Letters of Credit

New York Banking Development District Deposits

In 1998, the New York State Banking Development District Program (“BDD”) was created under New York State banking law to provide banks with incentives to open branches in underserved communities throughout New York State.  Since all New York State funds on deposit with a financial institution must be fully collateralized under New York State Finance Law, which includes New York State Court deposits and deposits from BDDs, BDD deposits are considered municipal deposits that, by law, must be fully collateralized and deposited into a demand deposit account or an interest-bearing time deposit account. 

Section 8(11) of New York States Finance Law permits the New York State comptroller to designate savings banks as depositaries for New York State Court funds.  Section 105 of the New York State Finance Law authorizes the use of an Irrevocable Letter of Credit issued by the HLB as collateral for deposits received from New York State Courts and Banking Development Districts.

Highlights on New York State’s BDD program:

  • More than $100 million in public funds is available for deposits in new BDD branches
  • Banks approved for the BDD program can receive upwards of $20 million in below market deposits from both New York City and New York State government and agency deposits
  • Commercial banks, savings banks, and savings and loans can participate in the BDD program
  • Both New York State and federally chartered institutions are eligible for the program
  • The New York State Superintendent of Banks approves all BDD applications and works in partnership with other New York State agencies to make additional incentives available, such as real estate tax abatements and job creation credits
  • Banks can receive highly favorable CRA consideration for branches in BDDs

For more information about the BDD program, please visit the New York State Department of Financial Services website at http://www.dfs.ny.gov/.

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