New York Codes, Rules and Regulations
Title 3 - BANKING
Legal Interpretations
LI 4 - Savings Banks and Savings and Loan Associations
Section LI 4.2 - Savings bank not permitted to remove trustee automatically upon his separation from his position as an officer

A savings bank was advised that a proposed by-law providing for automatic removal of a trustee who is also an officer, upon separation of the trustee from the office he holds, would be inconsistent with section 248, and, therefore invalid.

In limine, the department noted that section 248(2) sets forth the instances when it is mandatory that the office of a trustee becomes vacant; that section 248(1) sets forth the circumstances under which a trustee may be removed at the discretion of the other trustees; and that there is no provision in either of those subdivisions or any other part of the Banking Law for removal of a trustee who is also an officer, upon his separation from such office. The department reasoned that discretionary removal by the board of trustees is limited to the conditions described in subdivision 1 of section 248. The department observed that besides providing the substantive grounds for discretionary removal, the subdivision also set forth procedural requirements which must be satisfied. The department rejected the idea that these procedural safeguards could apply to situations other than those set forth in the subdivision, and did not believe that it would make sense to apply less stringent standards to non-statutorily prescribed grounds for removal. Under the circumstances, it was clear to the department that the Legislature did not contemplate discretionary removal of trustees for other than the statutorily prescribed grounds.

Considering that officers are appointed or elected by the board of trustees and may be removed, with or without cause, by the trustees, the department concluded that a trustee who is an officer would not be able to function as a trustee with total independence from the influence of the other members of the board, so long as he must act with the knowledge that his colleagues on the board might remove him as trustee by terminating his employment as an officer of the savings bank.

The department emphasized that its policy is to prevent a situation where certain members of a board may exercise undue or excessive influence upon other members of the board. Just as the influence of officer-trustees is restrained by the limitation of their number on the board, so too should the influence which other members of the board might exercise upon an officer-trustee be restrained.

Lastly, it was recognized that certain officers may be elected to the board of trustees so that their special knowledge will be readily available to the board and that when such officer-trustees no longer serve as officers their value to the board would, understandably, be diminished. Nevertheless, the department concluded that the potential danger of the proposed by-law required its prohibition.

DATED: September 3, 1968