2017 - 2018 LEGISLATURE
January 10, 2018 - Introduced by Representatives Katsma, E. Brooks, R. Brooks,
Felzkowski, Jacque, Kerkman, Kitchens, Tauchen, Weatherston, Born and
Tusler, cosponsored by Senators Marklein, Cowles and Feyen. Referred to
Committee on Ways and Means.
1An Act to renumber and amend
645.46 (11); to amend
34.07, 138.052 (5) (am) 2
1., 186.235 (16) (a), 214.54 (1), 214.54 (2), 214.725 (3) (intro.), 215.03 (2) (a), 3
220.04 (1) (a), 220.06 (1m) and 223.105 (3) (a); and to create
186.235 (7) (b) 4., 4
214.725 (3m), 214.755 (1) (f), 215.02 (6) (a) 7., 221.0328 (4), 645.05 (3), 645.46 5
(11) (b) and 645.54 (1) (b) 3. of the statutes; relating to: confidentiality of
6financial institution information maintained by the Department of Financial
7Institutions; periodic examinations of financial institutions; savings bank loan
8limitations; interest on residential mortgage loan escrow accounts; capital of
9state banks; security provided by public depositories; insurance company
10liquidation proceedings; and modifying an administrative rule of the
11Department of Workforce Development related to an exemption from overtime
12pay requirements for outside salespersons.
Analysis by the Legislative Reference Bureau
This bill allows the Division of Banking (division) and the Office of Credit
Unions (OCU) in the Department of Financial Institutions to disclose certain
financial institution information to a Federal Home Loan Bank and to accept and
rely on information collected by other agencies or independent third parties in
conducting financial institution examinations. The bill also increases the limit on
loans by a savings bank to a single person. The bill eliminates the requirement that
financial institutions and mortgage bankers pay interest on escrow accounts for
residential mortgage loans originated on or after the effective date of the bill. The
bill also specifies that the security that may be provided by a public depository to
secure the repayment of public deposits includes an irrevocable letter of credit issued
by a Federal Home Loan Bank or financial institution. The bill further allows a state
bank, with approval of the division, to reduce its capital and distribute cash or other
assets to its shareholders. The bill also includes provisions applicable to collateral
and other security interests of Federal Home Loan Banks in insurance company
liquidation proceedings. Finally, the bill modifies an administrative rule of the
Department of Workforce Development to conform the rule to a similar provision
under the federal Fair Labor Standards Act (FLSA).
Disclosure of information to Federal Home Loan Bank
Under current law, the division regulates state banks, savings banks, and
savings and loan associations and OCU regulates state credit unions (collectively,
financial institutions), and this regulation includes periodic examinations of these
financial institutions by, and reports from these financial institutions to, the division
or OCU. Current law generally requires the division and OCU to maintain the
confidentiality of examination information and of reports provided to the division or
OCU. However, limited exceptions allow disclosure under certain circumstances,
including disclosure to state regulatory authorities and to the Federal Deposit
Insurance Corporation or National Credit Union Administration.
This bill allows the division or OCU to furnish to a Federal Home Loan Bank,
upon request, a copy of any examination report made by, or other supervisory
information created by, the division or OCU if the Federal Home Loan Bank agrees
to treat the information confidentially.
Periodic examinations of financial institutions
With exceptions, current law requires the division and OCU to examine the
records and affairs of financial institutions under their respective jurisdictions at
least once every 18 months.
Under this bill, in conducting these periodic examinations, the division and
OCU may accept and rely on information collected by other agencies or independent
third parties in determining whether a financial institution has satisfied any
requirement that is part of the examination.
Limit on savings bank loans to one borrower
Under current law, with exceptions, a savings bank may not make loans to a
single person totaling more than 15 percent of the savings bank's capital.
This bill increases this limit to 20 percent.
Interest on residential mortgage loan escrow accounts
Under current law, subject to certain exceptions, a financial institution or
mortgage banker that originates a residential mortgage loan and requires an escrow
to assure the payment of taxes or insurance must pay interest on the outstanding
principal balance of the escrow at the following annual rate: 1) if the loan was
originated between February 1, 1984, and December 31, 1993, not less than 5.25
percent; or 2) if the loan was originated on or after January 1, 1994, a variable rate
calculated annually by the division and OCU using the average interest rate paid on
Under this bill, financial institutions and mortgage bankers are not required
to pay interest on escrow accounts for residential mortgage loans originated on or
after the effective date of the bill.
Security for public deposits
Under current law, the Investment Board and the governing bodies of counties,
municipalities, and certain other local governmental units (collectively, public
depositors) must designate one or more federal or state credit unions, federal or state
savings and loan associations, state banks, savings and trust companies, federal or
state savings banks, or national banks in this state (public depositories) for deposit
of all public moneys received by the public depositor. The public depositor must
specify whether security is required of the public depository to secure the repayment
of deposits exceeding deposit insurance.
This bill specifies that the security that may be provided by a public depository
includes an irrevocable letter of credit issued by a Federal Home Loan Bank, state
bank, national bank, federal or state savings bank, federal or state credit union, or
federal or state savings and loan association.
Capital reduction by state banks
Current law requires the division, immediately following a state bank's
organization, to determine the required capital of the bank, including the required
capital stock. “Capital stock" means the bank's stock other than preferred stock, and
“capital” includes the bank's capital stock, preferred stock, surplus, and undivided
profits. Subject to certain requirements and limitations, a bank's board of directors
may declare and pay a dividend from its undivided profits, but the bank's dividends
may not impair or diminish the bank's capital except to reduce undivided profits.
This bill provides that, with approval of the division, a state bank may, by vote
of its shareholders, reduce its capital and distribute cash or other assets to its
Insurance company liquidation proceedings
Current law contains various provisions applicable in a proceeding brought by
the commissioner of insurance for the liquidation or rehabilitation of an insurer. Any
receiver, liquidator, or rehabilitator appointed in such a proceeding may seek and
obtain from a court a restraining order or injunction to prevent specified conduct by
the insurer, including its transaction of business, transfer of property, or wasting of
This bill specifies that a Federal Home Loan Bank may not be stayed, enjoined,
or prohibited from exercising or enforcing any right or cause of action regarding
collateral pledged under any security agreement or similar arrangement.
Current law provides certain powers for the liquidator in a liquidation
proceeding, including the power to enter into contracts as necessary to carry out the
liquidation and the power to affirm or disavow any contracts to which the insurer is
a party. Also in a liquidation proceeding, if one of the specified conditions is met, a
liquidator may avoid a preference and recover property or its value. A “preference”
is a transfer of an insurer's property to or for the benefit of a creditor based on a
preexisting debt if the transfer is made within one year before the liquidation
petition and the transfer's effect is to enable the creditor to obtain a greater
percentage of his or her debt than another creditor of the same class.
This bill provides that a liquidator does not have the power to disavow any
Federal Home Loan Bank security agreement or similar arrangement, and may not
avoid any transfer of money or property in connection with any Federal Home Loan
Bank security agreement or similar arrangement, except that a transfer may be
avoided if it was made with actual intent to hinder, delay, or defraud creditors.
Exemption from overtime pay requirements for outside salespersons
The FLSA currently provides an exemption from the minimum wage and
overtime pay provisions of the FLSA for employees employed as outside
salespersons, as defined under the Code of Federal Regulations. Rules promulgated
by DWD currently provide an exemption from state overtime pay provisions for
outside salespersons who spend 80 percent of their time away from the employer's
place of business.
The bill modifies the administrative rule provision to conform the state
exemption for outside salespersons to the exemption under the FLSA. Specifically,
the bill provides that the state exemption applies to an employee 1) whose primary
duty is either making sales or obtaining orders or contracts for services or for the use
of facilities for which a consideration will be paid by the client or customer, and 2)
who is customarily and regularly engaged away from the employer's place of
business in performing that primary duty.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
34.07 of the statutes is amended to read:
A surety bond or other security, including an irrevocable letter
3of credit issued by a federal home loan bank, state bank, national bank, federal or
4state savings bank, federal or state credit union, or federal or state savings and loan
may be required of or given by any public depository for any public 6
deposits that exceed the amount of deposit insurance provided by an agency of the 7
United States and the coverage provided under s. 34.08 (2).
138.052 (5) (am) 1. of the statutes is amended to read:
(am) 1. Except as provided in par. (b) and unless the escrow funds 2
are held by a 3rd party in a noninterest-bearing account, a bank, credit union, 3
savings bank, savings and loan association or mortgage banker which originates a 4
loan on or after January 1, 1994, and before the effective date of this subdivision ....
5[LRB inserts date],
or a loan subject to subd. 3.,
and which requires an escrow to 6
assure the payment of taxes or insurance shall pay interest on the outstanding 7
principal balance of the escrow at the variable interest rate established under subd. 8
186.235 (7) (b) 4. of the statutes is created to read:
(b) 4. Furnish to a federal home loan bank, upon request, a copy of 11
any examination report made by, or other supervisory information created by, the 12
office of credit unions of any credit union, if the federal home loan bank agrees to treat 13
the information received under this subdivision with the same degree of 14
confidentiality that is required of employees of the office of credit unions under par. 15
186.235 (16) (a) of the statutes is amended to read:
(a) Except as provided in par. (b), at least once every 18 months, 18
the office of credit unions shall examine the records and accounts of each credit 19
union. For that purpose the office of credit unions shall have full access to, and may 20
compel the production of, each credit union's records and accounts. The office of 21
credit unions may administer oaths to and examine each credit union's officers and 22
agents. In conducting examinations under this paragraph, the office of credit unions
23may accept and rely on information collected by other agencies or independent 3rd
24parties in determining whether a credit union has satisfied any requirement that is
25part of the examination.
214.54 (1) of the statutes is amended to read:
Except as provided in sub. (2) and s. 214.49 (4), the total of 3
outstanding loans and extensions of credit, both direct and indirect, made by a 4
savings bank to a single person shall be subject to limits established by rule of the 5
division, but may not exceed 15 20
percent of the savings bank's capital.
214.54 (2) of the statutes is amended to read:
Total outstanding loans and extensions of credit, both direct and 8
indirect, made by a savings bank to a single person may exceed the
limit under sub. (1), but may not exceed 25 percent of the savings bank's capital, if 10
all loans or extensions of credit that exceed the 15
percent limit are at least 100 11
percent secured by readily marketable collateral having a market value that may be 12
determined by reliable and continuously available price quotations.
214.725 (3) (intro.) of the statutes is amended to read:
(intro.) An Subject to sub. (3m), an
examination shall include a 15
review of all of the following:
214.725 (3m) of the statutes is created to read:
In conducting examinations under sub. (1) (a), the division may 18
accept and rely on information collected by other agencies or independent 3rd parties 19
in determining whether a savings bank has satisfied any requirement that is part 20
of the examination.
214.755 (1) (f) of the statutes is created to read:
(f) A federal home loan bank if the federal home loan bank agrees 23
to keep the information confidential.
215.02 (6) (a) 7. of the statutes is created to read:
(a) 7. The division may furnish to a federal home loan bank a copy 2
of any examination report made by, or other supervisory information created by, the 3
division of any association if the federal home loan bank agrees to keep the 4
examination report or other information confidential.
215.03 (2) (a) of the statutes is amended to read:
(a) Except as provided in par. (b), at least once within every 7
18-month period, the division shall examine the cash, bills, collaterals, securities, 8
assets, books of account, condition and affairs of all such associations and for that 9
purpose the division or the division's examiners shall have access to, and may compel 10
the production of, all their books, papers, securities and moneys, administer oaths 11
to and examine their officers and agents as to their affairs. In conducting
12examinations under this paragraph, the division may accept and rely on information
13collected by other agencies or independent 3rd parties in determining whether an
14association has satisfied any requirement that is part of the examination.
employee of the division may not examine an association in which the employee is 16
interested as an officer or director.
220.04 (1) (a) of the statutes is amended to read:
(a) The division shall examine at least once every 18 months the 19
cash, bills, collaterals, securities, assets, books of account, condition and affairs of 20
each bank and trust company bank doing business in this state, except national 21
banks. For that purpose the division may examine on oath any of the officers, agents, 22
directors, clerks, stockholders, customers or depositors thereof, touching the affairs 23
and business of such institution. In conducting examinations under this paragraph,
24the division may accept and rely on information collected by other agencies or
25independent 3rd parties in determining whether a bank or trust company bank has
1satisfied any requirement that is part of the examination.
In making such 2
examinations of banks, the division shall determine the fair valuation of all assets 3
in accordance with the schedules, rules and regulations prescribed by the banking 4
220.06 (1m) of the statutes is amended to read:
No division employee may examine a bank or licensee in which 7
that person is interested as a stockholder, officer or employee. No division employee 8
may examine a bank or licensee located in the same village, city or county with any 9
bank or licensee in which that person is so interested. Employees in the division, and 10
each member and employee of the banking review board, shall keep secret all facts 11
and information obtained in the course of examinations or from reports not under s. 12
221.1002 (1) filed by a bank or licensee with the division, except so far as the public 13
duty of the person requires reporting upon or taking special action regarding the 14
affairs of any bank or licensee, and except when called as a witness in any criminal 15
proceeding or trial in a court of justice. The division may furnish to the federal 16
deposit insurance corporation, to a federal home loan bank,
or to any regulatory 17
authority for state or federal financial institutions, insurance or securities a copy of 18
any examination made of any such bank or licensee or of any report made by such 19
bank or licensee and may give access to and disclose to the corporation or to any 20
regulatory authority for state or federal financial institutions, insurance or 21
securities any information possessed by the division, or to a federal home loan bank
22any information created by the division,
with reference to the conditions or affairs 23
of any such insured bank or licensee if the regulatory authority agrees to treat all 24
information received with the same degree of confidentiality as applies to reports of 25
examination that are in the custody of the division.
221.0328 (4) of the statutes is created to read:
221.0328 (4) Reduction of capital.
Subject to the approval of the division, and 3
subject to ss. 221.0211 (4) and 221.0323 (1) and (2), a bank may, by a vote of 4
shareholders owning, in the aggregate, at least two-thirds of its capital stock, reduce 5
its capital. Notwithstanding sub. (2) and subject to ss. 221.0216 (5) and 221.0327, 6
as part of its capital reduction plan approved by the division in accordance with this 7
subsection, and with the affirmative vote of shareholders owning at least two-thirds 8
of the shares of each class of its stock outstanding, a bank may distribute cash or 9
other assets to its shareholders.