[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