OLR Bill Analysis
AN ACT CONCERNING BANK AND CREDIT UNION TRANSACTIONS
This bill sets the fee for bank and credit union examinations at their actual cost, expands the banking commissioner's authority of institutions' conversions, and bestows certain rights on credit union account holders. It modifies provisions concerning bank branch establishment, operation, consolidation, and relocation. It creates new sections addressing a credit union's sale of its assets and requires credit unions to apply to the commissioner before establishing mobile branches. The bill also eliminates a requirement that the recipient of a bounced check make his request for payment by certified mail.
The bill increases collateral requirements for certain public depositories and defines a "share account holder" as a person maintaining a share account at a Connecticut, federal, or out-of-state credit union. The bill also deletes obsolete language in the bank and credit union statutes and makes minor and technical changes.
EFFECTIVE DATE: July 1, 2003, except that the provision on bounced checks takes effect October 1, 2003.
FEES
Examination Fees
The bill specifies that the fee will be the actual cost, as the commissioner determines, for the examination of (1) a Connecticut bank organized to function solely in a fiduciary capacity or (2) an out-of-state branch of a Connecticut bank or credit union or a Connecticut branch of an out-of-state bank or credit union.
The bill allows the commissioner to share the examination fee with other banking regulators in accordance with agreements he enters into when (1) a Connecticut bank relocates a branch or limited branch established outside Connecticut to another location outside the state; (2) an out-of-state bank merges or consolidates with a bank, acquires a bank's assets, or establishes a de novo branch in Connecticut; (3) a Connecticut bank merges or consolidates with an out-of-state bank where the resulting institution is a bank; or (4) a Connecticut bank acquires an out-of-state bank's branch, a significant part of its assets, or at least 10% of its stock. The bill also allows the commissioner to share the fee with other credit union regulators in accordance with agreements he enters into for the examination and supervision of a Connecticut credit union's out-of-state branches and a state-chartered out-of-state credit union's Connecticut branches.
Acquisition Fee
The bill extends the $ 2,500 fee for acquiring assets to cover state and federal credit unions and eliminates this fee for assumption of a bank's liabilities.
CONVERSIONS
The law requires a converting institution's eligible account holders to receive subscription rights to buy the converted institution's capital stock. The bill specifies that the commissioner's regulations dealing with the conversion identify which account holders will be eligible for the subscription rights. It also requires the converting institution to offer subscription rights to account holders before offering them to the community or the general public. Current law only requires subscription rights to be offered to account holders before the general public and does not address the community.
The bill allows, rather than requires, the commissioner to approve conversions that meet specified criteria under current law, and precludes him from approving conversions that do not meet these criteria. It clarifies that the documents a converting bank must file when converting to an uninsured bank include a proposed amended certificate of incorporation. Current law only refers to a proposed certificate of incorporation.
BRANCHES
Current law requires branches to maintain minimum banking hours of 9 a. m. to 3 p. m. , Monday through Friday. The bill eliminates the specific hours requirement and simply requires branches to be open for banking business Monday through Friday. The bill defines branch consolidation as combining within the same neighborhood, without substantially affecting the nature of the business or customers served, (1) two or more branches into a single branch, (2) one or more branches and one or more limited branches into a single branch or limited branch, (3) two or more limited branches into a single branch, or (4) one or more branches or limited branches into a main office.
The law requires the commissioner to consider several factors when deciding whether to allow a bank to establish a new branch. Under the bill, the commissioner would have to determine whether establishment of the branch is consistent with safe and sound banking practices in general, without reference to the town or surrounding area. The bill allows a Connecticut bank, for up to three years after the commissioner issued its final certificate of authority, to establish a branch or limited branch if the proposed branch or limited branch was approved as part of the bank's original application for organization. Unless the commissioner requires approval, the bank only must give him 30 days prior notice that it is establishing the branch or limited branch.
The bill eliminates the need for a Connecticut bank to obtain the commissioner's approval before relocating a branch or limited branch in or out of the state. Instead, it requires the bank to provide 30 days prior written notice to the commissioner and notice to customers. Current law requires banks to get the commissioner's approval and does not require them to give notice to customers. The bill also allows a Connecticut bank to consolidate a branch, limited branch, or main office in or out of the state with 30 days prior notice to the commissioner, and notice to customers, in accordance with the commissioner's requirements. The bill specifies that the commissioner's approval for a Connecticut bank's sale of a branch, limited branch, or mobile branch established outside the state is not required under the statutes dealing with branches if it is required under the statutes addressing sale of assets.
SALE OF ASSETS
Banks
The bill broadens banks' options as to the disposition of their assets by changing the terms "sale" and "purchase" to "transfer" and "acquisition" to cover activities such as assignment, transfer, and exchange. It specifies that the statutory provisions dealing with the sale of assets do not apply to a Connecticut bank's liquidation of its retail deposits in connection with its bank's conversion to an uninsured bank. Current law prohibits a bank or out-of-state bank from purchasing or otherwise acquiring a Connecticut bank or credit union's assets and business from that institution's receiver without the commissioner's approval. The bill refines the ban to prohibit a bank or out-of-state bank from acquiring all or a significant part of a Connecticut bank or credit union's assets or business from the institution's receiver without the commissioner's approval.
Credit Unions
The bill allows credit unions to transfer, rather than just sell, all or a significant part of their assets or business, with the commissioner's approval, to a bank, Connecticut credit union, or federal credit union. By current law, a transferring credit union and its acquirer must file with the commissioner a written agreement setting out the transaction's terms and conditions. The bill requires the agreement also to contain such other information as the commissioner requires. Current law requires the agreement to be approved and executed by a majority of the governing board of both the transferring credit union and the acquirer, but the bill specifies that if the acquirer does not have a governing board, someone the acquirer authorizes to execute the agreement on his behalf can do so.
The bill allows the commissioner to require a transferring credit union to obtain authorization for the transfer by the affirmative vote of at least a majority of its members. Current law requires a credit union to get authorization for the sale by the affirmative vote of at least two-thirds of the credit union's voting members. If a Connecticut credit union transfers all of its assets and business, the bill requires it to comply with existing laws regarding termination and dissolution. Current law requires it to engage in a detailed process, including (1) sending notice to all share account holders and publishing the notice in the newspaper, (2) liquidating its affairs, (3) enforcing a time-limit on share account holders' claims, and (4) distributing any surplus among eligible parties.
The bill eliminates a prohibition on a Connecticut credit union acquiring all or a significant part of a federal credit union's assets or business if the acquisition would result in the Connecticut credit union controlling 30% or more of all bank and credit union deposits in the state, unless the commissioner allows a greater percentage.
INTERSTATE BANKING
The bill allows the commissioner to waive the provisions regarding out-of-state banks as applied to their acquisition of a bank's assets from their receiver.
PUBLIC DEPOSITS
The bill increases collateral requirements for certain public depositories (institutions allowed to hold public funds). Under current law, most institutions must hold an amount equal to between 10% and 120% of their public deposits, depending on their risk-based capital ratio. The bill requires a qualified public depository that is (1) an uninsured bank to maintain, apart from its other assets, an amount equal to 120% of all public deposits it holds and (2) subject to a cease and desist order, or entered into a stipulation and agreement or letter of understanding and agreement with a bank or credit union supervisor, to maintain, apart from its other assets, 120% of all public deposits it holds, except that the depository and the public depositor can agree on a greater percentage.
CREDIT UNION BRANCHES
Disapproval of Applications
The bill eliminates a provision in current law that allows the commissioner to disapprove a Connecticut credit union's application to establish a branch if allowing the branch would result in an impermissible overlap with the field of membership of other local credit unions. Instead, the bill allows him to disapprove the application if establishing the proposed branch would result in an oversaturation of credit unions in the town where the branch will be located.
Mobile Branches
The bill requires Connecticut credit unions to file an application with the commissioner listing each predetermined location before establishing a mobile branch in or out of the state. It defines a "mobile branch" as a Connecticut credit union office at which credit union business is conducted, that actually moves or is transported to one or more specific locations in accordance with a predetermined schedule. The commissioner may disapprove the application within 30 days after it is filed. The commissioner can disapprove an application for the same reasons he can disapprove an application to establish a regular branch. The bill requires a mobile branch to be conspicuously identified as a branch of a Connecticut credit union.
The bill requires a Connecticut credit union that proposes to close a mobile branch to submit to the commissioner a notice of the proposed closing no later than 30 days before the proposed closing date. The notice must include a detailed statement of the reasons for the decision to close the mobile branch. If a Connecticut credit union proposes to close a predetermined location of a mobile branch, the bill requires it to notify the commissioner before closing it.
Out-of-State, State-Chartered Credit Unions
The bill also allows the commissioner to enter into agreements with federal, as he already can with other state, credit union regulators concerning the examination or supervision of out-of-state, state-chartered credit unions with branches in Connecticut.
The bill allows an out-of-state state-chartered credit union, with the commissioner's prior written approval, to expand its field of membership to add members in Connecticut. The out-of-state credit union may expand its field of membership as long as the laws of the state in which it is organized allow a Connecticut credit union to expand its field of membership in that state, under conditions no more restrictive than those the commissioner imposes in Connecticut, and the proposed field of membership has been approved by that state. The bill prohibits the commissioner from approving an expansion unless he determines that (1) the out-of-state credit union is organized under laws similar to Connecticut's credit union laws, (2) the out-of-state credit union is financially solvent, (3) the out-of-state credit union has share insurance as required by the Federal Credit Union Act, (4) an official from the state where it was organized effectively examines and supervises the out-of-state credit union, and (5) the public interest in the probable benefits to members of the group proposed to be included in the out-of-state credit union's field of membership clearly outweighs any potential harm to Connecticut credit unions and their members.
BAD CHECKS
The bill gives the recipient of a dishonored check the option to make his written demand for payment on the check by first class or regular mail, as long as he includes an affidavit of service by mail. Current law requires him to send the demand by first class and certified mail, return receipt requested, with delivery restricted to the person who wrote the check. Either way he sends the demand, it must be sent on or after the date the payee received noticed that the check had bounced. The bill requires the affidavit of service by mail, if the recipient chooses to use first class or regular mail, to follow a form substantially similar to that provided in the bill.
CREDIT UNION MERGER EFFECTIVE DATES
The law requires merging credit unions to file several documents in an application with the commissioner, including a merger agreement. The bill allows the merger agreement to specify the proposed merger's effective date, which cannot be earlier than the date the parties file the agreement and the commissioner's approval in the Secretary of the State's office. If the merger agreement does not contain an effective date, the bill states that the merger is effective on the date the parties file the agreement and approval with the Secretary of the State.
BUSINESS NAMES
The bill corrects a reference to the bank organization statute in a provision exempting banks from the law prohibiting businesses from using the word "savings" as part of their name. Current law refers to a section on savings and loan depositors' votes instead of the section on organizing a bank.
BACKGROUND
Legislative History
On April 15, 2003, the Senate referred the bill to the Finance, Revenue and Bonding Committee. The committee favorably reported a substitute on April 24, 2003, deleting sections that (1) reduced the application and investigation fee for relocating a Connecticut bank's main office from $ 2,000 to $ 500 and eliminated the $ 500 fee for relocating a Connecticut bank's branch or limited branch and (2) eliminated of the current $ 500 application fee for acquiring, altering, or improving real estate or purchasing adjoining real estate when a Connecticut bank establishes a branch or limited branch.
COMMITTEE ACTION
Banks Committee
Joint Favorable Substitute
Yea |
19 |
Nay |
0 |
Finance, Revenue and Bonding Committee
Joint Favorable Substitute
Yea |
41 |
Nay |
1 |