HOUSE BILL REPORT

SB 5302

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by House Committee On:

Business & Financial Services

Title: An act relating to credit unions' corporate governance and investments.

Brief Description: Addressing credit unions' corporate governance and investments.

Sponsors: Senators Benton and Hobbs.

Brief History:

Committee Activity:

Business & Financial Services: 3/14/13 [DP].

Brief Summary of Bill

  • Modifies credit union governance provisions related to meetings, removal of directors, compensation of directors and supervisory committee members, and merger approval.

  • Permits a credit union to invest its funds in a registered investment company or collective investment fund, and modifies provisions related to investment in real property.

HOUSE COMMITTEE ON BUSINESS & FINANCIAL SERVICES

Majority Report: Do pass. Signed by 14 members: Representatives Kirby, Chair; Ryu, Vice Chair; Parker, Ranking Minority Member; Vick, Assistant Ranking Minority Member; Blake, Chandler, Habib, Hawkins, Hudgins, Hurst, Kochmar, MacEwen, Santos and Stanford.

Staff: Alexa Silver (786-7190).

Background:

Credit unions doing business in Washington may be chartered by the state or federal government. The National Credit Union Administration regulates federally chartered credit unions. The Department of Financial Institutions (Department) regulates state-chartered credit unions.

State credit unions are governed by a board of directors. A supervisory committee monitors both the financial condition of the credit union and the decisions of the board. The credit union's bylaws must prescribe the manner in which the business of the credit union will be conducted, including the frequency of regular meetings and the manner in which members may call a special membership meeting. State law also provides the following with respect to credit union corporate governance:

A credit union may invest its funds in certain specified investments, so long as the investment is deemed prudent by the credit union's board of directors. A credit union may also invest in real property primarily for its own use in conducting business if the credit union's net worth is at least 5 percent of the total of its share and deposit accounts, the board of directors approves the investment, and the aggregate of all investments in property does not exceed 7.5 percent of the total of its share and deposit accounts. If the property is acquired for future expansion, the credit union must use the property within three years after making the investment.

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Summary of Bill:

Credit union corporate governance provisions are modified as follows:

A credit union may invest its funds in a registered investment company or collective investment fund, so long as the company or fund's prospectus restricts the investment portfolio to investments and transactions permissible for credit unions. The Director may require a credit union to develop a plan for divestiture of an investment that was lawful when made but later becomes impermissible because of a change in circumstances or the law if the Director finds the investment will have an adverse effect on the credit union's safety and soundness.

A credit union may invest in real property for the use of a credit union service organization in conducting business. If property is acquired for future expansion, a credit union must partially occupy the premises within three years if the premises are improved or within six years if the premises are unimproved. The Director may adopt rules to interpret this provision.

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Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) This bill is designed to advance credit unions' charter and operating environment in this state. The changes are the same as those in Substitute House Bill 1582, which passed unanimously.

(Neutral) The Department provided technical advice on the proposed changes to the Credit Union Act. The bill provides the regulatory tools to ensure that credit unions operate safely and soundly. The Department can successfully implement the bill if it passes.

(Opposed) None.

Persons Testifying: (In support) Mark Minickiello, Northwest Credit Union Association.

(Neutral) Linda Jekel, Department of Financial Institutions.

Persons Signed In To Testify But Not Testifying: None.