Sec. 36a-262. (Formerly Sec. 36-98b). Limitations on liabilities of any one obligor. Exemptions. (a) Except as otherwise provided in this section, the total direct or
indirect liabilities of any one obligor that are not fully secured, however incurred, to
any Connecticut bank, exclusive of such bank's investment in the investment securities
of such obligor, shall not exceed at the time incurred fifteen per cent of the equity capital
and reserves for loan and lease losses of such bank. The total direct or indirect liabilities
of any one obligor that are fully secured, however incurred, to any Connecticut bank,
exclusive of such bank's investment in the investment securities of such obligor, shall
not exceed at the time incurred ten per cent of the equity capital and reserves for loan
and lease losses of such bank, provided this limitation shall be separate from and in
addition to the limitation on liabilities that are not fully secured. For purposes of this
section, a liability shall be considered to be fully secured if it is secured by readily
marketable collateral having a market value, as determined by reliable and continuously
available price quotations, at least equal to the amount of the liability. For purposes of
determining the limitations of this section, in computing the liabilities of an obligor, a
liability is incurred at the time of the closing of the transaction, unless such closing is
preceded by a legally binding written commitment to enter into the transaction, in which
case such liability is incurred at the time of commitment and is net of any liabilities of
the obligor to such bank that will be paid with the proceeds of the commitment at the
time of closing. The limitations provided for in this subsection may be exceeded for a
period of time not to exceed six hours if at the closing of any transaction at which such
obligor incurs such liabilities to a Connecticut bank in excess of such limitations, such
bank immediately assigns or participates out to one or more other persons an amount
that constitutes not less than the excess over the applicable limitation. Obligations as
endorser or guarantor of negotiable or nonnegotiable installment consumer paper which
carry an agreement to repurchase on default, unless the bank's sole recourse is to an
agreed reserve held by it, in which case the liability shall be excluded, a full recourse
endorsement or an unconditional guarantee by the person, partnership, association or
corporation transferring the same, shall be subject under this section to a limitation of
fifteen per cent of the bank's equity capital and reserves for loan and lease losses in
addition to the applicable limitations of this section with respect to the makers of such
obligations; provided, upon certification by an officer of the bank designated for that
purpose by the governing board that the responsibility of each maker of such obligations
has been evaluated and the bank is relying primarily upon each such maker for the
payment of such obligations, the limitations of this section as to the obligations of each
maker shall be the sole applicable loan limitation; and provided such certification shall
be in writing and shall be retained as part of the records of such bank.
(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 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.
(c) Loans to an obligor and its subsidiary, or to different subsidiaries of an obligor
shall not be aggregated unless either the direct benefit or the common enterprise test is
met. For purposes of this subsection, a corporation or a limited liability company is a
subsidiary of an obligor if the obligor owns or beneficially owns directly or indirectly
more than fifty per cent of the voting securities or voting interests of the corporation or
company.
(d) Loans to a partnership, joint venture, limited liability company or association
shall be deemed to be loans to each member of the partnership, joint venture, limited
liability company or association. This provision shall not apply to limited partners in
limited partnerships or to members of joint ventures, limited liability companies or
associations unless the partners or members, by the terms of the partnership or membership agreement, are held generally liable for the debts or actions of the partnership,
joint venture, limited liability company or association, and such terms are valid under
applicable law. Loans to partners or members of a partnership, joint venture, limited
liability company or association are not attributed to the partnership, joint venture, limited liability company or association unless either the direct benefit or the common
enterprise test is met. Both the direct benefit and common enterprise tests are met between a partner or member of a partnership, joint venture, limited liability company or
association and such partnership, joint venture, limited liability company or association,
when loans are made to the partner or member to purchase an interest in the partnership,
joint venture, limited liability company or association. Loans to partners or members
of a partnership, joint venture, limited liability company or association are not attributed
to other members of the partnership, joint venture, limited liability company or association unless either the direct benefit or the common enterprise test is met.
(e) Loans to foreign governments and their agencies and instrumentalities shall be
aggregated only if the loans fail to meet either the means test or the purpose test at the
time the loan is made. The means test is met if the obligor has resources or revenue of
its own sufficient to service its debt obligations. If the government's support, excluding
guarantees by a central government of the obligor's debt, exceeds the obligor's annual
revenues from other sources, it shall be presumed that the means test has not been
satisfied. The purpose test is met if the purpose of the loan is consistent with the purposes
of the obligor's general business. In order to show that the means test or the purpose
test has been satisfied, a Connecticut bank shall, at a minimum, retain in its files the
following items:
(1) A statement, accompanied by supporting documentation, describing the legal
status and the degree of financial and operational autonomy of the borrowing entity;
(2) Financial statements for the borrowing entity for a minimum of three years prior
to the date the loan or extension of credit was made or for each year that the borrowing
entity has been in existence, if less than three;
(3) Financial statements for each year the loan is outstanding;
(4) The bank's assessment of the obligor's means of servicing the loan, including
specific reasons in support of that assessment. The assessment shall include an analysis
of the obligor's financial history, its present and projected economic and financial performance, and the significance of any financial support provided to the obligor by third
parties, including the obligor's central government; and
(5) A loan agreement or other written statement from the obligor which clearly
describes the purpose of the loan. The written representation shall ordinarily constitute
sufficient evidence that the purpose test has been satisfied. However, when, at the time
the funds are disbursed, the bank knows or has reason to know of other information
suggesting the obligor will use the proceeds in a manner inconsistent with the written
representation, it may not, without further inquiry, accept the representation.
(f) Obligations of the United States or this state, or of any town, city, borough or
legally established district in this state which has the power to levy taxes for the payment
of such obligations, shall not be subject to any limitation based upon such equity capital
and reserves for loan and lease losses.
(g) Obligations of any one obligor, with the exception of loans secured by mortgage
of real estate and insured by the Federal Housing Administrator, which are secured or
covered by guaranties, or by commitments or agreements to take over or to purchase,
made by the United States or the Federal Reserve Bank or by any department, bureau,
board, commission or establishment of the United States, including any corporation
wholly owned, directly or indirectly by the United States, which, at the time of making
such guaranty or commitment or agreement to take over or purchase, is authorized by
law to enter into contracts with any financing institution guaranteeing such financing
institution against loss of principal and interest on loans, taxes or advances or agreeing
to take over or purchase the same, shall not be subject to any limitation based upon such
equity capital and reserves for loan and lease losses.
(h) Obligations of any one obligor secured by the pledge of direct or fully guaranteed
obligations of the United States shall be limited to fifty per cent of such equity capital
and reserves for loan and lease losses; except that obligations secured by the pledge of
direct or fully guaranteed obligations of the United States which will mature in not more
than eighteen months shall not be subject under this section to any limitation based upon
such equity capital and reserves for loan and lease losses.
(i) Any Connecticut bank may accept drafts or bills of exchange drawn upon it
having not more than six months' sight to run, exclusive of days of grace, which grow
out of transactions involving the importation or exportation of goods, or which grow out
of transactions involving the domestic shipment of goods, provided shipping documents
conveying or securing title are attached at the time of acceptance, or which are secured
at the time of acceptance by a warehouse receipt or other such document conveying or
securing title covering readily marketable staples. No Connecticut bank shall accept
such bills to an amount equal at any time in the aggregate to more than one-half of its
equity capital and reserves for loan and lease losses; provided the commissioner may
authorize any Connecticut bank to accept such bills to an amount not exceeding at any
time in the aggregate one hundred per cent of its equity capital and reserves for loan
and lease losses; provided further, the aggregate of acceptances growing out of domestic
transactions shall in no event exceed fifty per cent of such equity capital and reserves
for loan and lease losses.
(j) The following shall not be subject under this section to any limitation based upon
such equity capital and reserves for loan and lease losses: (1) Obligations in the form
of bankers' acceptances of other banks, provided such acceptances have at the time of
discount not more than six months' sight, exclusive of days of grace, and are endorsed
by at least one other bank; (2) obligations resulting from the purchase of securities
subject to a resale agreement; and (3) the rental obligation of a lessee of real or personal
property under a lease made or held by such bank.
(k) Obligations of any one obligor which are secured by a first mortgage on real
estate shall be limited to fifty per cent of such equity capital and reserves for loan and
lease losses, provided the total obligations to any one obligor to which this subsection
and subsection (a) of this section apply shall not exceed fifty per cent of such equity
capital and reserves for loan and lease losses. Loans made to manufacturing, industrial
or commercial borrowers when the bank looks for repayment out of the operations of
the borrowers' business, relying primarily on the borrowers' general credit standing and
forecast of operation, shall not be considered to be secured by a mortgage on real estate
for purposes of this subsection, even though such loan may be secured by a mortgage
on real estate.
(P.A. 85-379, S. 41; P.A. 86-403, S. 103, 132; P.A. 91-357, S. 23, 78; P.A. 92-97, S. 2, 4; P.A. 94-122, S. 119, 340;
P.A. 03-259, S. 18; P.A. 04-8, S. 4.)
History: P.A. 86-403 made technical changes; P.A. 91-357 made technical changes in Subsec. (a); P.A. 92-97 added
provisions in Subsec. (a) specifying when a liability is incurred for purposes of determining limitations of section; P.A.
94-122 consolidated the limits on loans to one obligor for all banks using the savings banks section as a base, deleted
Subsecs. (f) and (h) and renumbered former Subsecs. (g) and (i) as Subsecs. (f) and (g), clarified in Subsec. (g) that certain
commercial loans secured by mortgages are still limited to the 15% of equity capital and loss reserves limit on loans to
one obligor and cannot take advantage of the 50% of equity capital and loss reserves limit on first mortgage loans to any
one obligor, and made technical changes, effective January 1, 1995; Sec. 36-98b transferred to Sec. 36a-262 in 1995; P.A.
03-259 amended Subsec. (a) by deleting provision re computing liabilities of a partnership and a general partner, added
new Subsecs. (b) to (e) re attribution of liabilities of obligors, aggregation of loans to an obligor and its subsidiaries, loans
to a partnership, joint venture, limited liability company or association, and aggregation of loans to foreign governments
and their agencies and instrumentalities, and redesignated existing Subsecs. (b) to (g) as new Subsecs. (f) to (k); P.A. 04-8 made a technical change in Subsec. (b)(1), effective April 16, 2004.
Sec. 36a-263. Insider loans. (a) As used in this section, "executive officer" has
the meaning given to such term in 12 CFR 215.2 of Subpart A of Federal Reserve Board
Regulation O, 12 CFR Part 215, as from time to time amended. With the exception of
Sections 215.7 and 215.13 of Subpart A of Federal Reserve Board Regulation O, 12
CFR Part 215, as from time to time amended, Connecticut banks are subject to and shall
comply with the restrictions contained in 12 CFR Sections 337.3 and 349, as from
time to time amended, and no executive officer, director or principal shareholder of a
Connecticut bank or any of its affiliates shall knowingly receive, or knowingly permit
any of such person's related interests to receive, from a Connecticut bank, directly or
indirectly, any extension of credit that violates such restrictions. No executive officer,
director, employee, agent or other person shall participate in any conduct of the affairs
of the bank that violates this subsection.
(b) If the commissioner finds it necessary in the interests of the safety and soundness
of Connecticut banks and of depositors, the commissioner may adopt regulations, in
accordance with chapter 54, providing for further requirements governing extensions
of credit to directors, executive officers, principal shareholders, and the related interests
and associates of such persons.
(c) The commissioner may require Connecticut banks to file periodic reports with
the commissioner regarding the indebtedness owing to such banks by directors, executive officers and principal shareholders of the respective banks, or any related interests
or associates of such persons. These reports shall include such information as the commissioner may require.
(d) The commissioner may take enforcement action with respect to violations of
this section.
(P.A. 94-122, S. 120, 340; P.A. 03-259, S. 19.)
History: P.A. 94-122 effective January 1, 1995; P.A. 03-259 amended Subsec. (a) by defining "executive officer" and
adding prohibitions on extension of credit that violates restrictions, and participation in conduct of affairs of bank that
violates Subsec. (a).
Sec. 36a-264. (Formerly Sec. 36-68). Loans secured by own stock or stock of
holding company prohibited. Exception. A capital stock Connecticut bank shall not
make any loan on or discount any paper secured by a pledge of its own stock or of the
stock of a holding company of which such bank is an affiliate, unless such pledge shall
be necessary to prevent loss upon a debt previously contracted by such bank in good faith.
(1949 Rev., S. 5792; 1969, P.A. 504, S. 20; P.A. 83-273, S. 1, 2; P.A. 85-379, S. 5; P.A. 94-122, S. 121, 340.)
History: 1969 act prohibited pledge of stock of bank holding company of which company in question is an affiliate as
security for loan, etc. and defined "bank holding company"; P.A. 83-273 allowed state banks and trust companies to accept
pledges of their own stock or that of their bank holding company as security for loans if the pledge is necessary to prevent
loss on a previously existing debt; P.A. 85-379 replaced references to "bank and trust company" and "banks" with references
to "capital stock bank" and "capital stock banks" and replaced references to "bank holding company" with references to
"holding company"; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-68 transferred to Sec. 36a-264 in 1995.
Annotations to former section 36-68:
Refers to specific pledge not inconsistent with lien for stockholder's debt. 26 C. 157. Prohibition of loans on its stock
implies prohibition of purchase of stock by corporation. 52 C. 99. Corporation is forbidden by implication to purchase its
stock. Id.
Sec. 36a-265. (Formerly Sec. 36-9g). Alternative mortgage loan. (a) (1) "Mortgage loan" means a loan secured by a first mortgage on one, two, three or four family,
owner-occupied residential real property;
(2) "Standard mortgage loan" means a mortgage loan authorized by section 36a-261 or section 36a-457b for the Connecticut bank or Connecticut credit union making
such loan;
(3) "Alternative mortgage loan" means a mortgage loan which is a reverse annuity
mortgage loan or graduated payment mortgage loan, other than a standard mortgage
loan;
(4) "Reverse annuity mortgage loan" means a mortgage loan in which loan proceeds
are advanced to the mortgagors, in installments, either directly or indirectly, and which
together with unpaid interest, if any, is to be repaid in accordance with subdivision (2)
of subsection (e) of this section; and
(5) "Graduated payment mortgage loan" means a mortgage loan, other than a standard mortgage loan, in which principal and interest payments, if any, and the making
of additional advances, if any, are designed to reflect the prospective increasing or decreasing income of the mortgagor.
(b) Notwithstanding any other provision of the general statutes, Connecticut banks
and Connecticut credit unions may make alternative mortgage loans in accordance with
this section. The provisions of the general statutes governing standard mortgage loans
by a Connecticut bank or Connecticut credit union making such loans shall apply to
alternative mortgage loans unless inconsistent with the provisions of this section. Nothing in this section shall be construed to prohibit a Connecticut bank or Connecticut credit
union from making any loan which is not an alternative mortgage loan, provided such
loan otherwise complies with the general statutes.
(c) A Connecticut bank or Connecticut credit union making an alternative mortgage
loan may contract with the mortgagor for interest to be paid currently or to accrue, and
if accrued, for accrued interest to be added to the mortgage debt on which interest may
be charged and collected. Such accrued interest which is added to the mortgage debt
shall be secured by the mortgage to the same extent as the principal of such alternative
mortgage debt. No instrument evidencing an alternative mortgage loan and no deed
granting an alternative mortgage shall contain any provision imposing a penalty for
prepayment of such loan.
(d) (1) Each Connecticut bank and Connecticut credit union that offers or makes
any type of alternative mortgage loan shall disclose to each person who requests an
application for a mortgage loan or who states that such person is a prospective mortgage
loan applicant such information concerning all types of mortgage loans, including each
type of alternative mortgage loan, offered by such bank or credit union as the commissioner shall prescribe by regulations. The commissioner may prescribe forms for such
disclosure.
(2) Each prospective mortgage loan applicant shall have the choice of applying for
a standard mortgage loan or any type of alternative mortgage loan offered by such
Connecticut bank or Connecticut credit union.
(e) (1) If the mortgagee or its assignee and the mortgagor agree, any installment
payment of either the loan proceeds or any annuity purchased with the loan proceeds
of a reverse annuity mortgage loan may be reduced by an amount used for partial repayment of the mortgage debt, except as provided in subdivision (2) of this subsection.
(A) Notwithstanding any such reduction, each mortgagor shall receive a cash payment in each installment for the term of the annuity or, if no annuity, for the term during
which the mortgagee contracted with the mortgagor to advance loan proceeds; and
(B) No repayments of any part of the mortgage debt shall be required from the
mortgagor after termination of the period during which loan proceeds or any annuity
purchased with the loan proceeds are advanced to the mortgagor.
(2) If the mortgagee or its assignee and the mortgagor agree, and at the option of
the mortgagee, advances under a reverse annuity mortgage loan may terminate and the
entire unpaid balance of the loan plus accrued interest may become due and payable
upon the occurrence of any of the following events:
(A) The death of the last surviving mortgagor;
(B) The sale or other transfer of the real estate securing the loan to a person other
than any of the original mortgagors; or
(C) Any other occurrence which materially decreases the value of the property securing the loan or which will have the likely effect of causing the loan not to be repaid.
Any such additional occurrence shall be clearly recited in the mortgage deed.
(f) Every graduated payment mortgage loan offered or made by a Connecticut bank
or Connecticut credit union shall provide for interest at a specified rate or a series of
specified rates.
(g) The commissioner may adopt such regulations pursuant to chapter 54 as the
commissioner deems necessary to carry out the provisions of this section.
(P.A. 78-114, S. 1-7; P.A. 79-158, S. 1; P.A. 88-65, S. 47; P.A. 94-122, S. 122, 340; P.A. 96-109, S. 3; P.A. 02-73, S. 77.)
History: P.A. 79-158 clarified applicability of definitions in Subsec. (a), clarified applicability of provisions to alternative mortgage loans in Subsec. (b), added provisions re interest on alternative loans in Subsec. (c), required disclosure to
persons requesting mortgage loan applications in Subsec. (d), required commissioner to review mortgage deed re default
provisions and inserted new Subdiv. (3) in Subsec. (e), renumbering former Subdiv. (3) accordingly, inserted new Subsec.
(f) and relettered former Subsecs. (f) and (g) accordingly; P.A. 88-65 made a technical change in Subsec. (a)(5), deleted
obsolete Subsec. (e), re prototype plans for alternative mortgage loans and relettered remaining Subsecs; P.A. 94-122
deleted the definition of financial institution, renumbered the remaining definitions and made technical changes, effective
January 1, 1995; Sec. 36-9g transferred to Sec. 36a-265 in 1995; P.A. 96-109 made a technical change, adding reference
to Sec. 36a-442 in Subsec. (a)(2); P.A. 02-73 amended Subsec. (a)(2) by replacing reference to Sec. 36a-442 with reference
to Sec. 36a-457b.
Annotations to former section 36-9g:
Cited. 190 C. 756, 761.
Cited. 38 CS 8, 19.
Subsec. (f):
Subdiv. (2)(B) cited. 190 C. 756, 762.
Subdiv. (2)(B) cited. 38 CS 8, 19, 20, 22.
Sec. 36a-266. (Formerly Sec. 36-101). Investment in loans for repairs or reconstruction of property damaged by emergency. A Connecticut bank may invest its
assets in loans, the proceeds of which are to be used solely for the repair or reconstruction
of property damaged as a result of an emergency, upon such terms and conditions and
for such period as the commissioner may prescribe, provided such terms and conditions
appear to the commissioner to be in the best interests of the public. An emergency for
purposes of this section means conditions arising from damage to housing or business
as a result of a local catastrophe of a type not ordinarily covered by hazard insurance
and is deemed to be in existence upon proclamation by the Governor.
(November, 1955, S. N214; 1961, P.A. 420; 1967, P.A. 461, S. 24; P.A. 77-614, S. 161, 610; P.A. 78-121, S. 83, 113;
P.A. 87-9, S. 2, 3; P.A. 94-122, S. 123, 340.)
History: 1961 act authorized loans for repairs required by emergencies, not confined to 1955 floods; 1967 act deleted
references to state bank and trust companies and their savings departments; P.A. 77-614 replaced bank commissioner with
banking commissioner, effective January 1, 1979; P.A. 78-121 substituted "governing board" for "board of directors or
trustees"; (Revisor's note: Pursuant to P.A. 87-9 "banking commissioner" was changed editorially by the Revisors to
"commissioner of banking"); P.A. 94-122 consolidated the authority for all banks to make emergency loans for housing
damaged by disasters, effective January 1, 1995; Sec. 36-101 transferred to Sec. 36a-266 in 1995.
Secs. 36a-267 to 36a-274. Reserved for future use.
PART III
INVESTMENTS
Sec. 36a-275. Investments in debt securities and debt mutual funds. (a) As used
in this section, the term "debt securities" means (1) any marketable obligation evidencing
indebtedness of any person in the form of direct, assumed or guaranteed bonds, notes
or debentures or any security that has attributes similar to such marketable obligations;
(2) any obligation identified by certificates of participation in investments described in
subdivision (1) of this subsection in which a Connecticut bank could invest directly; or
(3) repurchase agreements, and the term "debt mutual fund" means a partnership interest
in, shares of stock of, units of beneficial interest in or other ownership interest in any
one investment company registered under the Investment Company Act of 1940, as
from time to time amended, commonly described as mutual funds, money market funds,
investment trusts or business trusts, provided the portfolios of such investment companies consist solely of investments described in subdivision (1) of this subsection.
(b) In addition to other investments authorized by this part, any Connecticut bank
may purchase or hold for its own account debt securities and debt mutual funds without
regard to any other liability to the Connecticut bank of the maker, obligor, guarantor or
issuer of such debt securities and debt mutual funds, provided: (1) The debt securities
and debt mutual funds are rated in the three highest rating categories by a rating service
of such securities recognized by the commissioner or, if not so rated, are determined
by the bank's governing board to be a prudent investment; (2) unless the bank obtains
the prior approval of the commissioner, the total amount of the debt securities and debt
mutual funds of any one maker, obligor or issuer purchased or held by a Connecticut
bank or for a Connecticut bank's account may not exceed, at any time, twenty-five per
cent of its total equity capital and reserves for loan and lease losses; and (3) the total
amount of any debt securities and debt mutual funds purchased or held by a Connecticut
bank or for a Connecticut bank's account pursuant to this subsection may not exceed
at any time twenty-five per cent of its assets.
(c) In addition to other investments authorized by this part, any Connecticut bank
may purchase or hold for its own account the following debt securities and debt mutual
funds without regard to any other liability to the Connecticut bank of the maker, obligor,
guarantor or issuer of such debt securities and debt mutual funds, provided the debt
securities and debt mutual funds are rated in the three highest rating categories by a
rating service recognized by the commissioner or, if not so rated, determined by the
bank's governing board to be a prudent investment:
(1) The general obligations of the United States or this state;
(2) Securities which are guaranteed fully as to principal and interest by the United
States or this state or for which the full faith and credit of the United States or this state
is pledged for the payment of principal and interest;
(3) Securities, including repurchase agreements, the principal and interest of which
are irrevocably secured by securities described in subdivisions (1) and (2) of this subsection;
(4) General obligations of any agency of the United States, including government
sponsored enterprises, which are not guaranteed fully as to principal and interest by the
United States or for which the full faith and credit of the United States is not pledged
for the payment of principal and interest; and
(5) Debt mutual funds, provided the portfolios of the investment companies consist
solely of investments described in subdivisions (1) to (4), inclusive, of this subsection.
(P.A. 94-122, S. 124, 340; P.A. 95-70, S. 3, 8; P.A. 96-44, S. 4; 96-271, S. 206, 254; P.A. 97-35, S. 1; P.A. 98-177, S.
1; 98-178, S. 2.)
History: P.A. 94-122 effective January 1, 1995; P.A. 95-70 amended Subsec. (b) to delete the references re the designation of debt securities and to make the fifteen per cent maximum applicable to the entire subsection, deleted Subsec. (c)
re a security or portfolio that ceases to meet the restrictions of Subsec. (b), added a new Subsec. (c)(1) excluding debt
securities specified in Subparas. (A), (B) and (C) from restrictions in Subsec. (b), renumbered former Subsec. (d) as Subsec.
(c)(2), amended Subsec. (c)(2) to delete Subdivs. (1), (2) and (3) re exclusions from certain investment restrictions and to
substitute as exclusions certain general obligations of federal and specified federally-related organizations, to delete reference to Subsec. (b)(2), to add references to Subsec. (b)(3) and (4), and to renumber Subsec. (d)(4) as Subsec. (c)(3), and
added a new Subsec. (d) re requirements on governing board re investments under this section, effective May 31, 1995;
P.A. 96-44 made numerous changes re investments in debt securities and added provisions re debt mutual funds, amended
Subsec. (a) to substitute "any obligation" for "obligations" and to define "debt mutual fund", and amended Subdiv. (c)(4) to
include "government sponsored enterprises"; P.A. 96-271 amended Subsec. (c) to add provision in Subdiv. (3) specifically
defining "state" and delete provision that referred to Sec. 33-284(v) for definition of "state", effective January 1, 1997,
but failed to take effect, Subdiv. (3) having been deleted in its entirety by P.A. 96-44; P.A. 97-35 redefined "debt securities"
to include repurchase agreements; P.A. 98-177 made technical changes in Subsec. (a); P.A. 98-178 amended Subsec.
(a) by deleting phrase "commonly known as investment securities", adding language re attributes similar to marketable
obligations and making technical changes.
Sec. 36a-276. Investments in equity securities and equity mutual funds. (a) As
used in this section: (1) "Equity security" means any stock or similar security, certificate
of interest or participation in any profit-sharing agreement, preorganization certificate
or subscription, transferable share, voting trust certificate or certificate of deposit for
an equity security, limited partnership interest, interest in a joint venture or certificate
of interest in a business trust; or any security convertible, with or without consideration,
into such a security, or carrying any warrant or right to subscribe to or purchase such a
security; or any such warrant or right; or any put, call, straddle or other option or privilege
of buying such a security from or selling such a security to another without being bound
to do so, but excludes a debt mutual fund, as defined in section 36a-275, and an equity
mutual fund; and (2) "equity mutual fund" means a partnership interest in, shares of
stock of, units of beneficial interest in or other ownership interest in any one investment
company which is registered under the Investment Company Act of 1940, as from time to
time amended, commonly described as mutual funds, money market funds, investment
trusts or business trusts, but excludes a debt mutual fund, as defined in section 36a-275.
(b) In addition to other investments authorized by sections 36a-275 to 36a-277,
inclusive, and 36a-280, any Connecticut bank may purchase or hold for its own account
equity securities and equity mutual funds, without regard to any other liability to the
Connecticut bank of the issuer of such equity securities and equity mutual funds, provided: (1) The total amount of equity securities and equity mutual funds of any one
issuer purchased or held by a Connecticut bank or for a Connecticut bank's account
may not exceed, at any time, twenty-five per cent of its total equity capital and reserves
for loan and lease losses; and (2) the total amount of any equity securities and equity
mutual funds purchased or held by a Connecticut bank or for a Connecticut bank's
account pursuant to this subsection may not exceed, at any time, twenty-five per cent
of its assets.
(c) In addition to other investments authorized by sections 36a-275 to 36a-277,
inclusive, and 36a-280, any Connecticut bank may purchase or hold for its own account,
without regard to any other liability to the Connecticut bank of the issuer, ten per cent
or more of the equity securities, including convertible securities, of a bank, out-of-state
bank or holding company in accordance with law.
(d) In addition to other investments authorized by sections 36a-275 to 36a-277,
inclusive, and 36a-280, any Connecticut bank, with the approval of the commissioner,
may purchase or hold for its own account, without regard to any other liability to the
Connecticut bank of the issuer, a controlling interest in a corporation or other entity,
the functions of which are limited to one or more of the functions which the bank may
carry on directly in the exercise of its express or incidental powers. For purposes of
this subsection, a "controlling interest" means at least fifty-one per cent of the equity
securities issued by the corporation or other entity, unless the commissioner determines
that under the circumstances, a lesser percentage constitutes effective working control
of the corporation or other entity.
(e) The bank shall notify the commissioner, in writing, twenty-four hours prior to
making any investment under subsections (b) and (c) of this section which would result
in such bank having invested in the aggregate in twenty-five per cent or more of the
equity securities of a corporation.
(P.A. 94-122, S. 125, 340; P.A. 95-70, S. 4, 8; 95-155, S. 21, 29; P.A. 96-44, S. 5.)
History: P.A. 94-122 effective January 1, 1995; P.A. 95-70 amended Subsec. (b)(2) by deleting reference to laws and
supervisory authority governing the bank and by adding a holding company to the list, amended Subsec. (c) by deleting
reference to Subsec. (e), amended Subsec. (d) by changing "ten" to "fifteen", and by renumbering the Subdiv. and adding
Subdiv. (3) re determination of prudence, amended Subsec. (e) by adding references to Subsec. (b)(1) and (c), by deleting
reference to time of investment re the rating, by deleting reference to the opinion of the bank and instead requiring a
determination by the governing board re prudence, by deleting the sentence re review and retention of investments that
are not prudent, by adding a new Subdiv. (2) re bank's investment policy, and by renumbering Subsec. (e)(2) to Subsec.
(f), amended Subsec. (f) by deleting references to Subsec. (e), (f)(1)(A) and (f)(1)(B), by adding references to Subsec.
(d)(3) and (e)(1), and by adding the provision re divestiture, effective May 31, 1995; P.A. 95-155 amended Subsec. (a)(2)
to add proviso re five-year requirement, to add references to the general statutes and to delete the requirement re approval,
effective June 27, 1995; P.A. 96-44 replaced prior provisions re investments in equity securities with new provisions, and
added provisions re equity mutual funds and re controlling interests in entities carrying on functions within bank powers.
Sec. 36a-277. Social purpose investments. In addition to other investments authorized by sections 36a-275 and 36a-276, this section and section 36a-280, any Connecticut bank may purchase or hold for its own account the following securities, without
regard to any other liability to the Connecticut bank of the obligor, maker, guarantor or
issuer of such securities, provided the total amount of the securities of any one maker,
obligor or issuer held by a Connecticut bank or for a Connecticut bank's account may
not exceed, at any time, ten per cent of its equity capital and reserves for loan and lease
losses:
(1) Equity securities, as defined in section 36a-276, and debt securities, as defined
in section 36a-275, of companies licensed or that have applied to be licensed as "small
business investment companies", under the federal Small Business Investment Act of
1958, 15 USC Section 661 et seq., as from time to time amended, and which qualify as
companies financing disadvantaged persons under 15 USC Section 681(d), as from time
to time amended;
(2) Equity securities, as defined in section 36a-276, and debt securities, as defined
in section 36a-275, of companies licensed or that have applied to be licensed as "small
business investment companies", under the federal Small Business Investment Act of
1958, 15 USC Section 661 et seq., as from time to time amended;
(3) Debt securities issued by corporations certified by the commissioner to be organized and operated solely for the purpose of providing assistance which will contribute
to the public welfare by facilitating the acquisition and maintenance of ownership of
homes by individuals whose ability to own their own homes is hampered because of
social or economic disadvantages, which debt securities are backed by mortgage loans
made by the issuing corporations;
(4) Shares of stock and debt securities issued by the National Corporation for Housing Partnerships or by any other corporation created pursuant to Title IX of the Housing
and Urban Development Act of 1968; limited partnership interests in The National
Housing Partnership or in any other limited partnership formed pursuant to Section
907(a) of that act; and any partnership, limited partnership, or joint venture formed
pursuant to Section 907(c) of that act;
(5) Shares of stock and debt securities of corporations, and equity interests in and
debt securities of, partnerships and limited partnerships, engaged solely in acquiring
and rehabilitating housing;
(6) Debt securities or equity securities of a corporation, all the equity securities
of which corporation are to be owned by one or more Connecticut banks and which
corporation is organized and operated for the purpose of developing, and stimulating
and assisting the development of, by any means and in any capacity, by itself or jointly
with others, low and moderate income housing in this state;
(7) Debt securities or equity securities of closed-end investment companies which
provide capital to racial or ethnic minority-owned businesses and institutions;
(8) Debt securities or equity securities of development corporations or similar organizations organized to promote the business prosperity and economic welfare of this
state and to encourage the location and development of new business, industry and
commerce at least in part within the municipality where the main office or a branch of
such bank is located; and
(9) Debt securities or equity securities that are social purpose investments, provided
before making any such investment, the bank shall obtain the certification of the commissioner that the investment is a social purpose investment. For purposes of this section,
a "social purpose investment" means an investment which contributes to the public
welfare by facilitating the provision of a service or facility needed by residents of the
area in which an office of the bank making the investment is located.
(P.A. 94-122, S. 126, 340; P.A. 95-70, S. 5, 8; P.A. 96-44, S. 6; P.A. 97-35, S. 2; P.A. 99-7.)
History: P.A. 94-122 effective January 1, 1995; P.A. 95-70 amended Subdiv. (1) by changing "minority enterprise
small business investment companies" to "small business investment companies", effective May 31, 1995; P.A. 96-44
rewrote section re bank investments, inserted new Subdiv. (2) re investments in "small business investments companies",
deleted population minimum in Subdiv. (5), and inserted "debt securities or equity securities" in several locations; P.A.
97-35 deleted former Subdiv. (7) re investment in small business investment companies and renumbered former Subdivs.
(8), (9) and (10) as Subdivs. (7), (8) and (9); P.A. 99-7 amended Subdivs. (1) and (2) by changing "shares of stock" to
"equity securities", adding definition references and making provisions applicable to equity securities of companies that
have applied to be licensed as small business investment companies.
Secs. 36a-278 and 36a-279. Investment in commercial paper. Leeway. Sections
36a-278 and 36a-279 are repealed.
(P.A. 94-122, S. 127, 128, 340; P.A. 95-70, S. 6, 8; P.A. 96-44, S. 9.)
Sec. 36a-280. Investment policy of bank governing board. Review by board.
(a) At least once a year, the governing board of each Connecticut bank shall adopt an
investment policy governing investments made pursuant to sections 36a-275 to 36a-277, inclusive. No Connecticut bank shall make any investment pursuant to said sections
unless the purchase and holding of such investment is consistent with the Connecticut
bank's investment policy. The policy shall establish standards for the making of prudent
investments, which standards shall include, but not be limited to, (1) the rating of individual investments by rating services recognized by the commissioner, if any, and (2)
standards for diversification of the Connecticut bank's investment portfolio among industry categories. The policy shall provide for frequent and periodic review by the
Connecticut bank of investments made pursuant to this policy, and shall provide for the
reasonable and expeditious divestiture of investments which the bank, upon its review,
no longer deems prudent or consistent with the Connecticut bank's investment policy.
The investment policy and any investment made pursuant to the policy shall be subject
to the supervision of the commissioner concerning safe and sound banking practices.
(b) At least semiannually, the governing board of each Connecticut bank shall review investments made by the Connecticut bank pursuant to sections 36a-275 to 36a-277, inclusive. The minutes of the meetings of such governing board shall recite the
results of each such review. The governing board shall cause the Connecticut bank to
use reasonable efforts to divest as expeditiously as possible any investment which the
governing board, upon its semiannual review, no longer deems prudent or consistent
with the Connecticut bank's investment policy.
(P.A. 96-44, S. 1.)