OLR Bill Analysis

sSB 983 (File 164, as amended by Senate "A")*

AN ACT CONCERNING FOREIGN BANKS AND RECEIVERSHIPS AND CONSERVATORSHIPS FOR CONNECTICUT BANKS AND CONNECTICUT CREDIT UNIONS

SUMMARY:

This bill makes several changes to the laws concerning foreign banks and bank and credit union receivers and conservators. It allows a person other than the banking commissioner to serve as a receiver or conservator under certain circumstances. If the commissioner does serve as receiver or conservator, the bill allows him to sell, assign, compromise, or otherwise dispose of the bank or credit union's debts and property up to $ 50,000 without the court's approval. It also requires the commissioner to pay the liquidators of a foreign bank's other United States offices, if any, after he takes what is necessary to satisfy the bank's Connecticut debts and before he returns remaining sums to the foreign bank's principal office, domiciliary liquidator, or receiver.

*Senate Amendment "A" eliminates a provision specifying that nothing in the statutory section concerning liquidating the business and property of foreign banks with Connecticut branches or agencies should be construed as adversely affecting the New York Federal Reserve Bank's valid lien or perfected security interest against the foreign bank's Connecticut property. It replaces it with a provision specifying that nothing in that section should be construed as adversely affecting the valid lien or perfected security interest of a federal reserve bank or the U. S. Treasury Department in a foreign bank's Connecticut business or property.

EFFECTIVE DATE: Upon passage

RECEIVERS AND CONSERVATORS

By law, the Superior Court may appoint the banking commissioner, the Federal Deposit Insurance Corporation, or the National Credit Union Administration as a receiver or conservator for a Connecticut bank or credit union. The bill allows the court to appoint another competent person if extraordinary circumstances exist. It authorizes a receiver or conservator, on the bank or credit union's behalf and subject to the appointing court's approval, if required, to (1) dispose of property by means other than sale; (2) sell, assign, or otherwise dispose of bad debt; and (3) compromise all doubtful claims. Current law always requires the court's approval for the sale of property or the compromise of bad debt.

Under the bill, if the court appoints the commissioner as receiver or conservator, he does not need the court's approval to (1) sell, assign, compromise, or otherwise dispose of the bank or credit union's bad or doubtful debts up to $ 50,000; (2) compromise any non-deposit claim against the bank or credit union when the amount proposed to be paid in compromise is $ 50,000 or less, except that he must get the court's approval for any claim in the bank or credit union's favor against a director, trustee, or other officer for breach or neglect of official duty; or (3) sell or otherwise dispose of any of the bank or credit union's personal property up to $ 50,000 in value. The bill considers the value of personal property to be the market value for a single class of a security, a commodity, or other property or claim with a readily discernable market value. It considers the value of other property or bad or doubtful debt to be its current value as the commissioner, in good faith, determines.

The law requires receivers to convert into money all bank or credit union assets that come into their possession. For that purpose, current law allows them to sell and dispose of the assets, properly convey them, and compromise all doubtful claims for or against the bank or credit union, except that they must get special authority and approval from the court for any claim in the bank or credit union's favor against a director, trustee, or other office for breach or neglect of official duty. The bill eliminates that provision and instead requires receivers to convert assets into money by selling, disposing of, or compromising property, debts, and claims.

FOREIGN BANKS

The bill limits the claims of foreign banks' creditors that the commissioner will accept for payment out of the foreign bank's Connecticut business and property. Under current law, the commissioner accepts claims arising out of transactions the creditors entered into with the foreign bank's Connecticut branches and agencies. The bill restricts these to claims arising out of transactions the creditors entered into with the foreign bank's Connecticut branches and agencies that still exist as those branches and agencies' liabilities are reflected in their books when the commissioner takes possession of the foreign bank's business and property.

The law requires the commissioner, upon the Hartford Superior Court's order, to turn over to the foreign bank's principal office, domiciliary liquidator, or receiver the assets remaining after the accepted claims, interest, and liquidation expenses have been paid in full. The bill requires the commissioner first to pay from the remaining assets to the foreign bank's other United States offices that are being liquidated, upon their liquidators' request, amounts they demonstrate are needed to pay claims they accept and expenses they incur in the liquidating process. After the commissioner makes these payments, if any, he must turn over the remaining assets to the foreign bank's principal office, domiciliary liquidator, or receiver.

Current law allows a party to a qualified financial contract with a foreign bank that has a Connecticut branch or agency to retain its collateral if the contract is repudiated or terminated and apply the collateral to satisfy any claims it secured. The bill expands that provision to allow parties to qualified financial contracts with any foreign bank the commissioner is liquidating, not just those with Connecticut branches or agencies, to retain their collateral if the contract is repudiated, terminated, or liquidated.

The bill specifies that nothing in the statutory section concerning liquidating the business and property of foreign banks with Connecticut branches or agencies should be construed as adversely affecting a valid lien or perfected security interest of a federal reserve bank or the U. S. Treasury Department in a foreign bank's business or property in Connecticut.

BACKGROUND

Legislative History

On April 30, the Senate referred the bill to the Judiciary Committee, which reported it favorably and without change on May 6.

COMMITTEE ACTION

Banks Committee

Joint Favorable Report

Judiciary Committee

Joint Favorable Report