# Why do banks have big buildings in many downtowns? **URL:** \ **Category:** Factual Questions\ **Created:** [April 9, 2013, 1:43pm UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223 "2013-04-09T13:43:46Z")\ **Posts on this page:** 7\ **Page:** 2
**Author:** ![KneadToKnow](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kneadtoknow/32/3999_2.png) [@KneadToKnow](https://boards.straightdope.com/u/KneadToKnow)\ **Post date:** [April 9, 2013, 3:49pm UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/21 "2013-04-09T15:49:52Z")
> [@Amateur\_Barbarian](#): > > I’d say sewers. Pooplic transport. ---
**Author:** ![Yllaria](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/yllaria/32/3452_2.png) [@Yllaria](https://boards.straightdope.com/u/Yllaria)\ **Post date:** [April 9, 2013, 3:59pm UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/22 "2013-04-09T15:59:11Z")
> [@Amateur\_Barbarian](#): > > I’d say sewers. I like the way you think. Priorities. ---
**Author:** ![Darth\_Panda](https://avatars.discourse-cdn.com/v4/letter/d/ee7513/32.png) [@Darth\_Panda](https://boards.straightdope.com/u/Darth_Panda)\ **Post date:** [April 9, 2013, 4:25pm UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/23 "2013-04-09T16:25:40Z")
**I actually learned about this in a banking law class about 6 years ago.** Banks are highly regulated entities, and are limited in the types of businesses ventures that they can take part in - particularly with regard to risk. This means that they have traditionally had a limited amount of places to make money “on the side.” This was particularly true prior to the allowance of mixing investment banking with retail, or consumer, banking. The allowance to enter into real estate operations when their own office was lcoated within the building was granted by the Office of the Comptroller of the Currency if I remember correctly. This gave (consumer) banks the ability to enter into a new line of business and take advantage of the cheap capital that they have access to in order to make some non-correlated returns to compliment their banking portfolio. I may be able to dig up some details from my Banking Law text when I get home, but don’t hold your breath. 🙂 ---
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [April 9, 2013, 4:35pm UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/24 "2013-04-09T16:35:15Z")
> [@Dewey\_Finn](#): > > I don’t think you can assume that the name on the building corresponds to the owner. A lot of times, the name on the building is just one of the tenants. Sometimes, this is the largest tenant, but sometimes a smaller tenant might negotiate the right to put its name on the building. Exactly. When I worked in advertising, in downtown Chicago, my agency’s logo was on the top of our building. We didn’t own the building – it was actually owned by the Metropolitan Water District (which was the other major tenant in the building), but the agency wanted the visibility of the big sign. 🙂 ---
**Author:** ![Mr\_Downtown](https://avatars.discourse-cdn.com/v4/letter/m/8e8cbc/32.png) [@Mr\_Downtown](https://boards.straightdope.com/u/Mr_Downtown)\ **Post date:** [April 10, 2013, 4:05am UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/25 "2013-04-10T04:05:50Z")
Even in places without much public transit, being downtown gives you access to a larger pool of workers. You say that you live in North Metropolis and don’t relish a one-hour commute to downtown. You might prefer the bank offices locate near your house. But what about the worker who lives in South Metropolis, and is now facing a two-hour commute to work at the bank? And in a lot of US cities, such a locational choice has racial and social equity implications. For several decades, companies (particularly those needing lots of clerical workers) decamped for suburban office parks. They were (a little) cheaper to rent, but it turned out that there was no yeast out there to make the bread rise. The workers ate in the cafeteria or the nearby Taco Bell, and never had chance meetings or experiences that them an unexpected idea or flash of creativity. And certain types of creative talent, particularly the millennials who program and design, simply can’t be persuaded to work in a suburban office park. If you want them, you locate downtown. ---
**Author:** ![Isilder](https://avatars.discourse-cdn.com/v4/letter/i/cc9497/32.png) [@Isilder](https://boards.straightdope.com/u/Isilder)\ **Post date:** [April 10, 2013, 4:18am UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/26 "2013-04-10T04:18:37Z")
Here in NSW Australia eg Sydney, Newcastle, Maitland, one can see the Victorian era (sandstone facade if not sandstone all round) bank buildings in these downtown areas, but the banks are not occupying them ! Well in some cases a newer bank, at least _new to the state_, has taken over occupancy… (there’s been a fad of state banks becoming nationwide, and of course, unifications, so thats why I say “new” … ). Now why would the new bank take over the old banks building ? Different question, but its the same answer. Its to get “brand recognition” from being prominent in the market place. its called “exposure” or “location location location”. I have seen the building saying “Bank of NSW” with a sports goods shop in it, and next door, the “Westpac” (new name of Bank of NSW) operating right next door in a modern building. The Commonwealth Bank of Australia, CBA, was still open in its original building just 100 meters away. ---
**Author:** ![Darth\_Panda](https://avatars.discourse-cdn.com/v4/letter/d/ee7513/32.png) [@Darth\_Panda](https://boards.straightdope.com/u/Darth_Panda)\ **Post date:** [April 10, 2013, 11:22am UTC](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223/27 "2013-04-10T11:22:27Z")
Here’s the applicable law: 12 usc 29 > [@](#): > > A national banking association may purchase, hold, and convey real estate for the following purposes, and for no others: > First. Such as shall be necessary for its accommodation in the transaction of its business. > **[USCODE-2009-title12-chap2-subchapI-sec29.pdf](https://www.govinfo.gov/content/pkg/USCODE-2009-title12/pdf/USCODE-2009-title12-chap2-subchapI-sec29.pdf)** > > 205.79 KB Here’s the ruling in _Brown v. Schleier_: > [@](#): > > Nor do we perceive any reason why a national bank, when it purchases or leases property for the erection of a banking house should be compelled to use it exclusively for banking purposes. If the land which it purchases or leases for the > accommodation of its business is very valuable, it should be accorded the same rights that belong to other land owners of improving it in a way that will yield the largest income, lessen its own rent, and render that part of its funds which are invested in realty most productive. There is nothing, we think, in the national bank act, when rightly construed, which precludes national banks, so long as they act in good faith, from pursuing the policy above outlined. Here’s a discussion of the applicable law by the Office of the Comptroller of the Currency (one of the primary bank regulators in the US) in an interpretive letter: > [@](#): > > A national bank’s authority to own real estate is governed by 12 U.S.C. § 29. Section 29(First) provides that a national bank may purchase, hold, and convey such real estate “as shall be necessary for its accommodation in the transaction of its business.” The limitations of section 29 are designed “to keep the capital of the banks flowing in the daily channel of commerce; to deter them from embarking in hazardous real estate speculations; and to prevent the > accumulation of large masses of such property in their hands …”2 > However, section 29 does not prohibit a national bank from owning or leasing premises larger than its current needs dictate.3 Consistent with section 29, the bank’s activities must be conducted in good faith, that is, for banking purposes and not in an effort to avoid the limitations of section 29.4 Once a national bank owns property for its own use, both the courts and the OCC have recognized that the bank may maximize the utility of its banking premises by leasing excess space in its premises. [http://www.occ.gov/static/interpretations-and-precedents/jul05/int1034.pdf](http://www.occ.gov/static/interpretations-and-precedents/jul05/int1034.pdf) But, there are limits: > [@](#): > > The Brown case also contains important limiting principles that have long been recognized by the OCC and the courts. The acquisition of real estate or establishment of bank facilities must be conducted in good faith in furtherance of a bank’s banking operations, and not as a real estate development business. The burden is on the bank to demonstrate a legitimate business reason based on accommodating its banking business operations for acquiring and/or developing the property for the projected use. As one measure of good faith use of the premises for banking purposes, the courts and the OCC look to the percentage of use or occupancy of property in conjunction with the bank’s business. Finally, the investment must not be speculative or motivated by realizing a gain on appreciation of the real estate property value. OCC interpretations, including these Bank Premises Letters, have recognized these substantial limitations and constraints. [http://www.occ.gov/news-issuances/congressional-testimony/2006/pub-test-2006-105-written.pdf](http://www.occ.gov/news-issuances/congressional-testimony/2006/pub-test-2006-105-written.pdf) [Previous page](https://boards.straightdope.com/t/why-do-banks-have-big-buildings-in-many-downtowns/655223.md?page=1)