BPI Amicus Brief in Canandaigua v Fed Board

Interest of Amici Curiae

The Bank Policy Institute ("BPI") is a nonpartisan public policy, research, and advocacy group that represents universal banks, regional banks, and major foreign banks doing business in the United States.^[1] BPI produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

Established in 1875, the American Bankers Association ("ABA") is the united voice of America's $23.4 trillion banking industry, comprised of small, regional, and large national and State banks that safeguard nearly $18.6 trillion in deposits, and extend more than $12.3 trillion in loans.

The New York Bankers Association ("NYBA") is a not-for-profit association of more than 100 community, regional, and money center commercial banks and savings associations located throughout New York state. NYBA's mission is to improve and promote a unified banking industry. NYBA's members have aggregate deposits of more than $2 trillion, annually lend more than $70 billion in home and small business loans, and employ nearly 200,000 people in New York State.

The Independent Community Bankers of America ("ICBA") has one mission: to create and promote an environment where community banks flourish. ICBA powers the potential of the nation's community banks through effective advocacy, education, and innovation. As local and trusted sources of credit, America's community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers' financial goals and dreams.

This case presents an issue important to Amici and their members, which include some of the nation's largest financial institutions: how the Board of Governors of the Federal Reserve System ("Board") evaluates applications to engage in activities that are "complementary" to a financial activity under Section 4(k) of the Bank Holding Company Act ("BHC Act"). See 12 U.S.C. § 1843(k)(1)(B).

Amici and their members share a significant interest in ensuring that the Board properly applies the BHC Act when it makes determinations regarding the activities in which bank holding companies may permissibly engage. Amici submit this brief to draw the Court's attention to legal errors in the Board's analysis and to urge the Court to resolve the case in a way that accounts for the broad range of other circumstances that implicate Section 4(k) of the BHC Act.^[2]

Introduction and Summary of Argument

Federal law generally prohibits banks and their affiliates from engaging in non-banking activities. To help banking organizations remain competitive, Congress established exceptions to that rule. In particular, Congress authorized a subset of bank holding companies that are well-capitalized and well-managed (called financial holding companies) to engage in an expanded set of non-banking activities. These expanded activities include activities that the Board of Governors of the Federal Reserve System has determined are complementary to a financial activity and do not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. See 12 U.S.C. § 1843(k)(1)(B).

This case concerns the Board's denial of a request by Canandaigua National Corporation ("Canandaigua") to engage in a limited-scope cash guarantee mortgage program under the authority Congress provided. See FRB Order No. 2025-17 (the "Order") (Oct. 17, 2025), reproduced at Petitioner's Appendix ("PA") 251.

Amici file this brief to inform the Court of the broader context in which this dispute is situated and to draw the Court's attention to flaws in the Order's analysis. Given those flaws, there is no need for the Court to reach a final conclusion regarding whether the BHC Act authorizes Canandaigua's request. The proper approach is to remand to the Board for further explanation or analysis, for two reasons.

First, the Board misconstrued the statutory framework that governs this dispute-the complementary activities authority contained in the Gramm-Leach-Bliley Act. See 12 U.S.C. § 1843(k)(1)(B). That authority is an exception to the general statutory prohibition on non-banking activities by bank holding companies. See id. § 1843(a)(2). The complementary activities authority thus by definition expands the range of permissible activities. But the Board's Order nullified Congress's design by denying Canandaigua's application because the proposed activity is a prohibited non-banking activity. If the Board's reasoning were correct, nothing would qualify as a complementary activity. Precedent counsels against giving the statute such a self-defeating interpretation. See, e.g., Nat. Res. Def. Council v. Abraham, 355 F.3d 179, 197 (2d Cir. 2004) (rejecting interpretation that would have rendered a statute "inoperative, or a nullity").

Second, the Board did not adequately account for a crucial aspect of Canandaigua's proposal. Canandaigua agreed to limit any exposure to real estate flowing from its cash guarantee mortgage program to less than 0.1 percent of its assets (and around only one percent of its Tier 1 capital). The Board acknowledged the relevance of this risk-mitigation mechanism, but nevertheless disregarded it when conducting the statutory safety-and-soundness inquiry. See Order at 8-9 (PA258-259). This defect in the Board's analysis defied the Administrative Procedure Act's requirement that agencies give satisfactory explanations for their decisions that account for all important aspects of an issue.

Each of these errors provides an independent ground for this Court to grant the Petition for Review and remand to the Board for further proceedings. Amici offer no prediction whether, with those deficiencies addressed, the Board could come to the same conclusion on remand. Whatever conclusion it reaches, however, the Court should be aware that this dispute-concerning a community bank's desire to compete more effectively with nonbank lenders in the Rochester, New York, real estate lending market-arises in the context of a statutory scheme that governs a broad range of other geographic markets and potential activities. Given that dynamic, and given the importance of the underlying legal issues to financial holding companies, Amici urge the Court to decide this case no more broadly than required. Cf. PDK Lab'ys, Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004) (Roberts, J., concurring in part and concurring in judgment) (citing "the cardinal principle of judicial restraint" that "if it is not necessary to decide more, it is necessary not to decide more").

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[1] Pursuant to Circuit Rule 29.1(b) and Federal Rule of Appellate Procedure 29(a)(4)(E), amici state that no party's counsel authored this brief in whole or in part and no person-other than amici, their members, or their counsel-contributed money intended to fund preparing or submitting this brief.

[2] Amici have authority to file this brief under Federal Rule of Appellate Procedure 29(a)(2) because all parties have consented to its filing.