LRB-5342/1
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1995 - 1996 LEGISLATURE
February 13, 1996 - Introduced by Representatives Kaufert, R. Potter, Ward,
Hoven, Ziegelbauer, F. Lasee, Meyer, Ourada, Baldus, Lehman, Hanson,
Huebsch, Jensen, Musser, Kreibich, Gard, Handrick, Ott, Grothman, Hahn,
Seratti, Olsen, Gronemus, Goetsch, Porter, Lorge, Johnsrud, Hutchison,
Zukowski, Ainsworth, Klusman, Brandemuehl, Freese, Vrakas, Green,
Ladwig, Silbaugh, Gunderson, Coleman, Travis, Nass, La Fave, Turner and
Powers, cosponsored by Senators Darling, Drzewiecki, Breske, Andrea,
Petak, Welch, Huelsman, Grobschmidt, George, Shibilski, Moen,
Fitzgerald, Moore, Buettner, Rude, Zien, Burke, Panzer, Farrow, Cowles,
Rosenzweig, C. Potter and Schultz. Referred to Committee on Financial
Institutions.
AB872,2,2
1An Act to repeal 180.1150 (3) (h), 219.08, 220.075, 223.025, 223.03 (10), 223.03
2(11), 223.03 (12), 223.04, 223.12 (4) and (5), 224.075, 224.08 and 404.213 (4m);
3to renumber and amend 138.052 (10), 223.11 and 224.092;
to amend 34.09,
466.04 (2m) (a), 157.19 (2) (a), 180.1132 (2) (a), 186.113 (15) (a), 215.13 (46) (a)
51., 215.13 (51), 217.11 (1), 220.04 (6) (a), 220.04 (7) (b) 3., 220.04 (9) (a) 2., 220.04
6(10), 220.06 (1m), 220.09, chapter 223 (title), 223.01, 223.03 (14), 223.07 (1),
7223.07 (3), 223.08, 223.12 (title), 223.12 (1), 223.12 (2) and (3), 701.19 (2) (d) and
8946.82 (4);
to repeal and recreate 138.056 (8), chapter 221, 223.02 and 223.03
9(6); and
to create 138.052 (10) (b), 220.04 (11), 220.04 (12), 220.08 (3am),
10subchapter I (title) of chapter 223 [precedes 223.01], subchapter II (title) of
11chapter 223 [precedes 223.10], subchapter III (title) of chapter 223 [precedes
12223.20] and 224.092 (2) of the statutes;
relating to: state banking law, the
1definition of public depository, residential and variable interest rate loans,
2granting rule-making authority and providing a penalty.
Analysis by the Legislative Reference Bureau
STATE BANKS
This bill recodifies chapter 221 of the Wisconsin Statutes, governing state
banks. In addition to recodifying this chapter, the bill makes a number of substantive
changes relating to banks, including the following:
Organization of banks
Current law provides that any number of adult residents of the state, not less
than 7 nor more than 20, who desire to organize a bank may apply to the division of
banking (division) to organize the bank. This bill lowers the minimum number of
applicants from 7 to 3. Similarly, current law requires that at least 7 but no more
than 21 residents of the state must sign the articles of incorporation. Under the bill,
the specific numeric requirement is eliminated. As under current law, however, a
majority of the incorporators must sign the articles of incorporation and those who
sign must be residents of the state.
Current law grants incorporators of a bank certain powers incidentally or
necessarily preliminary to the organization of a banking corporation, but is silent on
the manner in which these powers are to be exercised. This bill provides that actions
of the incorporators of a bank must be taken by majority vote of the incorporators.
Current law limits the ability of a person to directly or indirectly receive any
commission, compensation, bonus, right or privilege of any kind for organizing any
banking corporation in this state, or for securing a subscription to the original capital
stock of any banking corporation in this state. This bill repeals this provision.
Articles of incorporation and bylaws
Under current law, a bank may amend its articles of incorporation by a vote of
its stockholders representing two-thirds of the capital stock taken at a meeting
called for that purpose. Under the bill, the articles of incorporation may be amended
by the vote of shareholders owning a majority of the stock of the bank who are
entitled to vote, unless a greater number of votes are required under the bank's
articles of incorporation or bylaws.
Current banking law does not contain any specific provision for restating a
bank's articles of incorporation. This bill incorporates provisions from corporate law
into the banking law. Under these provisions, a bank may restate its articles of
incorporation, either with or without amendment, by filing the restated articles with
the division along with a certificate that states certain information regarding the
manner in which the restated articles were adopted.
Under current law, a bank may amend or repeal a bylaw only by the affirmative
vote of two-thirds of the outstanding capital stock having voting power. The bill
provides that the shareholders may adopt, repeal or amend bylaws by an affirmative
vote of shareholders owning a majority of the stock of the bank who are entitled to
vote, unless the articles of incorporation or bylaws require a greater percentage. The
bill also allows the board of directors of a bank to amend or repeal the bank's bylaws,
or adopt new bylaws, subject to certain limitations. The board of directors cannot
alter the bank's bylaws to the extent that the articles of incorporation reserve that
power to the shareholders or to the extent that the shareholders in adopting,
amending or repealing a particular bylaw, provided in the bylaws that that bylaw
could not be altered by the board of directors. Certain other changes may not be made
by the board of directors. For example, a bylaw that fixes a greater or lower quorum
requirement or a greater voting requirement for shareholders cannot be adopted,
amended or repealed by the board of directors.
Filing requirements and fees
Current law requires the payment of the following filing fees: $2,500 with an
application to organize a state bank, $100 with the filing of the articles of
incorporation, $1,000 for reorganization of a national bank as a state bank, $1,000
for the establishment or transfer of a branch bank, $1,000 for an application to
exercise trust powers, and $5,000 for an application for consolidation or merger,
unless more than 3 banks are to be consolidated, in which case the fee is $5,000 plus
$1,000 for each bank after the 3rd bank. The bill retains the requirement that a fee
be paid in these situations, but allows the division to determine the amount of the
fee. The bill also adds a general provision authorizing the division to establish such
fees as it determines are appropriate for documents filed with the division.
Current law requires certain bank documents to be filed with the register of
deeds in the county in which the bank is located. These documents include the
articles of incorporation, amendments to articles of incorporation and applications
to exercise trust powers. Under the bill, these documents are only required to be filed
with the division.
Issuance of capital stock, preferred stock and notes and debentures
Under current law, a bank may authorize an increase in the capital stock of a
bank for certain specified purposes, with the approval of the division and with the
vote of shareholders owning two-thirds of the stock of the bank entitled to vote. This
bill changes the shareholder vote requirement to be a majority of the stock of the
bank entitled to vote, or by such greater percentage provided in the bank's articles
of incorporation or bylaws. The bill repeals certain specific shareholder voting
requirements in order for a corporation to subscribe for, take or hold more than 10%
of the bank's stock.
The bill also repeals certain specific restrictions on the ability of a state bank
to grant stock options. Under current law, a state bank may grant options to
purchase, sell or enter into agreements to sell shares of its capital stock to its
employes, for a consideration of not less than 100% of the fair market value of the
shares on the date the option is granted or, if pursuant to a stock purchase plan, 85%
of the fair market value on the date the purchase price is fixed. Current law also
requires that the stock options not extend beyond a period of 10 years and that the
stock option plan be approved by the board of directors, by the holders of at least
two-thirds of the outstanding shares of the bank entitled to vote and by the division.
This bill repeals these provisions.
The bill also modifies the provisions governing issuance of preferred stock by
a bank. Under current law, an issuance of preferred stock must be provided for in
the original articles of incorporation or by an amendment to these articles adopted
by a two-thirds vote of the stock having voting power. This provision is changed to
require only approval by the shareholders owning a majority of the stock of the bank
that is entitled to vote, or such greater percentage as may be required in the articles
of incorporation. Current law provides that a a bank having a capital stock of less
than $100,000 may not issue preferred stock unless it has outstanding capital stock
in an amount equal to the minimum capital stock. This is requirement is eliminated.
As under current law, the bill continues to require division approval of an issuance
of preferred stock.
Current law authorizes banks to sell notes and debentures, if approved by the
board of directors and the division. This bill amends these provisions so that the
division may establish limits on the issuance of notes and debentures for a particular
bank and so that the bank is not required to get division approval of a specific
issuance of notes or debentures if the amount issued is within those limits. The bill
also allows notes and debentures to be considered capital of the bank, if approved by
the division.
Capital definition and requirements; reserve requirements
The bill eliminates statutorily specified minimum capital requirements for new
banks. Under current law, the minimum capital stock of a bank depends on the
population of the town, city or village in which the bank is to operate: $50,000 in
towns, cities and villages of less than 10,000 population; $100,000 in towns, cities
and villages having 10,000 or more and less than 25,000 population; and $250,000
in cities having 25,000 or more population. Under the bill, the minimum capital is
determined by the division, subject to review by the banking review board. The bill
also changes the definition of capital to include undivided profits and to exclude
intangible assets.
Current law provides that, if the division finds that the average of deposits for
a fiscal year exceed an amount equal to 15 times the unimpaired capital and
undistributed surplus of the bank, the division is required to order the bank to
increase its capital or surplus or both. This bill repeals this provision.
Current law requires that banks maintain sufficient reserves to meet
anticipated withdrawals, commitments and loan demand. The bill repeals state law
requirements regarding minimum reserves.
Directors, officers and employes
Under current law, the affairs of the bank must be managed by a board of not
less than 5 directors, at least two-thirds of whom must reside in this state. This bill
provides that the director need not be a resident, unless required in the bank's
articles of incorporation or bylaws. The bill allows banks to have a board with
staggered terms and, if a bank has issued classes of shares, allows the articles of
incorporation to authorize all or a specified number of directors to be elected by the
holders of one or more authorized classes of shares. Current law requires the board
of directors to have monthly meetings; the bill changes this requirement to quarterly
meetings. Under current law, the board is not authorized to appoint more than 2
persons to fill vacant director positions; under the bill there is no such restriction and
the board is authorized to fill director vacancies even if no quorum exists, by a
majority of those directors remaining in office.
Current law requires that a bank establish a loan committee composed of at
least 3 directors to determine policies as to renewals and applications for loans. This
bill repeals this specific requirement and allows the board to create such committees
as it determines necessary; these committees must have at least 2 members.
Current law provides that bank officers must be elected each year; the bill
repeals the specific term requirement. The bill also provides that any document
required to be signed by an officer of the bank shall be signed by the officer designated
by the bank's bylaws or board of directors.
Under current law, if a bank lends more than $25,000 in the aggregate to any
officer, director or employe of the bank, the loan must generally be approved by the
board of directors or be within a line of credit approved by the board of directors and
the amount of any loan in excess of $25,000 must be secured in full by collateral
security. The bill amends this provision to delete the collateral requirement and to
require board approval only if the credit exceeds $25,000 or 5% of the bank's capital,
whichever is greater, except that approval is required by the board in all cases where
the loan exceeds $500,000.
Powers of banks
Under current law, a bank is permitted to contract with other depository
institutions to provide banking and financially related products or services, subject
to review of the contract by the division. This bill modifies that provision to provide
that no contract is required for the acceptance of customer deposits at affiliated
banks.
Current law contains a number of specific provisions regarding the acquisition
of stock of a federal reserve bank, the federal home loan bank, the federal national
mortgage association and certain other federal agencies. In addition, this bill creates
a general provision which allows a bank to acquire, with the approval of the division,
the stock of any state or federal agency or any similar institution approved by the
division.
The bill grants to banks the authority, with the approval of the division, to
securitize assets for sale to the public in accordance with rules promulgated by the
division. The bill also adds a statutory prohibition on engaging in the business of
underwriting insurance, either directly or through a subsidiary.
Current law contains certain restrictions on the amount that a bank may invest
in bank building corporations and furniture, equipment and fixtures. These specific
restrictions are removed, although banks remain subject to an overall limit on bank
facilities, furniture, equipment, fixtures and investments in bank building
corporations equal to 60% of the bank's capital. Current law contains certain specific
provisions authorizing investments in real estate to provide parking and remote
facilities. The bill repeals these provisions and replaces them with a general
authorization for banks to acquire real estate for such other purposes as may be
approved by the division.
Current law contains certain provisions limiting bank liabilities to any one
person. Two separate tests must be met in order to determine compliance with these
provisions: under one test, all liabilities to one person may not exceed 20% of the
bank's capital and under the other test, all liabilities to the person, with certain
exclusions, may not exceed 15% of the bank's capital. This bill eliminates the 15%
test. Under current law, certain types of liabilities, including direct obligations of the
federal government and obligations of federal agencies that are guaranteed by the
federal government, are exempt from these limitations entirely. This bill amends
this provision to cover direct obligations of this state and state agency obligations
that are guaranteed by the state government. The bill incorporates into the statutes
certain banking rules regarding a bank's investment in time deposits and certificates
of deposit of other banking institutions and in bonds issued by foreign governments
and certain international banking institutions.
Current law also allows a bank to make loans and investments, subject to
certain percentage limits of the bank's capital established by the division for the
bank. Under current law, the percentage limitation of capital that is established by
the division may not exceed 20% for loans and 10% for investments. This bill
increases the maximum percentage limit for investments from 10% to 20%. In
addition, current law provides for investments to be made directly by the bank; the
bill permits the investment to be made directly or through a subsidiary. The bill also
provides that these permitted investments may include investments in other
financial institutions.
Under current law, a bank may generally not hold or purchase more than 5%
of its capital stock, notes or debentures. This bill increases this authority from 5%
to 10% and adds certain new provisions governing the status of these treasury
shares.
Current law limits the situations in which a bank may pledge its assets as
collateral. This bill amends this provision to allow a bank to secure deposits for a
particular depositor where permitted or required by law and to secure repurchase
agreements entered into by the bank.
The bill repeals certain provisions governing the situations in which a bank
may relocate its principal office and repeals a provision specifically authorizing a
bank to make charitable contributions. The bill repeals certain provisions dealing
specifically with the ability of a bank to invest in partnership interests in farm
operations; under the bill, these investments would be treated under the general
provisions dealing with bank investments.
Incorporation of provisions from corporate law
The bill incorporates a number of provisions from the corporate law, with minor
modifications, and specifically applies them to banks. These provisions include
provisions that do the following:
1. Specify how notice may be provided to and by a bank and specify the date
on which certain notices are effective.
2. Generally prohibit the use of a name by a bank, if the name is
indistinguishable from another bank's name. The bill permits a bank to use the same
name as another bank in certain specified instances involving mergers, acquisitions
or reorganizations.
3. Specify quorum and voting requirements with respect to shareholder voting
groups and specify methods of setting greater or lower quorum requirements or
greater voting requirements.
4. Specify the method of counting shareholders.
