Under Virginia's public-funds investment law, does 'domestic bank' mean only Virginia banks or any U.S. bank?

Plain-English summary

The town attorney for Dayton asked whether the phrase "domestic bank" in the Virginia Investment of Public Funds Act (VIPFA), § 2.2-4509, referred only to Virginia banks or to any U.S. bank. The AG concluded that "domestic bank" reaches any bank in the 50 states or D.C., organized under the laws of one of the 50 states, D.C., or the United States.

Section 2.2-4509 lets the Commonwealth and its political subdivisions invest in negotiable certificates of deposit and bank deposit notes of "domestic banks and domestic offices of foreign banks." Neither term is defined in VIPFA. The dictionary definitions of "domestic" could go either way: it could mean "of or relating to one's own country," or "of or relating to one's own jurisdiction."

The tiebreaker came from reading Virginia's banking statutes in pari materia with VIPFA. Va. Code § 6.2-836 incorporates by reference the federal definition of "foreign bank" at 12 U.S.C. § 3101(7) and 12 U.S.C. § 3103(c). Federal law defines a foreign bank as a company organized under the laws of a foreign country, or a U.S. territory like Puerto Rico, Guam, American Samoa, or the Virgin Islands. Reading that into VIPFA, "foreign bank" means banks organized outside the 50 states and D.C., which makes "domestic bank" mean banks organized inside the 50 states and D.C.

That construction also fit VIPFA's overall purpose, which is to safeguard public money by directing investment into safe instruments and setting standards of care. Limiting investment to only Virginia banks would have unnecessarily restricted the safe-investment universe.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What's a 'domestic office of a foreign bank'?
A U.S. branch or agency of a non-U.S. bank. Section 2.2-4509 lets public funds be invested in CDs and deposit notes of those domestic offices too, in addition to fully domestic banks.

Why does the distinction matter?
Because public funds have to be invested in specific permitted instruments at permitted counterparties. If "domestic bank" meant only Virginia banks, localities outside Virginia's biggest metropolitan areas might have limited investment options.

Is a credit union a 'bank' under this provision?
The opinion did not address credit unions. It dealt only with the geographic scope of "domestic bank." Whether credit unions qualify would turn on a separate analysis of "bank" itself, which is also undefined in VIPFA.

Does this mean any U.S. bank, no matter how small or risky, is okay?
No. Section 2.2-4509 imposes additional safety-and-soundness requirements, and VIPFA as a whole imposes standards of care. The opinion was about the geographic scope of "domestic bank," not about whether any specific bank passed the credit-quality criteria.

Why use the in pari materia canon?
Because related statutes are presumed to use the same words consistently. Virginia banking statutes had already adopted the federal "foreign bank" definition for one purpose. Reading VIPFA's "foreign bank" to mean something different would have created an internal inconsistency.

Background and statutory framework

The Virginia Investment of Public Funds Act (VIPFA), Va. Code §§ 2.2-4500 through 2.2-4518, governs how the Commonwealth and its political subdivisions invest public money. The Act enumerates permitted instruments and counterparties through a long list of specific statutes (§§ 2.2-4500 through 2.2-4512). Section 2.2-4509 allows investments in negotiable CDs and negotiable bank deposit notes of "domestic banks and domestic offices of foreign banks."

Virginia's banking statutes, Va. Code §§ 6.2-800 through 6.2-946, govern banks generally. Section 6.2-836 references 12 U.S.C. § 3103(c) for the definition of "home state." That federal statute, in turn, defines "foreign bank" at § 3101(7) to mean any company organized under the laws of a foreign country or a U.S. territory.

The Virginia Supreme Court's general statutory construction rules apply: undefined terms get their ordinary meaning (McKeon), the Code is a single body of law (King v. Commonwealth), and statutes addressing closely connected subjects are read in pari materia (Prillaman).

Citations

• Va. Code § 2.2-505 (Attorney General opinions)
• Va. Code §§ 2.2-4500 through 2.2-4518 (VIPFA)
• Va. Code § 2.2-4509 (CD and bank deposit note investments)
• Va. Code §§ 6.2-800 through 6.2-946 (Virginia banking statutes)
• Va. Code § 6.2-836 (home state definition)
• 12 U.S.C. § 3101 (foreign bank definition)
• 12 U.S.C. § 3103 (federal interstate branching)
• McKeon v. Commonwealth, 211 Va. 24, 175 S.E.2d 282 (1970) (Va. Supreme Court)
• King v. Commonwealth, 2 Va. App. 708, 347 S.E.2d 530 (1986) (Va. Court of Appeals)
• Prillaman v. Commonwealth, 199 Va. 401, 100 S.E.2d 4 (1957) (Va. Supreme Court)
• First Nat'l Bank of Richmond v. Holland, 99 Va. 495, 39 S.E. 126 (1901) (Va. Supreme Court)
• Turner v. Commonwealth, 226 Va. 456, 309 S.E.2d 337 (1983) (Va. Supreme Court)
• Tiller v. Commonwealth, 193 Va. 418, 69 S.E.2d 441 (1952) (Va. Supreme Court)
• Va. Real Estate Bd. v. Clay, 9 Va. App. 152, 384 S.E.2d 622 (1989) (Va. Court of Appeals)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2012/12-060_Ham.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

September 7, 2012

Jason J. Ham, Esquire
Town Attorney for the Town of Dayton
410 Neff Avenue
Harrisonburg, Virginia 22801-3434

Dear Mr. Ham:
I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented
You ask whether the term "domestic bank" in § 2.2-4509 of the Code of Virginia refers to any United States bank, or, in the alternative, is restricted to only Virginia banks.

Response
It is my opinion that the term "domestic bank," as used in § 2.2-4509, is not limited to banks located in the Commonwealth of Virginia, but rather refers to a bank located in the fifty United States or the District of Columbia and organized under the laws of one of the fifty states, the District of Columbia or the United States.

Applicable Law and Discussion
Section 2.2-4509, a provision of the Virginia Investment of Public Funds Act ("VIPFA"), generally permits the "Commonwealth and all public officers, municipal corporations, and other political subdivisions and other public bodies of the Commonwealth [to] invest [certain public] moneys ... in negotiable certificates of deposit and negotiable bank deposit notes of domestic banks and domestic offices of foreign banks . . . ." VIPFA, however, does not expressly define the terms "domestic bank" or "foreign bank." As such, the term "domestic" in this case could mean within the Commonwealth, or, more broadly, within the United States, while the term "foreign" could refer to an entity located outside of the United States, or simply outside the borders of the Commonwealth.

I am aware of no other place in the Code of Virginia where the terms "domestic bank" or "foreign bank" are specifically defined. Ordinarily, when a particular word in a statute is not defined therein, the word should be accorded its ordinary meaning. Black's Law Dictionary sets forth the following relevant definitions for the word "domestic": (1) "[o]f or relating to one's own country"; and (2) "[o]f or relating to one's own jurisdiction." Moreover, Black's Law Dictionary further defines the word "foreign" in the following pertinent ways: (1) "[o]f or relating to another country"; and (2) "[o]f or relating to another jurisdiction." Based on the foregoing definitions, a "domestic bank" as contemplated by § 2.2-4509 could refer to a bank located in the Commonwealth, or, in the alternative, a bank located in the United States. Because these definitions do not resolve the ambiguity, I must turn to other means of statutory construction to respond to your inquiry.

"The Code of Virginia constitutes a single body of law, and other sections can be looked to where the same phraseology is employed." Moreover, "statutes may be considered as in pari materia when they relate to the same person or thing, the same class of persons or things or to the same subject or to closely connected subjects or objects." The Virginia statutes applicable to banks incorporate by reference the term "foreign bank" as defined by a federal statute relating to interstate branching of foreign banks. This federal statute defines "foreign bank" as "... any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such laws, of any such company[.]" Because the Virginia banking statutes and § 2.2-4509 discuss closely connected subject matter (i.e., foreign versus domestic banks), I conclude that the term "foreign bank" in VIPFA refers to banks organized and operated outside of the fifty United States and the District of Columbia. Conversely, the term "domestic bank," therefore, must refer to a bank physically located in any of the fifty United States or the District of Columbia, and organized under the laws of one of the fifty states, the District of Columbia or the United States.

This interpretation is consistent with the apparent aim of VIPFA. Based on a review of the entirety of VIPFA, it is evident that the purpose of the act as a whole is to safeguard monies belonging to the Commonwealth and its subdivisions by requiring investment in safe and reliable devices, and by establishing standards of care by which such monies must be invested. Accordingly, I must assume that the purpose of § 2.2-4509 is to further the purpose of the VIPFA as a whole.

Conclusion
Accordingly, it is my opinion that the term "domestic bank" refers to a bank located in the fifty United States or the District of Columbia and organized under the laws of one of the fifty states, the District of Columbia or the United States; the term is not restricted to banks located in the Commonwealth of Virginia.

With kindest regards, I am
Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General