SB494,2,2
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.
5. Require that the bank have outstanding, at all times, shares that together
have unlimited voting rights and are entitled to receive the net assets of the bank
upon dissolution.
6. Govern the issuance of classes of stocks and different series of stock within
a class, govern issuance and disposition of fractional shares and govern the issuance
of share dividends.
7. Govern the form and content of share certificates.
8. Permit certain restrictions on the transfer of the shares and other securities
of a bank.
9. Specify when preemptive rights exist for bank shares and specify how those
rights may be exercised, waived or lapsed.
10. Regulate annual and special meetings of a bank's shareholders, including
provisions regarding required notices and disclosures to shareholders, and allowing
for action to be taken without a meeting in certain circumstances.
11. Establish the record date for determining the shareholders entitled to vote
or take other action and requiring the preparation and inspection of shareholder lists
prior to shareholder meetings.
12. Govern the use of proxies at shareholder meetings, including the method
of appointing and revoking a proxy, the effective date of a proxy, the effect of the proxy
and the effect of death or incapacity of a shareholder on the proxy; the recognition
of shares registered in the name of a nominee; the use of voting trusts and
agreements.
13. Govern the acceptance of instruments showing shareholder action.
14. Govern cumulative voting for directors.
15. Govern indemnification and insurance of directors, officers and employes;
limit director liability; and govern director conflicts of interest.
16. Govern the resignation and removal of directors, notice requirements for
board meetings, waiver of notice, board of director quorum and voting requirements,
and committees of the board.
17. Permit directors and officers to rely on certain information, unless they
have knowledge that makes the reliance unwarranted. The provisions cover
information supplied by certain officers and employes, experts and board
committees.
18. Allow directors do consider certain factors, other than shareholder
interests, in taking action.
19. Allow officers to hold more than one office simultaneously, govern the
resignation and removal of officers, and their duties.
20. Govern share exchanges and dissenters' rights. The dissenters' rights
provisions govern the creation of these rights, the application of these rights to
beneficial shareholders and after-acquired shares, the manner of exercising the
rights, dissenters' notices, demands for payment, methods of payment and
valuation, and appeal procedures.
Merger, consolidation, dissolution, liquidation and forfeiture of charter
Under current law, a consolidation or merger must be approved by shareholders
owning two-thirds of the bank's stock; the bill requires a vote by the shareholders
holding a majority of the outstanding capital stock and by the shareholders holding
a majority of any preferred stock entitled to vote, unless greater percentages are
required in the articles of incorporation or the bylaws. The bill removes the specific
30-day notice requirement for shareholder meetings to vote on mergers and
consolidations. The bill also repeals the specific dissenter's rights provisions with
more detailed dissenters' rights provisions incorporated from corporate law. Under
current law, the charter of a bank that has been absorbed by another bank may be
cancelled after publication of a class 3 notice and opportunity for rejection. This bill
repeals these requirements and requires the division to cancel the charter of the
absorbed bank upon consummation of the merger. Finally, the bill creates a new
provision allowing banks to consolidate or merge into an interim bank, organized
pursuant to rules promulgated by the division.
Under current law, a bank may be dissolved by the act of its shareholders
owning two-thirds of its stock. This bill changes this to require only the vote of
shareholders owning a majority of the stock entitled to vote, unless a greater
percentage is specified in the articles of incorporation or bylaws. Similarly, the
two-thirds vote requirement for liquidation is changed to the vote of shareholders
owning a majority of the outstanding capital stock, unless a greater percentage is
required under the articles of incorporation or the bylaws.
Other changes relating to state banks
The bill eliminates a requirement that prohibits banks from carrying any of its
assets on its books at a valuation exceeding its actual cost to the bank, without the
prior written consent of the division.
Current law requires that banks provide a customer, upon request, with a copy
of any written appraisal report which is held by the financial institution, which
relates to residential real estate that the individual owns or has agreed to purchase
and for which a fee is imposed. This bill provides that compliance with certain
appraisal disclosure requirements under federal law satisfies this requirement. The
bill repeals certain state law funds availability requirements. The bill also repeals
certain state law requirements relating to account disclosures and change in term
notices for state banks, as well as requirements to give customers notice of all of their
affiliated relationships in connection with a transaction conducted by a bank, bank
holding company or subsidiary.
The bill allows banks to obtain reimbursement for expenses and costs incurred
in searching for, reproducing and transporting books, papers, records and other data
required to be produced by legal process, unless otherwise prohibited by law. Under
current law, a bank is required to make at least 2 reports to the division each year,
on forms prescribed by the division; the most recent of these reports as of the last
business day of the 4th calendar quarter shall be published by the bank as a class
1 notice. This bill repeals the publication requirement.
The bill expands the scope of services permitted to be provided by bank-owned
banks to include certain correspondent banking services. Under current law,
shareholders of a bank may file a declaration with the division agreeing to be
individually responsible for the debts, demands and liabilities of the bank. This bill
repeals these provisions.
Trust company BANKS AND TRUST ACCOUNTS
The bill also makes a number of changes relating to trust company banks and
to trust accounts. These changes include the following:
1. Modifying the provisions governing the liquidation of failed blanks to permit
the division to transfer trust accounts of a failed bank to a successor organization
without having the successor assume liability for the past acts of the failed bank.
2. Repealing statutorily specified minimum capital requirements for trust
company banks and allowing the division to establish, with the approval of the
banking review board, minimum capital requirements for trust company banks.
3. Providing that trust company banks may not accept deposits, other than
trust deposits.
4. Eliminating the ability of a trust company bank, with court approval, to
transfer to trust estates any mortgages or other securities owned by the trust
company bank.
5. Allowing trust service offices to be established at any insured depository
institution, not just state or national banks as under current law.
6. Allows trust company banks to maintain adequate errors and omissions
insurance coverage in lieu of making an indemnity fund deposit.
Other changes
In addition to the changes regarding state banks and trust company banks, the
bill modifies the definition of public depository to require that public depositories
have main or branch offices in this state.
Current law contains certain provisions governing residential mortgage loans
which regulate prepayments of these loans, escrow accounts, late payment charges
on instalments, interest imposed after acceleration or the maturity of a loan and
required disclosures. Current law also contains provision governing variable rate
loans which regulate the maximum term of these loans, the use of approved indices,
notice of interest payment changes and required disclosures. This bill amends these
provisions to provide that they are not applicable to loans that are primarily for a
business or agricultural purpose.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB494,10,16
334.09 Financial institutions eligible as public depositories. Every
4federal or state credit union, state bank, federal or state savings and loan
5association, savings and trust company and federal or state savings bank and every
6national bank
located in this state which complies in all respects as to public deposits
7with this chapter and will accept payments made by the state under s. 16.412 may
8be designated as a public depository and may receive and hold public deposits,
9subject to this chapter
, if the financial institution has a branch or main office located
10in this state, complies with this chapter with respect to public deposits and accepts
11payments made by the state under s. 16.412. The division of banking
shall have has 12the same powers and duties with regard to making and continuing public deposits
13in national banks, federal and state credit unions, federal and state savings banks
14and federal and state savings and loan associations as the powers and duties
15exercised and performed by the division of banking with regard to public deposits in
16state banks.
SB494, s. 2
17Section
2. 66.04 (2m) (a) of the statutes is amended to read:
SB494,10,1918
66.04
(2m) (a) The institution is authorized to exercise trust powers under s.
19221.04 (6) 221.0316 or ch. 223.
SB494, s. 3
20Section
3. 138.052 (10) of the statutes is renumbered 138.052 (10) (intro.) and
21amended to read:
