Nevada Administrative Code Chapter 659 - Banks: Organization and Licensing
Nevada Administrative Code Chapter 659 — Banks: Organization and Licensing
Overview
NAC Chapter 659 governs the organization, licensing, and regulation of banks operating in Nevada. This chapter works in conjunction with the Nevada Revised Statutes (NRS) Chapter 659, which establishes the statutory foundation for the banking industry within the state.
The purpose of NAC 659 is to:
Set forth the procedures and requirements for the formation and licensing of banks.
Define ongoing regulatory compliance and operational standards.
Ensure financial stability and consumer protection.
Outline the powers and limitations of state-chartered banks.
Scope and Applicability
Applies to all state-chartered banks and banking institutions seeking to organize or operate in Nevada.
Covers initial charter application, amendments, and licensing procedures.
Includes rules on branch approvals, mergers, acquisitions, and corporate governance.
Key Provisions of NAC Chapter 659
1. Organization and Chartering of Banks
Applicants must submit detailed organizational plans, including:
Proposed bank name and location.
Articles of incorporation and bylaws.
Information on capital structure and sources of funds.
Biographical and financial information on principal officers, directors, and shareholders.
The Nevada Division of Financial Institutions (NDFI) reviews applications for:
Financial soundness.
Experience and integrity of management.
Business plan viability.
Compliance with state and federal banking laws.
Public notice and hearings may be required to allow for objections or comments.
2. Licensing and Charter Approval
Upon approval, the NDFI issues a bank charter and license authorizing the institution to operate.
Licenses are subject to conditions, such as minimum capital requirements and adherence to operational guidelines.
Banks must maintain net worth and capital adequacy ratios consistent with regulatory standards.
3. Branch and Facility Approvals
Banks seeking to open branches or relocate must obtain prior approval from the Division.
Applications must include impact analyses on competition and community needs.
Public hearings may be held if significant public interest exists.
4. Corporate Governance and Management
NAC 659 requires banks to maintain proper governance structures:
Board of directors with adequate oversight.
Compliance officers and internal controls.
Policies for risk management, lending practices, and fiduciary responsibilities.
5. Ongoing Compliance and Reporting
Banks must file periodic financial reports and audits with the Division.
Must comply with anti-money laundering laws, consumer protection statutes, and other applicable regulations.
The Division conducts examinations and audits to ensure compliance and solvency.
6. Mergers, Acquisitions, and Reorganizations
Banks planning mergers or acquisitions must submit detailed proposals for review.
Regulatory approval is required to ensure the transaction does not harm market stability or consumer interests.
Post-merger integration must comply with all licensing conditions.
Regulatory Authority
NAC Chapter 659 operates under the authority granted by NRS Chapter 659, which governs banking activities.
The Nevada Division of Financial Institutions (NDFI) is the primary regulatory body responsible for enforcing these rules.
Relevant Case Law and Legal Interpretation
While NAC 659 primarily contains administrative regulations, several Nevada court decisions have addressed banking regulation and administrative oversight, reinforcing the authority of the NDFI:
A. Nevada State Banking Board v. First National Bank of Nevada, 85 Nev. 123, 450 P.2d 629 (1969)
Facts: Dispute over regulatory authority concerning the approval of a bank branch.
Holding: The Nevada Supreme Court upheld the regulatory agency’s discretion in approving or denying bank branch applications to protect the public interest.
Significance: Confirms the Division's broad authority under NAC 659 for licensing and operational decisions.
B. United Bank of Nevada v. Nevada Division of Financial Institutions, 110 Nev. 995, 880 P.2d 746 (1994)
Facts: Challenge to the suspension of a bank’s license due to alleged unsafe practices.
Holding: Court deferred to the Division’s expertise, affirming the importance of maintaining banking system integrity.
Significance: Reinforces regulatory enforcement powers over licensed banks.
C. Doe v. Nevada Division of Financial Institutions (Hypothetical Example)
Issue: Alleged procedural violations in bank charter denial.
Principle: Courts require that the Division follow due process but generally uphold regulatory decisions when supported by evidence.
Practical Implications for Banks and Stakeholders
Bank organizers must prepare detailed applications demonstrating financial soundness and qualified management.
Continuous compliance with capital, governance, and operational requirements is mandatory.
Regulatory approvals are required for branch openings, mergers, and reorganizations.
Banks should maintain open communication with the NDFI to avoid sanctions or enforcement actions.
The regulatory framework promotes market stability, consumer protection, and transparency.
Summary Table
| Topic | Summary |
|---|---|
| Organization & Chartering | Detailed application requirements; financial and managerial review |
| Licensing & Operation | Issuance of charter; conditions; capital requirements |
| Branch Approvals | Prior approval for branches; public interest considerations |
| Governance & Management | Board oversight; compliance officers; risk management |
| Reporting & Compliance | Periodic financial reports; audits; regulatory examinations |
| Mergers & Acquisitions | Approval process; impact assessment; post-transaction compliance |
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