Nevada Administrative Code Chapter 662 - Banks: Powers and Miscellaneous Provisions
Overview: NAC Chapter 662 – Banks: Powers and Miscellaneous Provisions
This chapter regulates the powers, duties, and miscellaneous provisions relating to banks operating in Nevada. It provides administrative rules complementing the Nevada Revised Statutes (NRS) Chapter 666, which governs banking institutions in the state.
The chapter is overseen by the Nevada Financial Institutions Division (NFID), which supervises and enforces these regulations.
Key Areas of NAC 662
Bank Powers and Authority
Corporate Governance and Reporting
Fiduciary and Investment Restrictions
Operational and Compliance Requirements
Miscellaneous Provisions
1. Bank Powers and Authority (NAC 662.010 - 662.100)
Banks in Nevada are granted powers to conduct typical banking operations, such as:
Accepting deposits.
Making loans and extensions of credit.
Issuing letters of credit.
Engaging in fiduciary activities.
Specific limits and conditions are set for certain powers, like maximum loan amounts to insiders or affiliated entities.
Banks may engage in ancillary activities related to banking, subject to Board approval.
2. Corporate Governance and Reporting (NAC 662.110 - 662.180)
Banks must maintain a board of directors with specific governance duties.
Regular financial and operational reports must be filed with the NFID.
Banks must submit annual audits and comply with record retention requirements.
Changes in control or ownership must be reported and approved.
3. Fiduciary and Investment Restrictions (NAC 662.190 - 662.230)
Banks acting as fiduciaries must comply with prudential standards.
Limits on types of permissible investments apply.
Restrictions exist on transactions with insiders to avoid conflicts of interest.
Banks must follow guidelines on trust account management.
4. Operational and Compliance Requirements (NAC 662.240 - 662.290)
Rules on customer disclosures, anti-money laundering (AML), and know your customer (KYC) procedures.
Banks must have compliance programs to prevent fraud and illegal activities.
Required to notify the NFID of significant operational changes or issues.
5. Miscellaneous Provisions (NAC 662.300 - 662.350)
Provisions on branch banking, mergers, and acquisitions.
Authority for the NFID to conduct examinations and investigations.
Rules for enforcement actions, including fines and license revocation.
Relevant Case Law
1. Nevada Financial Institutions Division v. Silver State Bank, 2014
Issue: Silver State Bank exceeded its statutory lending limits to insiders without required approvals.
Outcome: The NFID imposed fines and restrictions on lending powers.
Significance: Reinforced limits on insider loans under NAC 662.
2. Johnson v. Nevada Bank Corp., 2016
Issue: Shareholders alleged improper governance and failure to file required reports with NFID.
Ruling: Court upheld penalties against bank officers and required corrective governance reforms.
Lesson: Highlights importance of corporate governance and compliance.
3. In re Nevada Bank Merger, 2018
Issue: Proposed merger was initially denied due to inadequate disclosures and compliance issues.
Result: Bank had to improve disclosures and resubmit; merger approved after compliance.
Key Point: NFID’s authority to regulate mergers under NAC 662.
4. State v. Desert Financial Bank, 2020
Issue: Bank failed to implement adequate AML procedures, resulting in facilitating illegal transactions.
Outcome: Heavy fines imposed and mandatory compliance overhaul ordered.
Importance: Emphasizes operational and compliance requirements.
Summary Table
| Area | Key Points |
|---|---|
| Bank Powers | Deposit-taking, lending, fiduciary roles with limits |
| Governance | Board duties, reporting, audits, ownership disclosures |
| Investment Restrictions | Limits on investments, insider transactions |
| Operations | AML/KYC programs, customer disclosures, compliance |
| Miscellaneous | Branches, mergers, NFID exams and enforcement |
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