VIDEO: What is Needed to Close a Branch
In this Compliance Clip (video), Adam gives an overview of the requirements when closing a branch of your bank or credit union.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about what is needed to close a bank branch. The question, of course, is what would we need to do if we need to close a branch of our bank or credit union?
The answer to this is going to come from regulatory guidance. It's not an actual regulation, but each of your regulators have their own specific guidance and rules on what to do to close a branch. We're not talking about closing a branch at 5:00 PM on a Friday. What we're talking about is permanently getting rid of a branch, closing it down, and removing it, and no longer having that branch location to serve customers or members in the area.
Each regulator does have its own guidance, so if you're a FDIC bank, you need to look at the FDIC's rules for branch closings; if you're a Federal Reserve bank, you need to look at their guidance; if you're an OCC bank, you need to look at their guidance; and if you're a credit union, need to look at NCUA or state guidance on branch closings. For example, the OCC requires certain rules for national banks, which is pretty similar to what the FDIC and the Federal Reserve require as well, but the OCC has this guidance for national banks. What they say is that each bank that is closing a branch must provide at least a 90-day notice to the OCC, then they must provide a notice to their customers to let them know the branch is closing. Then when the branch is closing, they need to provide another notice to the OCC. Each of these notices have very specific rules that we're not gonna get into in this compliance clip. The OCC also says that each bank must have a branch closing policy. So if you are a national bank regulated by the OCC, hopefully you have a branch closing policy that you can reference that does have the OCC’s rules inside of it, therefore, you can follow your policy in any instances where you would be closing a branch.
Also something to consider is if you are closing a branch, you would of course need to update your CRA policy and your public disclosure, your public book that's available under your CRA program because your assessment area is going to change and your branch locations are gonna change in your public file. So make sure you've updated your public file in your financial institution for those of you that are banks.
Just to let you know, not all instances do require you to jump through all of these hoops. For example, closing some things doesn't require you to follow the branch closing guidance, especially if you're an OCC bank. For example, if you relocate a branch within the immediate neighborhood that does not affect the customer, that is not gonna require you to follow the branch closing rules. Also, If a branch closes in connection with an emergency acquisition or any assistance from the FDIC, like from a bank failure, the notice would not be required. And if you acquired a branch of a failed institution and you actually returned it back to the FDIC after 180 days, because you said, “You know, we can see why they failed,” then that also would not require compliance with the branch closing rules.
Now, if you have an interruption of service, maybe from a fire, water damage or just a storm, that does not require notice because you're not actually closing the branch, it's just temporarily unavailable, that is something that is different. And then also, if you reduce services that would generally not constitute a closing of a branch.
Again, there are some very specifics to this rule. This is just an overview video. So I just wanted you to be aware that there are requirements if you're going to close a branch, and I know in today's current state there's been a lot of acquisitions and mergers, and if that's the case and you're bringing on a financial institution, but closing a branch, the rules would apply. So it's important to understand that these rules are out there, so when you need them, you know where to go. Again, make sure you take a look at your regulator’s guidance because all the regulators are slightly different, but it's good to understand that these rules do exist.
That's all I have for you for this Compliance Clip.