Colorado § 11-105-101 - Branch banks and practices prohibited.

§ 11-105-101. Branch banks and practices prohibited.

(1) Any state bank or state bank chartered in another jurisdiction, upon application to and approval by the banking board, may operate one or more loan production offices as defined by the banking board.

(2) For purposes of this subsection (2), "elementary school" means any public or private school with students in kindergarten through eighth grade. A bank that both opens accounts and accepts students' deposits at elementary schools in conjunction with other educational programs presented by the bank is not engaged in branch banking as defined in section 11-101-401 (10). Any bank establishing a location in an elementary school pursuant to this section shall receive the prior approval of the banking board. Approval shall be granted if the program is predominantly educational.

(3) Any other facility, agency, or paying or receiving station operated by any bank or agent shall constitute a branch within the meaning of this section. Any facility authorized by the United States treasury department shall not be subject to the limitations of this section.

(4) As authorized under section 10-2-601 (2), C.R.S., any bank may, pursuant to federal law or under such rules as may be prescribed by the banking board and subject to rules promulgated by the commissioner of insurance concerning the sale of insurance by financial institutions as provided in section 10-2-601, C.R.S., as such laws and rules are applicable to the bank, depending upon whether such bank is a national bank or a state bank, act as the agent for any fire, life, or other insurance company authorized to do business in this state by soliciting and selling insurance and collecting premiums on policies issued by such company. For services so rendered, such bank may receive such fees or commissions as may be agreed upon between the bank and the insurance company for which it may act as agent. For purposes of this subsection (4), "bank" shall have the same meaning as set forth in section 11-101-401 (3).

(5) Except as provided in the federal "Gramm-Leach-Bliley Act", as amended, Pub.L. 106-102, 113 Stat. 1388, it is unlawful for a bank or an officer, director, employee, or affiliate of a bank to engage in the business of issuing, floating, underwriting, distributing, or promoting the sale of stocks, bonds, or other securities or to be an officer, trustee, director, employee, stockholder, or partner of any person engaged principally in any such business. Additional exceptions to this section shall be securities issued or guaranteed as to principal and interest by the United States or any agency thereof or by a state or territory of the United States or a subdivision, instrumentality, or public authority organized under the laws of such state or territory or pursuant to an interstate compact between two or more states.

(6) Except as expressly permitted in this code, a state bank shall not assume liability as an insurer, nor shall it become a guarantor or endorser of any security instrument or obligation in which, or with respect to which, it has no property interest.

(7) An officer, director, employee, or agent of a state bank shall not knowingly maintain, or authorize the maintenance of, any account of the bank in a manner that does not conform to the requirements prescribed by this code or by the commissioner or the banking board.

(8) No officer, director, employee, or agent of a state bank shall obstruct, or endeavor to obstruct, a lawful examination of the institution by an officer or employee of the division.

Source: L. 2003: Entire article added with relocations, p. 1112, § 3, effective July 1. L. 2004: (1) amended, p. 323, § 5, effective April 7. L. 2007: (5) amended, p. 2021, § 14, effective June 1. L. 2013: (1) amended, (SB 13-154), ch. 282, p. 1466, § 12, effective July 1. L. 2024: (7) amended, (HB 24-1351), ch. 461, p. 3205, § 27, effective August 7.

Editor's note: This section is similar to former § 11-6-101 as it existed prior to 2003.

ANNOTATION

Law reviews. For article, "Impact of the Uniform Commercial Code on Colorado Law", see 42 Den. L. Ctr. J. 67 (1965). For article, "Judicial Gymnastics Open the Door for Branch Banking", see 16 Colo. Law. 1959 (1987). For article, "Recent Developments Permitting Banks to Engage in the Insurance Business", see 20 Colo. Law. 35 (1991). For article, "Colorado's Version of Branch Banking", see 20 Colo. Law. 1611 (1991).

Annotator's note. Since § 11-105-101 is similar to § 11-6-101 as it existed prior to the 2003 recodification of the "Colorado Banking Code", articles 101 to 109 of title 11, relevant cases construing that provision have been included in the annotations to this section.

This section clearly prohibits banks from conducting business at more than one location. It likewise implies that the duly granted charter of a bank cannot be used as a grant of authority to do business at more than the single place of business. Hence, it is also implied that an approved bank having a duly granted charter cannot apply for another charter to do business under a second charter at a second place of business. Peoples Bank v. Banking Bd., 164 Colo. 564, 436 P.2d 681 (1968).

If banks do business as one, then they are branches. To establish that a bank is a branch it must be shown, that, in substance, one is doing business through the instrumentality of the other, or vice versa, in the same way as if the institutions were one. Peoples Bank v. Banking Bd., 164 Colo. 564, 436 P.2d 681 (1968).

The general assembly did intend to permit what is known as "affiliate banks", whereby, for example, modern and progressive bookkeeping and accounting procedures may be employed by "smaller" banks through the contractual use of facilities of a "larger" bank, thus reducing overhead costs to both the smaller and the larger banks and thereby passing along larger profits to stockholders and less expensive charges to customers without the abuses, risks, and problems of supervision often involved in branch banking. Peoples Bank v. Banking Bd., 164 Colo. 564, 436 P.2d 681 (1968).

An electronic banking facility is prohibited branch banking in all its functions. State ex rel. State Banking Bd. v. First Nat'l Bank, 540 F.2d 497 (10th Cir. 1976).

Standing to challenge actions of comptroller of the currency. The interest of state administrative officials in enforcing branch banking prohibitions to maintain competitive equality between state and national banks has been held sufficient to confer standing to challenge the actions of the comptroller of the currency. State ex rel. State Banking Bd. v. First Nat'l Bank, 394 F. Supp. 979 (D. Colo. 1975), aff'd on this point, 540 F.2d 497 (10th Cir. 1976).

Letter of credit to secure bond not guaranty. An irrevocable letter of credit issued by a state bank to secure a supersedeas bond is not ultra vires as constituting a guaranty, contrary to subsection (4). United Bank v. Quadrangle, Ltd., 42 Colo. App. 486, 596 P.2d 408 (1979).