Office of the Attorney General

 

Governor
Jim Geringer

Administrative Law Division
123 Capitol Building
Cheyenne, Wyoming 82002
307-777-7876 or 307-777-7841 Telephone
307-777-6869 Fax

Deputy Attorney General
Rowena L. Heckert

Attorney General
Hoke MacMillan

    

September 19, 2001

 

L. Bruce Hendrickson
Banking Commissioner
Herschler Building, 3rd. Floor East
Cheyenne, WY 82002

Re: State Banks engaging in real estate brokerage activities

Dear Mr. Hendrickson:

You have asked for a letter of advice from staff counsel stating whether or not there is sufficient legal foundation to allow state banks to engage in real estate broker activities. Yes, there are sufficient facts to support a commissioner ruling allowing state banks to engage in real estate broker activities.

W.S. 13-2-101 (a) sets forth the powers of state banks. Subsections (i) through (x) sets forth the traditional activities associated with a bank such as operating depositor accounts, lending money, and conducting trust activities. Insurance activities are permitted under subsection (xi). Real estate broker activities are not included as a specific power. The statute includes two broader subsections, (xii) and (xiii), which allow state banks the opportunity to engage in bank related activities subject to the approval of the commissioner.

13-2-101.  Generally.

      1. Each bank may:
        1. Engage in any activity that is usual or incidental to the business of banking, subject to the prior written approval of the commissioner. The commissioner shall not approve a request to engage in an incidental activity if he finds that the requested activity will adversely affect the safety and soundness of the bank; and
        1. Engage in any activity in which a federally chartered insured depository institution as defined by W.S. 13-2-802(a)(ix) operating within this state is authorized to engage, as approved by rule by the commissioner.

There must be sufficient evidence that real estate brokerage activities are "usual or incidental" to the business of banking. Black’s Law dictionary, 5th edition defines "usual" to mean:

Habitual; ordinary; customary; according to usage or custom, commonly established, observed, or practiced. That which happens in common use or occurs in ordinary practice or course of events.

The office of the Conference of State Bank Supervisors (CSBS) presented testimony, by letter, to the Board of Governors of the Federal Reserve System, May 1, 2001, regarding real estate brokerage services offered by state chartered banks.  The CSBS stated:

…at least 25 states and the District of Columbia permit their state-chartered banks to engage in real estate brokerage activities. The state perspective on real estate brokerage activities is particularly germane because of the many years such activities have been permissible. In at least one state, it has been a permissible activity for more than a century.

Of those 25 states to which CSBS referred, 15 allow real estate brokerage activities by statute, the balance through reciprocation or regulatory authority. State banks have offered real estate brokerage activities for more than 20 years in a majority of those states allowing such service.

An example of statutory authority allowing state banks to engage in real estate brokerage activity is the Michigan banking code.

487.14104 Real estate brokerage.

Sec. 4104. (1) A bank may engage directly in, or own in whole or in part, a real estate brokerage business as provided under article 25 of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518.

Idaho addresses real estate brokerage activity in their Division of Financial Institution regulations.

DFI-Bkg 16.05 Bank offering of real estate brokerage services. A bank may provide real estate brokerage services directly or through a subsidiary at its home office, authorized branch offices, and other locations, provided, the bank does not make loans, accept deposits, provide trust services other than as permitted by s. 221.0316, Stats., or cash checks or other negotiable instruments at such other locations. Notification of locations shall be made annually as part of the financial statement. Prior approval by the administrator of the division of banking of such other locations is not required.

Based on the fact that 25 states and the District of Columbia allow state banks to offer real estate brokerage activity and have done so for more than 20 years, you can draw the conclusion that real estate brokerage activity is "usual" to the business of banking. The requirements of W.S. 13-2-101 are thereby satisfied subject to the individual safety and soundness requirement for each applying bank. Having determined that real estate brokerage services are permissible under subsection (xii) it is not necessary to address the propriety of such services under subsection (xiii).

Sincerely,

James Mitchell
Assistant Attorney General

 

cc: Jeff Vogel
    Rowena Heckert

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