In addition to the authority granted under the UB Law on acquisitions, mergers and asset purchases and on stock in bank-owned banks, and subject to the provisions of the UB Law with respect to equity securities, a universal bank would be authorized to invest in other financial institutions.
A universal bank would be permitted to make investments under the provisions outlined above, directly or indirectly through a subsidiary, unless DOB determined that an investment should be made through a subsidiary with appropriate safeguards to limit the risk exposure of the universal bank.
Universal Bank Purchase of its Own Stock
With certain exceptions, a universal bank could hold or purchase not more than 10% of its own capital stock, notes or debentures. However, a universal bank could exceed this limit if approved by DOB. In addition, a universal bank could hold or purchase more than 10% of its capital stock, notes or debentures if the purchase was necessary to prevent loss upon a debt previously contracted in good faith. Stock, notes or debentures held or purchased under this provision could not be held by the universal bank for more than six months if the securities could be sold for the amount of the claim of the universal bank against the holder of the debt previously contracted. The universal bank would be required to either sell the stock, notes or debentures within 12 months of acquisition under this provision or to cancel the stock, notes or debentures. Cancellation of the stock, notes or debentures would reduce the amount of the universal bank's capital stock, notes or debentures. If the reduction decreased the universal bank's capital below the minimum level required by DOB, the universal bank would have to increase its capital to the required amount.
A universal bank could not loan any part of its capital, surplus or deposits on its own capital stock, notes or debentures as collateral security, except that a universal bank would be allowed to make a loan secured by its own capital stock, notes or debentures to the same extent that the universal bank could make a loan secured by the capital stock, notes and debentures of a holding company for the universal bank.
Stock in Bank-Owned Banks
With the approval of DOB, a universal bank would be authorized to acquire and hold stock in one or more banks chartered under state statutes on bank-owned banks or national banks chartered under federal law or in one or more holding companies wholly owning such a bank. Aggregate investments under this provision could not exceed 10% of the universal bank's capital.
General Deposit Powers
The UB Law would provide that a universal bank could set eligibility requirements for, and establish the types and terms of, deposits that the universal bank could solicit and accept. The terms set under this provision could include minimum and maximum amounts that the universal bank would be able to accept and the frequency and computation method of paying interest.
A universal bank would be allowed to pledge its assets as security for deposits, subject to the limitations under current law applicable to banks.
With the approval of DOB, a universal bank would be permitted to securitize its assets for sale to the public. The Division could establish procedures governing the exercise of authority granted under this provision.
A universal bank would be authorized to take and receive, from any individual or corporation for safekeeping and storage, gold and silver plate, jewelry, money, stocks, securities, and other valuables or personal property. A universal bank could also rent out the use of safes or other receptacles upon its premises. A universal bank would have a lien for its charges on any property taken or received by it for safekeeping. If the lien was not paid within two years from the date the lien accrued, or if property was not called for by the person depositing the property, or by his or her representative or assignee, within two years from the date the lien accrued, the universal bank could sell the property at public auction. A universal bank would be required to provide the same notice for a sale under this provision that is required for sales of personal property on execution. After retaining from the proceeds of the sale all of the liens and charges due the bank and the reasonable expenses of the sale, the universal bank would be required to pay the balance to the person depositing the property, or to his or her representative or assignee.
Other Service and Incidental Activity Powers
Unless otherwise prohibited or limited by the UB Law, a universal bank would be authorized to exercise all powers necessary or convenient to effect the purposes for which the universal bank was organized or to further the businesses in which the universal bank was lawfully engaged.
Reasonbly Related Powers. Subject to any applicable state or federal regulatory or licensing requirements, a universal bank could engage, directly or indirectly through a subsidiary, in activities reasonably related or incident to the purposes of the universal bank. Such activities would be those that are part of the business of financial institutions, or closely related to the business of financial institutions, or convenient and useful to the business of financial institutions, or reasonably related or incident to the operation of financial institutions or are financial in nature. Activities that would be considered reasonably related or incident to the purposes of a universal bank would specifically include the following:
1. Business and professional services;
2. Data processing;
3. Courier and messenger services;
4. Credit-related activities;
5. Consumer services;
6. Real estate-related services, including real estate brokerage services;
7. Insurance and related services, other than insurance underwriting;
8. Securities brokerage;
9. Investment advice;
10. Securities and bond underwriting;
11. Mutual fund activities;
12. Financial consulting;
13. Tax planning and preparation;
14. Community development and charitable activities;
15. Debt cancellation contracts;
16. Any activities reasonably related or incident to activities on the list above;
17. An activity that is authorized by statute or regulation for financial institutions to engage in as of the effective date of this provision (the first day of the third month beginning after publication of the bill); and
18. An activity permitted under the Bank Holding Company Act.
In addition, DOB would be authorized to expand the list of activities reasonably related or incident to the purposes of a universal bank. Any additional activity approved by the Division would be authorized for all universal banks.
A universal bank would be required to give 60 days' prior written notice to DOB of the universal bank's intention to engage in an activity under these provisions.
Standards for Denial. DOB would be permitted to deny the authority of a universal bank to engage in an activity under these provisions, other than the first 16 activities listed above, if the Division determined any of the following: (a) that the activity was not an activity reasonably related or incident to the purposes of a universal bank; (b) that the financial institution was not well-capitalized or adequately capitalized; (c) that the financial institution was the subject of an enforcement action; or (d) that the financial institution did not have satisfactory management expertise for the proposed activity.
Insurance Intermediation. A universal bank, or an officer or salaried employe of a universal bank, would be permitted to obtain a license as an insurance intermediary, if otherwise qualified. A universal bank could not, directly or indirectly through a subsidiary, engage in the business of underwriting insurance.
Activities Approved by DOB. A universal bank would be authorized to engage in any other activity that was approved by rule of DOB. In addition, a universal bank could engage in activities under these provisions, directly or indirectly through a subsidiary, unless the Division determined that an activity had to be conducted through a subsidiary with appropriate safeguards to limit the risk exposure of the universal bank.
Activities Provided Through a Subsidiary. The amount of the investment in any one subsidiary that engaged in an activity under these provisions could not exceed 20% of capital or a higher percentage if approved by DOB. The aggregate investment in all subsidiaries that engaged in an activity under this provision could not exceed 50% of capital or a higher percentage authorized by the Division. A subsidiary that engaged in an activity under these provisions could be owned jointly, with one or more other financial institutions, individuals or entities.
Trust Powers
Subject to rules of DOB, a universal bank would be permitted to exercise trust powers in accordance with such authority granted by the statutes to state banks.
Rule-Making Authority
The bill would require DOB to use the emergency rule making procedures to promulgate rules for the period before permanent rules became effective. However, DOB would not be required to provide evidence of an emergency.
Effective Date
These provisions would take effect on the first day of the third month beginning after publication of the bill.
[Bill Sections: 2343, 2346, 9119(1) and 9419(1)]
GENERAL PROVISIONS
Budget Change Items
1. TOBACCO SETTLEMENT FUNDS
GPR-REV
1998-99 $49,728,900
1999-00 136,839,600
2000-01 152,068,600
Total $338,637,100
Governor: On November 23, 1998, Wisconsin and 45 other states signed a settlement agreement with the tobacco industry. This agreement settled a lawsuit that Wisconsin filed against the tobacco industry on February 5, 1997. Under the agreement, Wisconsin is estimated to receive $338.6 million by June 30, 2001 (through the year 2025, Wisconsin is estimated to receive $5.9 billion). In addition, legal fees for Department of Justice and private attorneys involved with the suit will be paid from separate funds. Initial payments will be disbursed to Wisconsin the earlier of June 30, 2000, or once 80 percent of the 46 states have obtained state-specific finality and those states represent 80 percent of the payments. State-specific finality occurs when a state's case has achieved an official court dismissal and the time for appeal has expired. Wisconsin's suit was officially dismissed on December 4, 1998, and the time for appeal has expired. Therefore, Wisconsin has achieved state-specific finality. However, recent appeals in New York, New Jersey and California make it likely that the initial payment will not be made before June 30, 2000.
The bill assumes estimated revenues of $338.6 million in tobacco settlement monies would be deposited to the general fund as follows: (a) $49.7 million in 1998-99; (b) $136.8 million in 1999-00; and (c) $152.1 million in 2000-01. These amounts are reflected in the bill's general fund condition statement. Estimated 1998-99 revenues are reflected in the opening balance, while 1999-00 and 2000-01 revenues are reflected under estimated departmental revenues.
The bill is silent as to any directed use of the $338.6 million in tobacco settlement monies. The executive budget documents, however, do indicate that the "funds will be used for a variety of state health programs in the 1999-2001 budget and to provide a partial reimbursement to the general fund and state taxpayers for general purpose taxes spent on such costs in previous years." Additionally, executive budget documents indicate that tobacco settlement monies would be used for the following initiatives included in the budget: (a) $1,000,000 annually to the University of Wisconsin to advance the work of the UW Center for Tobacco Research and Intervention in developing new educational programs to discourage tobacco use and expanding smoking cessation programs throughout Wisconsin; (b) $500,000 annually to the Medical College of Wisconsin to expand existing programs for research efforts on cancer and cardiovascular disease, to translate research findings into medical practice for medical students and residents and to increase community outreach to providers and clinics on smoking cessation programs and techniques; (c) $500,000 annually to the Department of Public Instruction for grants of up to $10,000 to schools for smoking prevention activities in grades kindergarten through eighth grade; (d) $500,000 annually to the Department of Health and Family Services to establish a smoking prevention program for women and children as part of the women's health program; and (e) $200,000 in 1999-00 to the Office of the Commissioner of Insurance to issue a grant to an entity that would develop a plan for a small employer purchasing pool. These are summarized in the following table. Summaries for these initiatives can be found under the respective agency summaries.
1999-00 2000-01
University of Wisconsin $1,000,000 $1,000,000
