Connecticut Seal

Senate Bill No. 286

Public Act No. 04-8

AN ACT IMPLEMENTING THE LEGISLATIVE COMMISSIONERS' RECOMMENDATIONS FOR TECHNICAL REVISIONS TO VARIOUS STATUTES RELATIVE TO THE BANKING LAW OF CONNECTICUT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-12 of the general statutes, as amended by section 2 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

The commissioner may appoint and define the duties and authority of such employees as may be necessary to perform properly the functions of the commissioner's office. The deputy commissioner and any other employee of the Department of Banking shall have the same privileges and be subject to the same restrictions as the commissioner concerning relationships and transactions with any federal bank, federal credit union, out-of-state bank, out-of-state credit union, holding company that has a wholly-owned subsidiary that is a Connecticut bank, or [with] any person subject to the general supervision of the commissioner, except that any employee of the Department of Banking other than the deputy commissioner may be indebted to any person subject to the general supervision of the commissioner, provided the prior approval of the commissioner is obtained for any singular indebtedness or series of indebtedness in the aggregate of twenty-five thousand dollars or more to any such person. Such prior approval shall not be required for (1) indebtedness resulting from the sale of the debt by the original lender, (2) indebtedness incurred at least six months prior to appointment as an employee of the Department of Banking, provided, the commissioner may grant retroactive approval upon such appointment in the case of any singular indebtedness or series of indebtedness in the aggregate of twenty-five thousand dollars or more to any such person that is incurred, in whole or in part, within six months prior to such appointment, or (3) indebtedness incurred by any employee of the Department of Banking who is covered under the terms of the administrative clerical (NP-3) collective bargaining agreement. For purposes of this section, "indebtedness" shall include a line of credit extended to any employee by a person subject to the general supervision of the commissioner whether or not such line of credit has been drawn upon. Any information submitted by an employee to the commissioner for the commissioner's approval pursuant to this section shall be exempt from disclosure under section 1-210, as amended.

Sec. 2. Subsection (g) of section 36a-139b of the general statutes, as amended by section 43 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

(g) After receipt of the commissioner's approval for the conversion, the converting bank shall promptly file such approval and its certificate of incorporation with the Secretary of the State and with the town clerk of the town in which its principal office is located. Upon such filing, the converted Connecticut bank shall not accept retail deposits and shall be an uninsured bank, as defined in subsection (t) of section 36a-70, subject to the limitations in subdivisions (3) and (4) of subsection (t) of section 36a-70. Upon such conversion, the converted Connecticut bank possesses all of the rights, privileges and powers granted to it by its certificate of incorporation and by the provisions of the general statutes applicable to its type of Connecticut bank, and all of the assets, business and good will of the converting bank shall be transferred to and vested in the converted Connecticut bank without any deed or instrument of conveyance, provided the converting bank may execute any deed or instrument of conveyance as is convenient to confirm such transfer. The converted Connecticut bank shall be subject to all of the duties, relations, obligations, trusts and liabilities of the converting bank, whether as debtor, depository, registrar, transfer agent, executor, administrator or otherwise, and shall be liable to pay and discharge all such debts and liabilities, and to perform all such duties in the same manner and to the same extent as if the converted bank had itself incurred the obligation or liability or assumed the duty or relation. All rights of creditors of the converting bank and all liens upon the property of such bank shall be preserved unimpaired and the uninsured bank shall be entitled to receive, accept, collect, hold and enjoy any and all gifts, bequests, devises, conveyances, trusts and appointments in favor of or in the name of the converting bank and whether made or created to take effect prior to or after the conversion.

Sec. 3. Section 36a-251a of the general statutes, as amended by section 25 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

The commissioner shall submit an annual report to the joint standing committee of the General Assembly having cognizance of matters relating to banks no later than January first. The report shall summarize the commissioner's actions taken pursuant to section 36a-70, 36a-139a or subdivisions (40) and (41) of subsection (a) of section 36a-250. [or section 36a-252a. ]

Sec. 4. Subsection (b) of section 36a-262 of the general statutes, as amended by section 18 of public act 03-259, is repealed and the following is substituted in lieu thereof (Effective from passage):

(b) Liabilities of one obligor shall be attributed to another person and each such person shall be deemed to be an obligor when proceeds of a loan are to be used for the direct benefit of the other person, to the extent of the proceeds to be so used, or a common enterprise is deemed to exist between such persons. For purposes of this section, the proceeds of a loan to an obligor shall be deemed to be used for the direct benefit of another person and shall be attributed to the person when the proceeds, or assets purchased with the proceeds, are transferred to another person, other than in a bona fide arm's length transaction where the proceeds are used to acquire property, goods or services. For purposes of this section, a common enterprise shall be deemed to exist and liabilities of separate obligors shall be aggregated:

(1) When the expected source of repayment for each liability is the same for each obligor and neither obligor has another source of income from which the liability, together with the obligor's other liabilities, may be fully repaid. An employer shall not be treated as a source of repayment under this subdivision because of wages and salaries paid to an employee, unless the standards of subdivision (2) of this [section] subsection are met;

(2) When loans are made (A) to obligors who are related directly or indirectly through common control, including where one obligor is directly or indirectly controlled by another obligor; and (B) substantial financial interdependence exists between or among the obligors. Substantial financial interdependence is deemed to exist when fifty per cent or more of one obligor's gross receipts or gross expenditures, on an annual basis, are derived from transactions with the other obligor. Gross receipts and expenditures include gross revenues, expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments;

(3) When separate persons borrow from a Connecticut bank to acquire a business enterprise of which such obligors will own more than fifty per cent of the voting securities or voting interests, in which case a common enterprise is deemed to exist between the obligors for purposes of combining the acquisition loans; or

(4) When the commissioner determines, based upon an evaluation of the facts and circumstances of particular transactions, that a common enterprise exists.

Sec. 5. Subsection (c) of section 36a-428n of the general statutes, as amended by section 3 of public act 03-153, is repealed and the following is substituted in lieu thereof (Effective from passage):

(c) Title to such business and property in this state of a foreign bank shall vest by operation of law in the commissioner and his successors upon taking possession, without the execution of any instruments of conveyance, assignment, transfer or endorsement. The commissioner shall promptly apply to the superior court for the judicial district of Hartford for appointment as receiver of such foreign bank with effect from the time of taking possession, and the superior court shall make such appointment. Thereafter, except as otherwise provided in this section, the commissioner shall liquidate or otherwise deal with such business and property in this state of a foreign bank in accordance with the provisions of sections 36a-223 to 36a-239, inclusive, as amended, provided, (1) "debts", "liabilities", "deposits", "claims" and other similar terms used in sections 36a-223 to 36a-239, inclusive, as amended, refer to the claims that the commissioner shall accept pursuant to subsection (e) of this section; (2) "creditors" and "depositors", as used in [such] said sections, refer to the owners of such accepted claims; (3) except as the context otherwise requires, "Connecticut bank", as used in [such] said sections, refers to the state branches or state agencies in this state; and (4) "officer", as used in [such] said sections, includes any person in charge of or who is an officer of such state branches and the agent or other person in charge of such state agencies. Notwithstanding any contrary provision of law, including chapters 55a and 67, the commissioner may employ or contract with such legal counsel and expert assistants under such titles as the commissioner may assign to them and may retain such of the officers or employees of such foreign bank as the commissioner deems necessary in the liquidation and distribution of the assets of such foreign bank, without the prior approval of any other state agency or elective officers. The commissioner shall be entitled to the appointment of a single judge to supervise the liquidation upon request to the administrative judge of the superior court for the judicial district of Hartford. Said judge shall have the power to order expedited or simplified procedures whenever necessary to resolve a matter in such liquidation.

Sec. 6. Subdivision (4) of subsection (k) of section 36a-448a of the general statutes, as amended by section 4 of public act 03-35, is repealed and the following is substituted in lieu thereof (Effective from passage):

(4) The number of appointed directors and their qualifications shall be specified [for] in the bylaws.

Sec. 7. Subsection (l) of section 36a-454b of the general statutes, as amended by section 6 of public act 03-35, is repealed and the following is substituted in lieu thereof (Effective from passage):

(l) The directors, appointed directors, members of board-appointed committees, members of senior management and the immediate family members of such persons that have outstanding loans or investments in a credit union service organization shall not receive any salary, commission, investment income or other income or compensation from such credit union service organization, either directly or indirectly, or from any person being served through the credit union service organization. This provision shall not prohibit (1) such Connecticut credit union insiders or the immediate family members of such persons from assisting in the operation of such credit union service organization, provided such persons are not compensated by the credit union service organization, and (2) reimbursement to the Connecticut credit union for the services provided by such directors, appointed directors, committee members or senior management members if the accounts receivable of the Connecticut credit union due from the credit union service organization [is] are paid in full at least quarterly.

Sec. 8. Subsection (g) of section 36a-461a of the general statutes, as amended by section 64 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

(g) (1) Prior to investing in or lending to a credit union service organization, a Connecticut credit union shall obtain (A) a written agreement that the credit union service organization will: (i) Account for all transactions in accordance with generally accepted accounting principles, (ii) prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards, (iii) provide the commissioner with complete access to all books and records of the credit union service organization and with the ability to review credit union service organization internal controls, as the commissioner deems necessary, and (iv) pay the actual cost of any examination conducted by the commissioner; and (B) a written legal opinion that the credit union service organization is established as a corporation, limited partnership or limited liability company and the potential exposure of the Connecticut credit union is limited to no more than the loss of funds invested in or lent to the credit union service organization. In order for a Connecticut credit union to maintain its investment in or loan to a credit union service organization that plans to change its form of organization, the Connecticut credit union shall obtain a written legal opinion that the credit union service organization will continue in such form that will limit potential exposure to the Connecticut credit union to no more than the loss of funds invested in or lent to the credit union service organization.

(2) If the commissioner determines that a Connecticut credit union's investments in or loans to any credit union service organization exceed the limitations of this section or subsection (d) of section 36a-459a, or [is] are otherwise not prudent for the Connecticut credit union to maintain, the commissioner may require the Connecticut credit union to divest such loans or investments.

Sec. 9. Subsection (k) of section 36a-461a of the general statutes, as amended by section 64 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

(k) Each Connecticut credit union service organization and each of its directors, officers, managers, general partners, employees and authorized [agent of a Connecticut credit union service organization] agents who [has] have charge or possession of the funds, securities or other assets of such credit union service organization shall be bonded by a surety company authorized to do business in this state. Such bond shall be in favor of the Connecticut credit union service organization and in such amount as is approved by the board of directors, managers or general partners of the credit union service organization, which amount the commissioner may require to be increased for reasons of safety and soundness. A copy of each such bond and any renewal thereof or premium receipt therefor shall be promptly filed with the commissioner by the Connecticut credit union service organization.

Sec. 10. Subsection (e) of section 36a-470a of the general statutes, as amended by section 73 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

(e) The commissioner may seek the appointment of a conservator or receiver for any Connecticut credit union, in accordance with section 36a-220, if the commissioner certifies, in writing, that no other reasonable alternatives are available to protect the members and creditors of such Connecticut credit union, and [,] it appears that:

(1) The Connecticut credit union, through insolvency, repeated gross mismanagement or repeated neglect in the conduct of its operations, is no longer able to carry out the purposes for which it was formed;

(2) The Connecticut credit union has abandoned its activities and is no longer functioning as a Connecticut credit union and termination cannot be accomplished by any other means; or

(3) Any reason specified in subsection (a) of section 36a-220 exists.

Sec. 11. Subdivision (3) of section 36a-800 of the general statutes, as amended by section 1 of public act 03-262, is repealed and the following is substituted in lieu thereof (Effective from passage):

(3) "Creditor" means a person, including a municipality, [who] that retains, hires, or engages the services of a consumer collection agency.

Sec. 12. Section 49-31j of the general statutes, as amended by section 39 of public act 03-84, is repealed and the following is substituted in lieu thereof (Effective from passage):

The Banking Commissioner shall adopt such regulations, in accordance with chapter 54, as the commissioner deems necessary specifying (1) the manner in which a composite interest rate shall be computed for the new mortgage debt pursuant to subsection (c) of section 49-31i, and (2) the method or standard by which prevailing market rates of interest are to be determined.

Approved April 16, 2004