LRB-5079/1
ARG&KRP:emw&ahe
2017 - 2018 LEGISLATURE
January 4, 2018 - Introduced by Senators Marklein, Cowles and Feyen,
cosponsored by Representatives Katsma, E. Brooks, R. Brooks, Felzkowski,
Jacque, Kerkman, Kitchens, Tauchen, Weatherston, Born and Tusler.
Referred to Committee on Revenue, Financial Institutions and Rural Issues.
SB686,1,12 1An Act to renumber and amend 645.46 (11); to amend 34.07, 138.052 (5) (am)
21., 186.235 (16) (a), 214.54 (1), 214.54 (2), 214.725 (3) (intro.), 215.03 (2) (a),
3220.04 (1) (a), 220.06 (1m) and 223.105 (3) (a); and to create 186.235 (7) (b) 4.,
4214.725 (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
passbook accounts.
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
shareholders.
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
assets.
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:
SB686,1 1Section 1 . 34.07 of the statutes is amended to read:
SB686,4,7 234.07 Security. 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
5association,
may be required of or given by any public depository for any public
6deposits that exceed the amount of deposit insurance provided by an agency of the
7United States and the coverage provided under s. 34.08 (2).
SB686,2 8Section 2 . 138.052 (5) (am) 1. of the statutes is amended to read:
SB686,5,8
1138.052 (5) (am) 1. Except as provided in par. (b) and unless the escrow funds
2are held by a 3rd party in a noninterest-bearing account, a bank, credit union,
3savings bank, savings and loan association or mortgage banker which originates a
4loan 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
6assure the payment of taxes or insurance shall pay interest on the outstanding
7principal balance of the escrow at the variable interest rate established under subd.
82.
SB686,3 9Section 3. 186.235 (7) (b) 4. of the statutes is created to read:
SB686,5,1510 186.235 (7) (b) 4. Furnish to a federal home loan bank, upon request, a copy of
11any examination report made by, or other supervisory information created by, the
12office of credit unions of any credit union, if the federal home loan bank agrees to treat
13the information received under this subdivision with the same degree of
14confidentiality that is required of employees of the office of credit unions under par.
15(a).
SB686,4 16Section 4 . 186.235 (16) (a) of the statutes is amended to read:
SB686,5,2517 186.235 (16) (a) Except as provided in par. (b), at least once every 18 months,
18the office of credit unions shall examine the records and accounts of each credit
19union. For that purpose the office of credit unions shall have full access to, and may
20compel the production of, each credit union's records and accounts. The office of
21credit unions may administer oaths to and examine each credit union's officers and
22agents. 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.
SB686,5
1Section 5. 214.54 (1) of the statutes is amended to read:
SB686,6,52 214.54 (1) Except as provided in sub. (2) and s. 214.49 (4), the total of
3outstanding loans and extensions of credit, both direct and indirect, made by a
4savings bank to a single person shall be subject to limits established by rule of the
5division, but may not exceed 15 20 percent of the savings bank's capital.
SB686,6 6Section 6 . 214.54 (2) of the statutes is amended to read:
SB686,6,127 214.54 (2) Total outstanding loans and extensions of credit, both direct and
8indirect, made by a savings bank to a single person may exceed the 15 20 percent
9limit under sub. (1), but may not exceed 25 percent of the savings bank's capital, if
10all loans or extensions of credit that exceed the 15 20 percent limit are at least 100
11percent secured by readily marketable collateral having a market value that may be
12determined by reliable and continuously available price quotations.
SB686,7 13Section 7 . 214.725 (3) (intro.) of the statutes is amended to read:
SB686,6,1514 214.725 (3) (intro.) An Subject to sub. (3m), an examination shall include a
15review of all of the following:
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