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General Laws

Section 2. Every bank, subject to limitations imposed by this chapter or other general law, shall have the following powers and whatever further incidental or complimentary powers that may fairly be implied from those expressly conferred and those reasonably necessary to enable it to exercise fully those powers according to common customs and usages:

1. To discount, buy, invest in, hold, assign, transfer, sell and negotiate promissory notes, drafts, bills of exchange, mortgages, trade acceptances, banker’s acceptances, bonds, debentures, bonds or notes secured by mortgages, installment obligations, accounts receivable, balances due on conditional sales and other evidences of debt for its own account or for the account of customers;

2. To invest in the bonds or other evidences of indebtedness of associations or trusts, both as defined in chapter one hundred and eighty-two, and of corporations;

3. To invest in the bonds or other evidences of indebtedness of governments, or political subdivisions thereof, both foreign and domestic;

4. To invest in the capital stock of any bank, national banking association, federal savings bank, federal or state savings and loan association or bank holding company;

5. To invest in the capital stock of any small business investment company organized under the provisions of the Small Business Investment Act of 1958 in an amount aggregating not more than two per cent of its capital stock and surplus account for a stock corporation or not more than two per cent of its surplus account for a thrift institution; to invest, subject to the approval of the commissioner, in the Minbanc Capital Corporation, a non-diversified closed end investment company created for the purpose of making capital funds available to qualifying minority owned banks, up to an amount not exceeding two per cent of its capital stock and surplus account for a stock corporation or not more than two per cent of its surplus account for a thrift institution;

6. To invest such amount not exceeding 10 per cent of its capital stock, surplus account, and undivided profits for a stock corporation and not exceeding 10 per cent of its surplus account for a thrift institution or any other such amount which may be authorized under 12 USC section 618, whichever is the greater, as the commissioner may approve in the capital stock of one or more corporations organized under the laws of the United States for the purpose of engaging in international or foreign banking or other internal or foreign financial operations, or in banking or other financial operations in a dependency or insular possession of the United States, and subject to the jurisdiction and supervision of the Board of Governors of the Federal Reserve System;

7. To invest subject to the approval of the commissioner and under such limitations or conditions as he may impose, in the capital stock or shares of one or more wholly owned subsidiary corporations, limited liability corporations or trusts or such other forms of organization permitted by the commissioner, organized and operated solely for the purpose of performing functions that the bank itself is empowered to perform directly;

7A. To invest, subject to the approval of the commissioner and under such limitations or conditions as he may impose, in the capital stock or shares of a subsidiary corporation or trust which is treated as a real estate mortgage investment conduit pursuant to the provisions of 26 USC 860D.

8. Such corporation may make any investment not otherwise eligible under any other provision of this chapter or any other provision of law including, but not limited to, investment in any capital stock of a corporation organized for the purpose of acquiring and managing interests in real property and acquiring, constructing, rehabilitating, leasing, financing and disposing of housing facilities, or in any other interest in real or personal property or activities incidental thereto, debt security, equity security, loan or community benefits; provided, however, that (a) not more than seven percent of the deposits of such corporation shall be invested pursuant to the provisions of this paragraph; and provided, further, that any amount in excess of three percent of said seven percent shall be invested by such corporation in the following manner: (i) in the capital stock of a corporation organized for the purpose of acquiring, constructing, rehabilitating, leasing, financing and disposing of housing facilities; (ii) for the purpose of micro-lending in the area of small business, including the fishing industry, and farm loans; and (iii) for the purpose of providing technical assistance to nonprofit housing corporations, small businesses and farms for the purpose of establishing credit worthiness; (b) no investment shall be made by such corporation in the equity securities of any one issuer pursuant to this paragraph if the aggregate amount invested by it in the equity securities of such issuer pursuant to this paragraph together with the amount invested in such securities pursuant to any other provision of law exceeds, or by the making of such investment will exceed, two percent of the deposits of such corporation, and no investment shall be made by such corporation in a loan to, or the debt securities of, any one issuer pursuant to this paragraph, if the aggregate amount invested by it pursuant to this paragraph together with the amount invested in a loan to, or in the debt securities, of such issuer pursuant to any other provision of law exceeds two percent of the deposits of such corporation; (c) any loan made or debt security purchased pursuant to this paragraph shall be secured over the term of the loan or the debt security; (d) this paragraph shall not be deemed to alter any provision of this chapter or other provision of law limiting the aggregate amount that may be invested in any class of loan or investment, except for (ii) and (iii), above, which shall be in addition to any such provision of this chapter or other provision of law; and (e) investments authorized solely by this paragraph shall not be deemed investments in which savings banks may legally invest for the purposes of any other provision of law which restricts investments to those in which savings banks may legally invest.

9. To purchase, hold and lease real estate suitable for the transaction of its business; provided, however, that if the aggregate amount invested and proposed to be invested therein, including the cost of alterations and additions in the nature of permanent fixtures exceeds, directly or indirectly, thirty percent of its capital stock and surplus account or one hundred percent of its capital stock whichever is greater, for a stock corporation or if such amount exceeds one hundred percent of surplus for a thrift institution such excess investment shall be made only with the approval of the commissioner. The amount of any mortgage on real estate owned by a bank directly or indirectly and used by it in whole or in part for the transaction of its business and the amount of money invested by a bank in the securities of any corporation, trust or other organization which holds real estate used in whole or in part for the transaction of the business of such bank or intended for such use, shall be included in determining the amount of real estate that may be held by such bank under this section;

Any sums that may be recovered by a bank through the sale or other disposal of real estate or any part thereof held under this section, together with such sums as are allowable for ordinary depreciation under the provisions of the federal income tax law, and such additional sums as are taken on account of depreciation or obsolescence, or for other reason shall, with the consent of the commissioner or at his direction, be deducted from the amount considered to be invested in such real estate;

10. To invest an amount to be approved by the commissioner, subject to such regulations, if any, as he may deem necessary, in a corporation or association formed for the purpose of furnishing to such bank, or to other banks as hereinafter provided, statistical or bookkeeping services or information of the kind generally required by a bank. A bank may also, in participation with any other bank or national banking association, invest its deposits in such corporation or association, subject however to the same approval and regulation, if any, as above provided. The provisions of section two of chapter one hundred and sixty-seven shall apply to such corporations or associations. Nothing contained herein shall be construed to preclude a bank from renting or subscribing for the services of such corporations or association or any other corporation or association rendering such services;

11. To consent to any settlement, modification or readjustment of any investment in securities legally made by such corporation, and to accept and hold as investments bonds, notes, stocks and other securities offered in full or partial settlement, modification or readjustment of any such investment, pursuant to a reorganization or otherwise;

12. To act as trustee or custodian under a retirement plan or individual retirement account which in the judgment of such corporation at the time such trustee or custodian is accepted, is established pursuant to the provisions of Public Law 87-792 entitled “Self-Employed Individuals Tax Retirement Act of 1962”, Public Law 93-406 entitled “Employee Retirement Income Security Act of 1974”, section 152 of Public Law 95-600 entitled “Revenue Act of 1978”, or sections 311 and 312 of the Economic Recovery Tax Act of 1981 Public Law 97-34, or pursuant to the provisions of sections 235 through 249, inclusive, of the Tax Equity and Fiscal Responsibility Act of 1982 Public Law 97-248, if the provisions of said plan have been approved by the commissioner and permit any of the funds of said trust or custodial account to be invested in savings deposits or time deposits of said bank. No funds held by said bank as trustee or custodian shall be invested otherwise than in bank deposits, properly qualified life insurance retirement income policies or other investments authorized by law for banks, or any combination thereof as such plan may prescribe or permit. Every advertisement, announcement, or solicitation for such a plan or account shall state in a clear and conspicuous manner the amounts of any contributions and earnings thereon, subject to state and federal taxable income;

13. To act as trustee for the holders of any bond issued by the Massachusetts Industrial Finance Agency, pursuant to the provisions of chapter twenty-three A or by any industrial development authority of any city or town pursuant to the provisions of chapter forty D or by the Massachusetts Health and Educational Facilities Authority, pursuant to the provisions of chapter six hundred and fourteen of the acts of nineteen hundred and sixty-eight. No funds held as a trustee shall be invested otherwise than in bank deposits or other legal investments for banks or any combination thereof, as may be prescribed by the trust instrument;

14. To issue or participate with other persons in the issuance of mortgage-backed securities which are guaranteed as to principal and interest by the United States or by an agency of the United States and are backed in whole or in part by mortgages held by such corporation, and may sell, assign or transfer to the United States or any agency of the United States any mortgage loan or interest in any mortgage loan held by such corporation; and in connection therewith such corporation may enter into and perform such agreements relating to the custody and servicing of such mortgages and to other matters as may be required pursuant to applicable regulations of any such agency. For purposes of this section, the Government National Mortgage Association and the Federal Home Loan Mortgage Corporation shall be deemed to be agencies of the United States;

15. To issue or participate with other persons in the issuance of securities representing units of interest in specific mortgage loans or pools or mortgage loans held by such corporation or other issuer, and in connection therewith may enter into and perform such arrangements relating to the custody and servicing of such mortgages and to other related matters, including without limitation provisions for guaranteeing collection or payment of the principal and interest on such securities, as may be found necessary and appropriate by the board of investment or applicable committee of such corporation; provided, however, that the commissioner may from time to time promulgate regulations governing the terms and conditions upon which any such securities may be issued;

16. To purchase by itself or with other banks group life insurance on the lives of debtors who request such insurance. The premium for such insurance, or the premium on an individual life insurance policy held to cover the indebtedness, may be added to the payments required of those who elect to become insured. In the event of the death of any debtor so insured, the insurance proceeds shall be applied to reduce or extinguish the unpaid indebtedness to the extent of such payment. No trustee, director, officer or employee of such bank shall benefit financially, directly or indirectly from the sale of such insurance;

17. To purchase by itself or with other banks group accident and health insurance covering debtors of such bank or group of banks if the debtors request such insurance. Such insurance shall cover all or part of the indebtedness of such debtors. The premium for such insurance, or the premium on an individual accident and health insurance policy held to cover the indebtedness, may be added to the payments required of any such debtor who elects to become insured. No trustee, director, officer or employee of such bank or group of banks shall benefit financially, directly or indirectly from the sale of such insurance;

A bank which has purchased such group accident and health insurance shall send written notice to each such insured debtor thirty days prior to the effective date of any amendment to or cancellation of such insurance. Such notice shall be sent by mail to the last known address of the debtor and shall clearly state the effect such amendment or cancellation will have on the insured debtor. Such notice shall also be given by an advertisement in newspapers published daily or weekly and of general distribution in cities and towns in which the bank has an office, or if there be no such newspaper, then in a newspaper published in the county wherein the city or town is situated and of general distribution. Such notice shall be published at least seven days prior to the effective date of the amendment or cancellation and shall clearly state the effect on the insured debtors.

18. To indemnify its directors, trustees, officers, employees and other agents to whatever extent specified in or authorized by a by-law adopted pursuant to law. Such indemnification may include payment by the bank of expenses incurred in defending a civil or criminal action or proceeding in advance of the final disposition of such action or proceeding upon receipt of an undertaking by the person indemnified to repay such payment if he shall be adjudicated to be not entitled to indemnification under this section. Any such indemnification may be provided although the person to be indemnified is no longer an officer, director, trustee, employee or agent of the bank;

No indemnification shall be provided for any person with respect to any matter as to which he shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the bank;

A bank shall have power to purchase and maintain insurance on behalf of any person who is or was a director, trustee, officer, employee or other agent of the bank, against any liability incurred by him in any such capacity, or arising out of his status as such, whether or not the bank would have the power to indemnify him against such liability;

19. To provide group life insurance, group accident and health insurance or group medical, surgical or hospital insurance or benefits, or all or any combination thereof, for its employees, officers, and directors. The commissioner may, if he deems it necessary, establish regulations providing reasonable restrictions in connection therewith;

20. To establish, participate in, and act as trustee in an educational savings program approved by the commissioner whereby any person may purchase a specific plan in such program designed to provide for the education of a child upon his attaining college age. Such bank may purchase group life insurance on the lives of the debtors participating in such program. The premium for such insurance, or the premium on an individual life insurance policy held to cover the indebtedness, may be added to the payments required of any such debtor and the proceeds of any such insurance, dividends or premium refunds shall be applied by the bank for the sole benefit of the debtors in the manner provided in paragraph 16. No trustee, director, officer or employee of such bank shall benefit financially, directly or indirectly, from the sale of such insurance;

21. To buy and sell gold and silver bullion, foreign coin and exchange;

22. Subject to such restrictions as may be imposed by the commissioner, to accept for payment at a future date drafts and bills of exchange drawn upon it and to issue letters of credit authorizing holders thereof to draw drafts upon it, or its correspondents, at sight or on time; provided, that such acceptance of drafts be based upon actual values; and, provided, that no such corporation shall accept such bills or drafts to an aggregate amount exceeding at any one time one-half of its capital stock and surplus account for a stock corporation and one-half of its surplus account for a thrift institution, except with the approval of the commissioner, and in no case to an aggregate amount in excess of its capital stock and surplus account for a stock corporation or its surplus account for a thrift institution;

23. To accept drafts or bills of exchange drawn upon it and arising out of transactions involving the import or export of goods, having not more than six months’ sight to run; provided, however, that no such corporation shall accept such bills to an aggregate amount exceeding at any time one-half of its capital stock and surplus account for a stock corporation or its surplus account for a thrift institution;

24. To rediscount notes, drafts and bills of exchange arising out of actual commercial transactions;

25. To act as financial or other agent for a person, association, trust, corporation, municipal corporation or government, and in their behalf to negotiate loans and the sale, purchase or other disposition or acquisition of securities or other property;

26. To act as fiscal agent of the United States, and of any corporation, state, county municipality, board, commission or other body politic, and to perform all duties as such fiscal agent as may lawfully be required of it;

27. To assist customers or act for customers in the preparation of payrolls and payroll deductions and in the preparation, maintenance and furnishing of records and statistical information;

28. To lease equipment, machinery, or personal property to customers provided that such equipment, machinery or personal property was acquired at the request of the customer and to maintain, and rent out for hire, at any location occupied by its principal office or any branch office, safe deposit boxes or other receptacles for the safe keeping of personal property upon such terms and conditions as may be agreed upon;

29. To contribute such sum or sums of money as the board of investment in a savings bank or the board of directors in a cooperative bank or trust company may determine to be reasonable, (a) to any private nonprofit organization organized for improving the social and economic conditions, including community development programs and small business technical assistance, in communities in which any such institution has an office or branch including any educational institution, (b) to any educational institution for the purpose of providing scholarships for the benefit of residents of such communities, or (c) to any fund being raised by a committee or agency for the purpose of relieving suffering or distress resulting from disaster or other calamity occurring in any part of the commonwealth; and

30. To participate in the small business capital access program created under section fifty-seven of chapter twenty-three A and to make the loans and create the reserve and take any and all other actions as may be necessary or appropriate for participating in such program.

30A. To participate in the activities of the Massachusetts Growth Capital Corporation created under chapter 40W by making capital available to the corporation by making an investment or deposit in or grant to said corporation, an affiliate or subsidiary of said corporation or any fund managed by said corporation.

31. To exercise any power and engage in any activity that is permissible for a federal bank or out-of-state bank, as defined in section 1 of chapter 167, in accordance with regulations promulgated by the commissioner; provided, however, that the activity is not otherwise prohibited under the laws of the commonwealth; provided, further, that the activity shall be subject to the same limitations and restrictions that are applicable to the federal or out-of-state bank; and provided, further, that the activity authorized for the out-of-state bank has been approved by the Federal Deposit Insurance Corporation under section 24 of the Federal Deposit Insurance Act and Part 362 of the regulations thereunder. In the event that federal or out-of-state banks lose the authority to exercise any power or engage in any activity based upon which comparable authority was granted to state chartered banks pursuant to this section, then unless such authority is authorized by another law of the commonwealth, or a rule, regulation or policy adopted pursuant to such other law of the commonwealth, or by a judicial decision, the commissioner shall revoke the authority or power for state chartered banks pursuant to this section. In determining whether or not to authorize any such activity, the commissioner shall also determine whether or not competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted. The commissioner shall prescribe from time to time such regulations as may be necessary in carrying out the provisions of this paragraph. Except for emergency regulations adopted pursuant to section two of chapter thirty A, any such regulation, or any amendment or repeal thereof, shall, after compliance with all applicable provisions of chapter thirty A except section five, be submitted to the general court.

The commissioner shall file the proposed regulation, amendment or repeal with the clerk of the house of representatives, together with a statement that the pertinent provisions of said chapter thirty A have been complied with and a summary of the regulations in layman’s terms. The clerk shall refer such filing to the joint committee on banks and banking within five days of the filing thereof. No such regulation shall take effect until ninety days after it has been so filed; provided, however, that such ninety day period shall not include days when the general court is prohibited by law or rule from meeting in formal session.

32. To engage in an activity and to acquire and retain the shares of any company engaged in any activity that the commissioner determines to be financial in nature or incidental to the financial activity that is complementary to a financial activity and does not pose a substantial risk to the safety and soundness of the bank, subject to the approval of the commissioner and under limitations or conditions he may impose. In determining whether an activity is financial in nature or incidental or complementary thereto, the commissioner shall consider, but shall not be limited to, those activities considered to be financial in nature or incidental to the financial activity or an activity that is complementary to a financial activity under section 103, section 121 and section 122 of Public Law 106-102, entitled the “Gramm-Leach-Bliley Act of 1999”. Notwithstanding any general or special law to the contrary, this chapter does not authorize a bank or a subsidiary or affiliate of a bank to sell title insurance.

33. To participate in the redevelopment access to capital program created under section 60 of chapter 23A and to make the loans and create the reserve and take other actions necessary or appropriate for participating in the program.

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