SB494: Bill Text

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, s. 1 Section 1. 34.09 of the statutes, as affected by 1995 Wisconsin Act 27, is amended to read:

SB494,10,16 34.09 Financial institutions eligible as public depositories. Every federal or state credit union, state bank, federal or state savings and loan association, savings and trust company and federal or state savings bank and every national bank located in this state which complies in all respects as to public deposits with this chapter and will accept payments made by the state under s. 16.412 may be designated as a public depository and may receive and hold public deposits, subject to this chapter, if the financial institution has a branch or main office located in this state, complies with this chapter with respect to public deposits and accepts payments made by the state under s. 16.412. The division of banking shall have has the same powers and duties with regard to making and continuing public deposits in national banks, federal and state credit unions, federal and state savings banks and federal and state savings and loan associations as the powers and duties exercised and performed by the division of banking with regard to public deposits in state banks.

SB494, s. 2 Section 2. 66.04 (2m) (a) of the statutes is amended to read:

SB494,10,19 66.04 (2m) (a) The institution is authorized to exercise trust powers under s. 221.04 (6) 221.0316 or ch. 223.

SB494, s. 3 Section 3. 138.052 (10) of the statutes is renumbered 138.052 (10) (intro.) and amended to read:

SB494,11,1 138.052 (10) (intro.) This section does not apply to loans any of the following:

SB494,11,3 (a) A loan to corporations a corporation or a limited liability companies company.

SB494, s. 4 Section 4. 138.052 (10) (b) of the statutes is created to read:

SB494,11,6 138.052 (10) (b) A loan that is primarily for a business purpose or for an agricultural purpose, as defined in s. 421.301 (4).

SB494, s. 5 Section 5. 138.056 (8) of the statutes is repealed and recreated to read:

SB494,11,8 138.056 (8) Applicability. This section does not apply to any of the following:

SB494,11,9 (a) A loan or forbearance to a corporation or a limited liability company.

SB494,11,11 (b) A loan that is primarily for a business purpose or for an agricultural purpose, as defined in s. 421.301 (4).

SB494,11,12 (c) A reverse mortgage loan, as defined in s. 138.058 (1) (b).

SB494,11,13 (d) A transaction initially entered into before November 1, 1981.

SB494, s. 6 Section 6. 157.19 (2) (a) of the statutes is amended to read:

SB494,11,23 157.19 (2) (a) Except as provided in sub. (5) and the rules promulgated under sub. (4), the cemetery authority may deposit care funds under s. 157.11 (9g), and shall deposit care funds under s. 157.12 (3) and preneed trust funds under s. 440.92, with a financial institution located in this state. The financial institution shall be the trustee of the care funds and preneed trust funds. A bank need not comply with s. 221.04 (6) 221.0316 (1) or (2) or ch. 223 to accept or disburse deposits under this section. The trustee shall invest the care funds and preneed trust funds as provided under s. 881.01, except as provided in sub. (5) and the rules promulgated under sub. (4).

SB494, s. 7 Section 7. 180.1132 (2) (a) of the statutes is amended to read:

SB494,12,3 180.1132 (2) (a) A corporation if a business combination involving the corporation is governed by s. 186.31, 215.53, 215.73, 221.25, 221.565 221.0702 or 223.11 223.21.

SB494, s. 8 Section 8. 180.1150 (3) (h) of the statutes is repealed.

SB494, s. 9 Section 9. 186.113 (15) (a) of the statutes, as affected by 1995 Wisconsin Acts 27 and 55, is amended to read:

SB494,12,23 186.113 (15) (a) Directly or indirectly, acquire, place and operate, or participate in the acquisition, placement and operation of, at locations other than its offices, remote terminals, in accordance with rules established by the office of credit unions. The rules shall provide that any remote terminal shall be available for use, on a nondiscriminatory basis, by any state or federal credit union which has its principal place of business in this state, by any other credit union obtaining the consent of a state or federal credit union which has its principal place of business in this state and is using the terminal and by all members designated by a credit union using the terminal. This subsection does not authorize a credit union which has its principal place of business outside the state to conduct business as a credit union in this state. The remote terminals also shall be available for use, on a nondiscriminatory basis, by any state or national bank, state or federal savings bank or state or federal savings and loan association, whose home office is located in this state, if the bank, savings bank or savings and loan association requests to share its use, subject to the joint rules established under s. 221.04 (1) (k) 221.0303 (2). The office of credit unions by order may authorize the installation and operation of a remote terminal in a mobile facility, after notice and hearing upon the proposed service stops of the mobile facility.

SB494, s. 10 Section 10. 215.13 (46) (a) 1. of the statutes, as affected by 1995 Wisconsin Acts 27 and 55, is amended to read:

SB494,13,20 215.13 (46) (a) 1. Directly or indirectly, acquire, place and operate, or participate in the acquisition, placement and operation of, at locations other than its home or branch offices, remote service units, in accordance with rules established by the division. Remote service units established in accordance with such rules are not subject to sub. (36), (39), (40) or (47) or s. 215.03 (8). The rules of the division shall provide that any such remote service unit shall be available for use, on a nondiscriminatory basis, by any state or federal savings and loan association which has its principal place of business in this state, by any other savings and loan association obtaining the consent of a state or federal savings and loan association which has its principal place of business in this state and is using the terminal and by all customers designated by a savings and loan association using the unit. This paragraph does not authorize a savings and loan association which has its principal place of business outside this state to conduct business as a savings and loan association in this state. The remote service units also shall be available for use, on a nondiscriminatory basis, by any credit union, state or national bank or state or federal savings bank, whose home office is located in this state, if the credit union, bank or savings bank requests to share its use, subject to the joint rules established under s. 221.04 (1) (k) 221.0303 (2). The division by order may authorize the installation and operation of a remote service unit in a mobile facility, after notice and hearing upon the proposed service stops of the mobile facility.

SB494, s. 11 Section 11. 215.13 (51) of the statutes, as affected by 1995 Wisconsin Acts 27 and 55, is amended to read:

SB494,14,3 215.13 (51) Contract for financial services. Contract with a bank that is owned by a bank holding company which also owns the contracting association, to provide products or services under s. 221.04 (1) (p) 221.0301 (8). The bank shall be subject to regulation and examination by the division with regard to services performed under the contract to the same extent as if the services were being performed by the association itself on its own premises.

SB494, s. 12 Section 12. 217.11 (1) of the statutes is amended to read:

SB494,14,7 217.11 (1) Every check sold by any licensee shall bear the name of the licensee clearly imprinted thereon, including the words authorized under s. 221.49 (2) 221.0402 (2) if applicable.

SB494, s. 13 Section 13. 219.08 of the statutes is repealed.

SB494, s. 14 Section 14. 220.04 (6) (a) of the statutes, as affected by 1995 Wisconsin Act 27, is amended to read:

SB494,14,21 220.04 (6) (a) The division, with the approval of the banking review board, may establish uniform savings rules which shall be adopted by every bank and trust company bank. Such rules may provide the conditions under which banks or trust company banks may accept time deposits and the methods of figuring interest. Such rules may also provide the term of notice of withdrawal and the amounts which may be withdrawn by depositors, which conditions the bank may put in force in times of financial stress by action of its board of directors. The maximum rate of interest on deposits paid by banks whose deposits are not insured by the federal deposit insurance corporation, whether certificates of deposit or book savings deposits, shall be the same as the rate set by the federal deposit insurance corporation for banks whose deposits are insured by it.

SB494, s. 15 Section 15. 220.04 (7) (b) 3. of the statutes is amended to read:

SB494,14,25 220.04 (7) (b) 3. Require the organization to maintain reasonable safeguards to protect fiduciary property including the maintenance of an indemnity fund in the same manner as that required of trust company banks under s. 223.02 (1).

SB494, s. 16 Section 16. 220.04 (9) (a) 2. of the statutes, as affected by 1995 Wisconsin Act 27, is amended to read:

SB494,15,5 220.04 (9) (a) 2. "Regulated entity" means a bank, trust company bank and any other entity which is described in s. 220.02 (2) or 221.56 221.0526 as under the supervision and control of the division.