pursuance of properly delegated authority, has the force and effect of law. See generally, 73 C.J.S. ``Public Administrative Bodies and Procedures,'' Sec. 97. In this instance, neither the Texas statute (Art. 342-917) nor the Rule is in conflict with any federal law, since no provision under the national banking laws governs national bank names or requires their approval by a federal authority. On the contrary, while the national banking laws did govern this issue at one time, Congress changed the law in 1982 and left little doubt of its intent that approval of national bank names (except for registered trademarks) not be subject to federal regulation. Prior to 1982, a national bank was required, pursuant to 12 U.S.C. Secs. 22 and 30, to obtain approval from the OCC both for its initial name and for subsequent name changes. However, the Garn-St Germain Depository Institutions Act of 1982 amended Sections 22 and 30 to delete this requirement for OCC approval of bank name or name change. P.L. No. 320, 97th Cong., 2d Sess., Sec. 405, 96 Stat. 1469, 1512 (1982). The Senate Report accompanying this change gave the following explanation: Comptroller approval for bank name changes will no longer be required. There exists little supervisory interest in the name of a particular national bank. Federal approval procedures are to be replaced by a simple notice requirement. Any confusion between bank names shall be resolved under other laws, including the federal Lanham Act and state statutory and common law principles of unfair competition. S. Rep. No. 536, 97th Cong., 2d Sess. 28, reprinted in 1982 U.S. Code Cong. & Ad. News 3054, 3082.3 \3\ The Lanham Act is a common name for the Trademark Act of 1946, 15 U.S.C. Sec. 1051 et seq., which gives federal courts jurisdiction over trademarks and trade names registered with the United States Patent Office. It has no direct relevance to the present discussion. --------------------------------------------------------------------------- OCC regulations were amended accordingly to provide that the OCC would simply receive notice of the initial name and subsequent name changes. 12 CFR 5.42.4 The only explicit requirement remaining under the national banking laws is that bank names, whether new or revised, include the word ``national.'' 12 U.S.C. Secs. 22 and 30(a). Congress has thus made clear its intention that issues related to the names of national banks are subject to state law. \4\ The regulations prior to the Garn-St Germain amendment provided for OCC approval of national bank names and name changes: The [OCC] considers an application for change in corporate title to be primarily a business decision of the applicant. An application will be approved if the proposed new title is sufficiently dissimilar from that of any other existing or proposed unaffiliated bank or depository financial institution so as not to substantially confuse or mislead the public in a relevant market. 12 CFR 5.42(b) (1981). --------------------------------------------------------------------------- Since these 1982 amendments, the OCC's policy on this matter is that the naming of a national bank, or of a branch office of a national bank, is primarily a business decision of the bank, subject to applicable state law. However, should the OCC determine that a national bank's name or advertising is so misleading or confusing as to constitute an unsafe or unsound practice, it may initiate enforcement action under 12 U.S.C. 1818(b). Further, while there is little supervisory interest in the name of a national bank, the OCC generally does not permit branches of a bank to operate under a different bank name. To do so would not only violate the provisions of 12 U.S.C. 22 and 30, which anticipate that a bank operate under a single title, but could lead customers unwittingly to exceed FDIC insurance limits by depositing excess amounts in two bank branches in the mistaken belief that they were dealing with different banks. In light of both the federal legislative history on this issue and judicial preemption guidelines, we conclude that the Texas Rule is not preempted with respect to national banks. Not only is there no federal statute dealing with this issue, but there is no indication that the Rule is unduly burdensome to national banks or that it impairs their ability to discharge the duties imposed by federal law. Long, supra at 987; Franklin National Bank v. New York, 347 U.S. 373 (1954). The national banking laws do not prevent state measures aimed at preventing misleading advertising, as long as the state regulations do not put national banks at a competitive disadvantage relative to state financial institutions. As stated above, the Rule does not prescribe any particular type of sign or advertising. Its principal requirements are that banks which become branches of another bank as part of an acquisition cease use of the former bank name, and that bank branches identify themselves as branches. Since it is obvious [[Page 32209]] that every bank, bank branch, or other bank facility will have some sort of sign identifying the premises to the public, it is not burdensome to require that the sign not be confusing or misleading. Equally, it is not burdensome to prohibit a bank branch resulting from a corporate acquisition within a reasonable time thereafter to cease using the name of its extinguished corporate predecessor. Nor does the Rule appear to hamper banks in their operations or efficiency or limit their ability to carry out their functions. The situation here is unlike the situation in Franklin, supra, 347 U.S. 373, 377, in which a state law was determined to be preempted because it prohibited national banks from advertising in connection with one of their authorized activities (receiving deposits). Under the Rule, banks are not prohibited from advertising any authorized activity. They are not prevented from using abbreviated ``advertising'' names, such as ``FNB'' instead of ``First National Bank,'' although if there should be two different ``First National Banks'' in one city, the Rule requires the second one establishing a bank facility, which will usually be an out-of-town bank, to identify either its domicile city or its branch status: e.g., ``FNB Austin'' or ``San Antonio Branch.'' Such requirements do not infringe upon a national bank's ability to establish branches under 12 U.S.C. 36(c) or to carry out any other authorized activity. Since the Texas Rule and the underlying statute are not in conflict with federal law, do not prevent national banks from carrying out their authorized functions under the national banking laws, and do not unduly burden them in operating, it is my opinion that they are applicable to national banks. The OCC, as the authority responsible for administering and enforcing laws and regulations applicable to national banks, will, as the Rule envisions, determine compliance with the Rule with respect to national banks. I trust this is responsive to your inquiry. Sincerely, /s/ Julie L. Williams, Chief Counsel. [FR Doc. 95-15060 Filed 6-19-95; 8:45 am] BILLING CODE 4810-33-P