On October 21, NYDFS proposed to repeal and replace Part 14 of the superintendent’s regulations, which governs investments by state-chartered banks, trust companies, and licensed branches and agencies of foreign banks in operating subsidiaries, Edge Act subsidiaries, and other entities. According to the regulatory impact statement, the current rule imposes heavy filing burdens on most investments without regard to risk and has not kept pace with federal standards. The proposal would incorporate substantive provisions of the May 2025 “Wild Card Order” that allowed simplified filings equivalent to those the OCC permits for national banks, and NYDFS would rescind that order upon adoption of new Part 14.

A bank generally would need to apply to establish an operating subsidiary and could proceed after 30 days unless the superintendent acts. A bank that is “well capitalized” and “well managed” — the latter requiring composite and management ratings of 1 or 2 rather than freedom from enforcement orders — could instead give after-the-fact notice for 33 listed activities or for activities substantively the same as previously approved activities. Such a bank would need no filing for a new subsidiary limited to activities previously approved or reported for a prior subsidiary, and any bank could invest up to an additional 1 percent of capital and surplus in an approved or reported subsidiary without filing if the subsidiary’s activities do not change. Non-controlling equity investments in other entities generally would require notice within 10 days of making the investment, with prior approval or a waiver needed if the bank cannot make the required certifications.

The proposal also would add a new section on tax equity financing that, according to the summary, codifies NYDFS’s existing practice of following the OCC’s tax equity rule. A bank could engage in such a transaction under its lending authority only if the transaction is the “functional equivalent of a loan,” meaning, among other things, that it has limited tenure, is repaid through tax benefits and other payments rather than project appreciation, and leaves the bank a passive investor. A bank’s first transaction of a particular type would require an application, with written notice, among other things, required before each later transaction. Total tax equity financing would be capped at 5 percent of capital and surplus, or up to 15 percent with the superintendent’s written approval, and the transactions would be subject to lending limits and, where applicable, affiliate transaction restrictions. The rule would take effect upon publication of the notice of adoption in the State Register.