SB318: Bill Text

SB318,2,2 An Act to repeal 220.02 (2) (e), 221.04 (1) (pm), 221.58, 221.59 (2) (e), 224.04 and 701.107 to 701.109; to amend 215.13 (51), 220.04 (1) (b), 221.04 (1) (jm) 1., 221.04 (1) (k) 1., 221.04 (1) (p), 221.04 (4h), 221.08 (9), 221.56 (1), 221.59 (3) (a) (intro.), 221.59 (3) (b) (intro.), 221.59 (3) (b) 1., 221.59 (3) (c), 221.59 (4), 221.59 (5), 221.59 (6) (intro.), 221.59 (6) (f), 221.59 (8) (a), 221.59 (8) (b), 221.59 (9) and 221.59 (10); to repeal and recreate 215.13 (51), 220.04 (1) (b), 221.04 (1) (jm) 1., 221.04 (1) (k) 1., 221.04 (1) (p), 221.04 (4h), 221.08 (9) and 221.56 (1); to create 221.59 of the statutes; and to affect 1995 Wisconsin Act 27, sections 6179 to 6189, 1995 Wisconsin Act 27, sections 7050 to 7060, 1995 Wisconsin Act 27, section 6102 and 1995 Wisconsin Act 27, section 9459 (7); relating to: acquisition of in-state banks and in-state bank holding companies, ability of banks to contract with depository institutions for financial products and services, customer bank communications terminals, control of limited service banking institutions, meetings of bank boards of directors and committees, granting rule-making authority and providing penalties.

Analysis by the Legislative Reference Bureau

Interstate banking

Current law permits certain types of regional bank and bank holding company mergers and acquisitions. Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri and Ohio are the regional states covered by the current interstate banking law. Under current law, an in-state bank or in-state bank holding company may acquire direct or indirect ownership or control of voting shares of, an interest in or substantially all of the assets of one or more regional state banks or regional state bank holding companies and may merge with one or more regional state banks or regional state bank holding companies.

The current regional interstate banking law also permits a regional state bank holding company to acquire ownership or control of one or more in-state banks or in-state bank holding companies or to merge with one or more in-state bank holding companies, if the commissioner makes certain findings. The commissioner must find that the statutes of the regional state in which the regional state bank holding company has its principal place of business permit in-state bank holding companies both to acquire one or more regional state banks and to acquire and merge with one or more regional state bank holding companies in the regional state. Current law provides for public notice and hearing on the transaction, and payment by the regional state bank holding company of a $5,000 application fee and the banking commissioner's actual costs related to the application. Current law contains provisions protecting an in-state bank from acquisition if the in-state bank has been in existence for less than 5 years. Under current law, the commissioner may disapprove the regional state bank holding company merger or acquisition if he or she makes any of certain specified findings. Acquisitions of up to 5% of the voting shares or any amount of nonvoting shares of one or more in-state banks are exempt under current law. Current law also contains provisions allowing a charitable trust to transfer stock in in-state bank holding companies to banks or bank holding companies in a nonreciprocal state, if certain requirements are met.

This bill repeals these regional interstate banking provisions and creates new provisions governing acquisitions of in-state banks and in-state bank holding companies, regardless of the home state or country of the acquiring company. Under the bill, except as expressly permitted by federal law, no company may acquire an in-state bank or in-state bank holding company, without commissioner approval. This approval is required for a company to merge or consolidate with an in-state bank holding company, to assume direct or indirect ownership of more than a specified percentage of any class of voting shares of an in-state bank holding company or an in-state bank, or take other action that results in the direct or indirect acquisition of control of an in-state bank holding company or an in-state bank. The specified percentage of voting shares that triggers approval requirements is 25% if the acquiring company is not a bank holding company prior to the acquisition and 5% if the acquiring company is a bank holding company prior to the acquisition. An exemption from the approval requirements exists for certain transactions arranged to prevent the insolvency or closing of the acquired bank or in certain transactions where a bank forms its own bank holding company. In acquisitions that are exempt from the approval requirements, the parties must give the commissioner written notice of the transaction, generally at least 15 days before the effective date of the acquisition.

If approval is required, the acquiring company is required to file an application with the commissioner, to pay an application fee of $5,000 and the commissioner's actual costs incurred in connection with the application, to publish a notice in the official state newspaper, and to provide proof of compliance with requirements applicable to foreign corporations transacting business in the state. Unless the commissioner finds that an emergency exists, the commissioner is required to hold a hearing on the transaction if at least 25 state residents of the state petition for a hearing, or if the commissioner calls for a hearing on his or her own motion, within 30 days of the newspaper notice.

The commissioner may disapprove the transaction if the commissioner determines that the transaction would be contrary to the best interests of the shareholders or customers of the in-state bank or in-state bank holding company or is detrimental to the safety and soundness of the applicant or the in-state bank or in-state bank holding company. The commissioner may also disapprove the transaction if the applicant or its officers, directors or principal shareholders lack an established record of sound performance, efficient management, financial responsibility and integrity, if the applicant has received ratings of "needs to improve record of meeting community credit needs" or "substantial noncompliance in meeting community credit needs" under the federal community reinvestment act, or if the applicant has failed to enter into an agreement to comply with state consumer credit charges and disclosures that are not preempted by federal law.

The bill retains provisions similar to those under the current regional banking law, which provide protections for banks which have not been in existence and in continuous operation for at least 5 years. Unlike current law, the bill provides that these protections do not apply to banks resulting from a merger of in-state banks, if the in-state banks would have been in existence and continuous operation for at least 5 years but for the in-state merger. The bill requires that a company controlling an instate bank or in-state bank holding company file certain reports regarding its financial condition.

Other changes

In addition to the provisions regarding interstate banking, the bill modifies provisions relating to the ability of banks to enter into contracts with depository institutions for the provision of banking and financially related products services. Current law allows such contracts with other banks and with savings and loan associations; banks are required to inform the commissioner in writing of contracts with other banks. Under the bill, banks may also contract with depository institutions other than banks and savings and loan associations, but must provide a written notice of intention to enter into a contract to the commissioner at least 30 days before the effective date of the contract, together with a description of the services to be provided and a copy of the contract. The bill explicitly prohibits a bank from conducting any activity as an agent that it would be prohibited from conducting as a principal. The bill also allows the commissioner to order a bank and certain other depository institutions to cease acting as an agent or principal under the contract if the commissioner finds that it is inconsistent with safe and sound banking practices.

Current law requires a bank's board of directors and loan committee to meet at least once each month. This bill changes these requirements to require only quarterly meetings. The bill also makes certain changes regarding customer bank communications terminals, such as automated teller machines (ATMs). Current law requires these terminals to be available for use, on a nondiscriminatory basis, to in-state banks, credit unions, savings banks and savings and loan associations. This bill eliminates the nondiscrimination requirement and requires that the terminals be made available to out-of-state institutions. Current law prohibits advertising with regard to a shared terminal that suggests or implies exclusive ownership or control of the shared terminal by any financial institution or group of financial institutions. This bill eliminates this prohibition. Lastly, the bill repeals provisions which prohibit a bank holding company from controlling banks that do not both accept demand deposits and make commercial loans.

The bill generally takes effect on September 29, 1995. Consistent with provisions in 1995 Wisconsin Act 27 (the budget act), the powers and duties of the commissioner of banking under the bill are transferred to the division of banking in the department of financial institutions, effective July 1, 1995.

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:

SB318, s. 1 Section 1. 215.13 (51) of the statutes is amended to read:

SB318,4,7 215.13 (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) (pm) (p). The bank shall be subject to regulation and examination by the commissioner 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.

SB318, s. 2 Section 2. 215.13 (51) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,5,8 215.13 (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). 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.

SB318, s. 3 Section 3. 220.02 (2) (e) of the statutes is repealed.

SB318, s. 4 Section 4. 220.04 (1) (b) of the statutes is amended to read:

SB318,5,16 220.04 (1) (b) In lieu of any examination required to be made by the commissioner, the commissioner may accept any examination that may have been made of any bank or trust company bank within a reasonable period by the federal deposit insurance corporation or a federal reserve bank a bank supervisory agency, as defined in s. 221.59 (2) (d), provided a copy of the examination is furnished the commissioner.

SB318, s. 5 Section 5. 220.04 (1) (b) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,5,22 220.04 (1) (b) In lieu of any examination required to be made by the division, the division may accept any examination that may have been made of any bank or trust company bank within a reasonable period by a bank supervisory agency, as defined in s. 221.59 (2) (d), if a copy of the examination is furnished to the division.

SB318, s. 6 Section 6. 221.04 (1) (jm) 1. of the statutes is amended to read:

SB318,5,25 221.04 (1) (jm) 1. To establish and maintain a branch bank or joint branch bank with the approval of the commissioner.

SB318, s. 7 Section 7. 221.04 (1) (jm) 1. of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,6,4 221.04 (1) (jm) 1. To establish and maintain a branch bank or joint branch bank with the approval of the division.

SB318, s. 8 Section 8. 221.04 (1) (k) 1. of the statutes is amended to read:

SB318,7,3 221.04 (1) (k) 1. Directly or indirectly, to acquire, place and operate, or participate in the acquisition, placement and operation of, at locations other than its main or branch offices, customer bank communications terminals, in accordance with rules established by the commissioner. The rules of the commissioner shall provide that any such customer bank communications terminal shall be available for use, on a nondiscriminatory basis, by any state or national bank which has its principal place of business in this state, by any other bank obtaining the consent of a state or national bank which has its principal place of business in this state and is using the terminal and by all customers designated by a bank using the terminal. This paragraph does not authorize a bank which has its principal place of business outside this state to conduct banking business in this state. The customer bank communications terminals also shall be available for use, on a nondiscriminatory basis, by any credit union, savings and loan association or savings bank, whose home office is located in this state, if the credit union, savings and loan association or savings bank requests to share its use, subject to rules jointly established by the commissioner of banking, the commissioner of credit unions and the commissioner of savings and loan. The rules of the commissioner and the joint rules shall each prohibit any advertising with regard to a shared terminal which suggests or implies exclusive ownership or control of the shared terminal by any financial institution or group of financial institutions operating or participating in the operation of the terminal. The commissioner by order may authorize the installation and operation of a customer bank communications terminal in a mobile facility, after notice and hearing upon the proposed service stops of the mobile facility.

SB318, s. 9 Section 9. 221.04 (1) (k) 1. of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,7,23 221.04 (1) (k) 1. Directly or indirectly, to acquire, place and operate, or participate in the acquisition, placement and operation of, at locations other than its main or branch offices, customer bank communications terminals, in accordance with rules established by the division. The rules of the division shall provide that any such customer bank communications terminal shall be available for use by any state or national bank which has its principal place of business in this state, by any other bank obtaining the consent of a state or national bank which has its principal place of business in this state and is using the terminal and by all customers designated by a bank using the terminal. This paragraph does not authorize a bank which has its principal place of business outside this state to conduct banking business in this state. The customer bank communications terminals also shall be available for use by any credit union, savings and loan association or savings bank, if the credit union, savings and loan association or savings bank requests to share its use, subject to rules jointly established by the division of banking, the office of credit unions and the division of savings and loan. The division by order may authorize the installation and operation of a customer bank communications terminal in a mobile facility, after notice and hearing upon the proposed service stops of the mobile facility.

SB318, s. 10 Section 10. 221.04 (1) (p) of the statutes is amended to read:

SB318,8,20 221.04 (1) (p) To contract with one or more banks depository institutions to provide banking and financially related products or services on its behalf to its customers or to establish a joint branch bank of the contracting banks. The contracting banks shall inform the commissioner in writing of any contract entered into under this paragraph. The establishment of a joint branch bank is subject to the provisions for the establishment of a branch bank in par. (jm). A bank that proposes to enter into a contract under this paragraph shall file with the commissioner, at least 30 days before the effective date of the contract, a notice of intention to enter into a contract with a depository institution, a description of the services proposed to be performed under the contract and a copy of the contract. A bank may not, pursuant to a contract under this paragraph, conduct any activity as an agent that it would be prohibited from conducting as a principal under applicable state or federal law, or have an agent conduct any activity that the bank as a principal would be prohibited from conducting under applicable state or federal law. The commissioner may order a bank or any other depository institution subject to the commissioner's enforcement powers to cease acting as an agent or principal under any contract that the commissioner finds to be inconsistent with safe and sound banking practices. A bank acting as an agent for a depository institution under a contract under this paragraph does not become a branch of the depository institution by entering into a contract under this paragraph.

SB318, s. 11 Section 11. 221.04 (1) (p) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,9,13 221.04 (1) (p) To contract with one or more depository institutions to provide banking and financially related products or services on its behalf to its customers. A bank that proposes to enter into a contract under this paragraph shall file with the division, at least 30 days before the effective date of the contract, a notice of intention to enter into a contract with a depository institution, a description of the services proposed to be performed under the contract and a copy of the contract. A bank may not, pursuant to a contract under this paragraph, conduct any activity as an agent that it would be prohibited from conducting as a principal under applicable state or federal law, or have an agent conduct any activity that the bank as a principal would be prohibited from conducting under applicable state or federal law. The division may order a bank or any other depository institution subject to the division's enforcement powers to cease acting as an agent or principal under any contract that the division finds to be inconsistent with safe and sound banking practices. A bank acting as an agent for a depository institution under a contract under this paragraph does not become a branch of the depository institution by entering into a contract under this paragraph.

SB318, s. 12 Section 12. 221.04 (1) (pm) of the statutes is repealed.

SB318, s. 13 Section 13. 221.04 (4h) of the statutes is amended to read:

SB318,9,20 221.04 (4h) Stock in bank-owned banks. Any bank holding company, subject to the limitations in s. 221.58 (7) 221.59, or any bank may, with the approval of the commissioner, acquire and hold stock in an aggregate amount not exceeding 10% of its capital and surplus, in one or more banks chartered under s. 221.57 or in one or more bank holding companies wholly owning a bank chartered under s. 221.57.

SB318, s. 14 Section 14. 221.04 (4h) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,9,25 221.04 (4h) Stock in bank-owned banks. Any bank holding company, subject to the limitations in s. 221.59, or any bank may, with the approval of the division, acquire and hold stock in an aggregate amount not exceeding 10% of its capital and surplus, in one or more banks chartered under s. 221.57 or in one or more bank holding companies wholly owning a bank chartered under s. 221.57.

SB318, s. 15 Section 15. 221.08 (9) of the statutes is amended to read:

SB318,10,14 221.08 (9) The board of directors shall meet at least once each month calendar quarter. At the monthly quarterly meeting they shall generally investigate the affairs of the bank and determine whether the assets are of the value at which they are carried on the books of the bank. The directors shall name a loan committee of 3 or more of its members, a majority of whom shall be other than active executives, except in 1st or 2nd class cities, or except when a majority of the directors are actively engaged in the bank's management. The committee shall meet at least once each month calendar quarter and shall determine policies as to renewals and applications for new loans. Any director who is found to be lax in attendance may be removed by the commissioner and the vacancy shall be filled within a reasonable time as the commissioner may direct.

SB318, s. 16 Section 16. 221.08 (9) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,11,2 221.08 (9) The board of directors shall meet at least once each calendar quarter. At the quarterly meeting they shall generally investigate the affairs of the bank and determine whether the assets are of the value at which they are carried on the books of the bank. The directors shall name a loan committee of 3 or more of its members, a majority of whom shall be other than active executives, except in 1st or 2nd class cities, or except when a majority of the directors are actively engaged in the bank's management. The committee shall meet at least once each calendar quarter and shall determine policies as to renewals and applications for new loans. Any director who is found to be lax in attendance may be removed by the division and the vacancy shall be filled within a reasonable time as the division may direct.

SB318, s. 17 Section 17. 221.56 (1) of the statutes is amended to read:

SB318,11,24 221.56 (1) Any domestic corporation, investment trust, or other form of trust or any regional state out-of-state bank holding company which shall own, hold or in any manner control a majority of the stock in a state bank or trust company, or a bank or bank holding company which through a transaction under s. 701.108 acquires control of a majority of the stock in a state bank, shall be deemed to be engaged in the business of banking and shall be subject to the supervision of the office of the commissioner of banking. It shall file reports of its financial condition or activities when called for by the commissioner of banking, and the commissioner may order an examination of its condition and solvency whenever in his or her opinion such examination is required, and the cost of such examination shall be paid by such corporation or association. Whenever in the opinion of the commissioner the condition of such corporation or association shall be such as to endanger the safety of the deposits in any bank or trust company which is owned or in any manner controlled by such corporation, or the operation of such corporation, association or trust shall be carried on in such manner as to endanger the safety of such bank or trust company or its depositors, the commissioner may order such corporation or trust to remedy such condition or policy within 90 days and if such order is not complied with, the commissioner shall have power to fully direct the operation of such banks or trust companies until such order is complied with, and may withhold all dividends from such corporation or trust during the period in which the commissioner may exercise such authority.

SB318, s. 18 Section 18. 221.56 (1) of the statutes, as affected by 1995 Wisconsin Acts 27 and .... (this act), is repealed and recreated to read:

SB318,12,20 221.56 (1) Any domestic corporation, investment trust, or other form of trust or any out-of-state bank holding company which shall own, hold or in any manner control a majority of the stock in a state bank or trust company shall be deemed to be engaged in the business of banking and shall be subject to the supervision of the division. It shall file reports of its financial condition or activities when called for by the division, and the division may order an examination of its condition and solvency whenever, the division's opinion such examination is required, and the cost of such examination shall be paid by such corporation or association. Whenever in the opinion of the division the condition of such corporation or association shall be such as to endanger the safety of the deposits in any bank or trust company which is owned or in any manner controlled by such corporation, or the operation of such corporation, association or trust shall be carried on in such manner as to endanger the safety of such bank or trust company or its depositors, the division may order such corporation or trust to remedy such condition or policy within 90 days and if such order is not complied with, the division shall have power to fully direct the operation of such banks or trust companies until such order is complied with, and may withhold all dividends from such corporation or trust during the period in which the division may exercise such authority.

SB318, s. 19 Section 19. 221.58 of the statutes is repealed.

SB318, s. 20 Section 20. 221.59 of the statutes is created to read:

SB318,12,25 221.59 Acquisitions of banks and bank holding companies. (1) Applicability. This section applies to acquisitions of an in-state bank or an in-state bank holding company by any company.

SB318,13,1 (2) Definitions. In this section:

SB318,13,2 (a) "Affiliate" has the meaning set forth in 12 USC 1841 (k).

SB318,13,3 (b) "Bank" has the meaning set forth in 12 USC 1841 (c).

SB318,13,6 (c) "Bank holding company" has the meaning set forth in 12 USC 1841 (a), and unless the context otherwise requires, includes an in-state bank holding company, an out-of-state bank holding company and a foreign bank holding company.

SB318,13,10 (d) "Bank supervisory agency" means the office of the comptroller of the currency, the federal deposit insurance corporation, the board of governors of the federal reserve system, or any successor to these agencies, or any agency of another state with primary responsibility for chartering and supervising banks.

SB318,13,11 (e) "Commissioner" means the commissioner of banking.

SB318,13,13 (f) "Company" has the meaning set forth in 12 USC 1841 (b) and includes a bank holding company.

SB318,13,14 (g) "Control" shall be interpreted consistently with 12 USC 1841 (a).

SB318,13,15 (h) "Deposit" has the meaning set forth in 12 USC 1813 (l).

SB318,13,17 (i) "Depository institution" means any insured depository institution under 12 USC 1813 (c) (2) and (3).

SB318,13,20 (j) "Foreign bank holding company" means a bank holding company that is organized under the laws of a country other than the United States or any territory or possession of the United States.

SB318,13,23 (k) "In-state bank" means a bank that is organized under this chapter, a trust company bank organized under ch. 223 or a bank organized under federal law and having its principal place of business in this state.

SB318,14,2 (L) "In-state bank holding company" means a bank holding company that has its principal place of business in this state or a company that has control of a trust company bank organized under ch. 223 and is not controlled by a bank holding company other than an in-state bank holding company.

SB318,14,5 (m) "Out-of-state bank holding company" means a bank holding company that is not an in-state bank holding company and, unless the context requires otherwise, includes a foreign bank holding company.

SB318,14,7 (n) "Principal place of business" of a bank holding company means the state in which the total deposits of its bank subsidiaries are the greatest.

SB318,14,9 (p) "State" means any state, territory or other possession of the United States, including the District of Columbia.

SB318,14,10 (q) "Subsidiary" has the meaning set forth in 12 USC 1841 (d).

SB318,14,13 (3) Approval requirements. (a) Except as otherwise expressly permitted by federal law or par. (b), no company may do any of the following without the prior approval of the commissioner:

SB318,14,14 1. Merge or consolidate with an in-state bank holding company.

SB318,14,15 2. Assume direct or indirect ownership or control of:

SB318,14,18 a. More than 25% of any class of voting shares of an in-state bank holding company or an in-state bank, if the acquiring company is not a bank holding company prior to the acquisition.

SB318,14,21 b. More than 5% of any class of voting shares of an in-state bank holding company or an in-state bank, if the acquiring company is a bank holding company prior to the acquisition.

SB318,14,23 c. All or substantially all of the assets of an in-state bank holding company or an in-state bank.

SB318,14,25 3. Take other action that results in the direct or indirect acquisition of control of an in-state bank holding company or an in-state bank.

SB318,15,2 (b) The approval of the commissioner is not needed under par. (a) in any of the following transactions:

SB318,15,4 1. A transaction arranged by the commissioner or a bank supervisory agency to prevent the insolvency or closing of the acquired bank.

SB318,15,7 2. A transaction in which a bank forms its own bank holding company, if the ownership rights of the former bank shareholders are substantially similar to those of the shareholders of the new bank holding company.

SB318,15,11 (c) In a transaction under par. (b) in which the commissioner's approval is not required, the parties shall give written notice to the commissioner at least 15 days before the effective date of the acquisition, unless a shorter period of notice is required under applicable federal law.

SB318,15,13 (4) Required application. A company that requires the commissioner's approval under sub. (3) (a) shall do all of the following:

SB318,15,15 (a) File with the commissioner an application in the form that the commissioner requires.

SB318,15,16 (b) Pay to the commissioner an application fee of $5,000.

SB318,15,19 (c) Reimburse the commissioner for all actual costs incurred by the commissioner in making an investigation related to the application under par. (a) and in holding any hearing on the application.

SB318,15,22 (d) Cause to be published a class 3 notice, under ch. 985, in the form prescribed by the commissioner, in the official state newspaper, of the application under par. (a) and of the opportunity for a hearing under sub. (5).

SB318,15,24 (e) File with the commissioner a proof of publication of the notice under par. (d), upon completion of the publication of the notice.