BP BHEAD INT S

AN ACT Relating to the creation of the department of financial institutions; amending RCW 43.17.010, 43.17.020, 43.19.010, 43.19.020, 43.19.030, 43.19.050, 43.19.080, 43.19.090, 43.19.095, and 43.19.112; adding a new chapter to Title 43 RCW; repealing RCW 43.19.040, 43.19.100, and 43.19.110; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that, given the overlap of powers and products in the companies regulated, the consolidation of the agencies regulating financial institutions into one department will better serve the public interest through more effective use of staff expertise. Therefore, for the convenience of administration and the centralization of control and the more effective use of state resources and expertise, the state desires to combine the regulation of financial institutions into one department.

NEW SECTION. Sec. 2. There is hereby created a state department of financial institutions which shall be headed by the director of financial institutions. The department shall be organized and operated in a manner which to the fullest extent permissible under applicable law protects the public interest, protects the safety and soundness of depository institutions, ensures access to the regulatory process for all concerned parties, and protects the interests and integrity of the public and all types of regulated institutions and entities under the jurisdiction of the director of financial institutions. The department of financial institutions shall be structured to reflect the unique differences in the types of institutions it regulates.

NEW SECTION. Sec. 3. The director of financial institutions shall be appointed by the governor with the advice of the financial institutions advisory board and shall exercise all powers and perform all of the duties and functions prescribed by law on or before July 1, 1994, with respect to banks, consumer loan companies, credit unions, check cashers and sellers, foreign bank branches, savings banks, savings and loan associations, and trust companies and departments which are currently exercised by the department of general administration. The director may deputize, appoint, and employ examiners and other such assistants and personnel as may be necessary to carry on the work of the department. The director of financial institutions shall receive a salary in an amount fixed by the governor.

NEW SECTION. Sec. 4. A person shall not be eligible for appointment as director of financial institutions unless he or she is, and for the last two years prior to his or her appointment has been, a citizen of the United States. A person shall not be eligible for appointment as director of financial institutions if he or she has an interest at the time of appointment, as a director, officer, or stockholder in any bank, trust company, credit union, consumer loan company, savings bank, or other institution regulated by the department.

NEW SECTION. Sec. 5. The director of financial institutions may adopt any rules, under chapter 34.05 RCW, necessary to implement the powers and duties of the director under this chapter or any other law.

NEW SECTION. Sec. 6. All powers, duties, and functions of the department of general administration under Titles 30, 31, 32, 33, and 43 RCW and any other title pertaining to duties relating to credit unions, commercial banks, trust companies and departments, savings banks, savings and loan associations, consumer loan companies, check cashers and sellers, and other similar institutions are transferred to the department of financial institutions. All references to the director of general administration, supervisor of banking, or the supervisor of savings and loan associations in the Revised Code of Washington shall be construed to mean the director of the department of financial institutions when referring to the functions transferred in this section. All references to the department of general administration in the Revised Code of Washington shall be construed to mean the department of financial institutions when referring to the function transferred in this section.

NEW SECTION. Sec. 7. All reports, documents, surveys, books, records, files, papers, or other written or electronically stored material in the possession of the department of general administration and pertaining to the powers, functions, and duties transferred by section 6 of this act shall be delivered to the custody of the department of financial institutions. All cabinets, furniture, office equipment, motor vehicles, and other tangible property employed by the department of general administration in carrying out the powers, functions, and duties transferred by section 6 of this act shall be made available to the department of financial institutions. All funds, credits, or other assets held by the department of general administration in connection with the powers, functions, and duties transferred by section 6 of this act shall be assigned to the department of financial institutions.

Any appropriations made to the department of general administration for carrying out the powers, functions, and duties transferred by section 6 of this act shall, on the effective date of this section, be transferred and credited to the department of financial institutions.

The director of the department of general administration shall take such steps as are necessary to ensure that this chapter is implemented by the effective date of this act.

In the event any dispute arises as to the transfer of any personnel, funds, books, documents, records, papers, files, equipment, or other tangible property used or held in the exercise of the powers and the performance of the duties and functions transferred, the director of financial management shall make a determination as to the proper allocation and certify the same to the state agencies concerned.

NEW SECTION. Sec. 8. The director of financial institutions shall have the power to appoint assistant directors for each of the divisions of the department and to delegate to them the power to perform any act or duty conferred upon the director. The director shall be responsible for the official acts of these assistant directors.

The department of financial institutions shall consist of at least the following three divisions; the division of FDIC insured institutions, with regulatory authority over all state-chartered FDIC insured institutions, the division of credit unions, with regulatory authority over all state-chartered credit unions, and the division of consumer affairs, with regulatory authority over state-licensed nondepository lending institutions and other regulated entities. The director of financial institutions is granted broad administrative authority to add additional responsibilities to these divisions as necessary and consistent with applicable law.

For purposes of this section, "FDIC" means the federal deposit insurance corporation.

NEW SECTION. Sec. 9. All employees classified under chapter 41.06 RCW, the state civil service law, who are employees of the department of general administration engaged in performing the powers, functions, and duties transferred by section 6 of this act are transferred to the department of financial institutions. All such employees are assigned to the department of financial institutions to perform their usual duties upon the same terms as formerly, without any loss of rights, subject to any action that may be appropriate thereafter in accordance with the laws and rules governing state civil service.

NEW SECTION. Sec. 10. All rules and all pending business before the department of general administration pertaining to the powers, functions, and duties transferred by section 6 of this act shall be continued and acted upon by the department of financial institutions. All existing contracts and obligations shall remain in full force and shall be performed by the department of financial institutions.

NEW SECTION. Sec. 11. The transfer of the powers, duties, functions, and personnel of the department of general administration shall not affect the validity of any act performed by such an employee prior to the effective date of this section.

NEW SECTION. Sec. 12. If apportionments of budgeted funds are required because of the transfers directed by sections 6 through 11 of this act, the director of financial management shall certify the apportionments to the agencies affected, to the state auditor, and to the state treasurer. Each of these shall make the appropriate transfer and adjustments in funds and appropriation accounts and equipment records in accordance with the certification.

NEW SECTION. Sec. 13. Nothing contained in sections 6 through 11 of this act may be construed to alter any existing collective bargaining unit or the provisions of any existing collective bargaining agreement until the expiration date of the current agreement or until the bargaining unit has been modified by action of the personnel board as provided by law.

NEW SECTION. Sec. 14. There is hereby created a financial institutions advisory board which shall consist of a number not to exceed twelve members.

NEW SECTION. Sec. 15. The financial institutions advisory board shall:

(1) Advise the governor on appointment of the director of financial institutions;

(2) Advise the director of financial institutions, at his or her request, on broad policy and major operational issues; and

(3) Acquaint themselves with the administration of the department and provide information to their respective industries, movement, or interest group.

NEW SECTION. Sec. 16. The board shall be composed of at least one representative of the senior management of state-chartered commercial banks, consumer loan companies, credit unions, savings banks, savings and loan associations, trust companies or departments, the general public, and other concerned parties, with no more than two members from any group. The governor shall appoint a representative of the general public as chair person of the financial institutions advisory board. The director of the department of financial institutions shall serve on the financial institutions advisory board as a nonvoting member. Representatives of the public appointed to the board shall have demonstrated some knowledge of and experience with the public policy issues involved in the regulation of financial institutions and markets. With the exception of representatives of the public, all members of the financial institutions advisory board shall be employees of organizations regulated by the department of financial institutions. The department of financial institutions shall provide staff support for the financial institutions advisory board.

NEW SECTION. Sec. 17. Members of the financial institutions advisory board shall be appointed by the governor for overlapping two-year terms, with one-half of the initial appointments serving an initial term of three years. No member shall serve more than two terms total. Appointments made to fill vacancies on the board shall serve out the remaining term of the position vacated, and such service shall count as a full term.

NEW SECTION. Sec. 18. The governor shall appoint the financial institutions advisory board chairperson and the board shall select a secretary. The financial institutions advisory board may create and adopt its own bylaws and methods of operation. The financial institutions advisory board shall have at least two regular meetings per year, at a time and site within the state of Washington of its choosing. Special meetings may be called by the chairperson or by the director of the department of financial institutions. Notice of a special meeting shall be given as required by chapter 42.30 RCW except at least seven days' written notice must be given to each board member.

NEW SECTION. Sec. 19. Members of the financial institutions advisory board shall be compensated for their travel expenses in accordance with RCW 43.03.050 and 43.03.060.

Sec. 20. RCW 43.17.010 and 1989 1st ex.s. c 9 s 810 are each amended to read as follows:

There shall be departments of the state government which shall be known as (1) the department of social and health services, (2) the department of ecology, (3) the department of labor and industries, (4) the department of agriculture, (5) the department of fisheries, (6) the department of wildlife, (7) the department of transportation, (8) the department of licensing, (9) the department of general administration, (10) the department of trade and economic development, (11) the department of veterans affairs, (12) the department of revenue, (13) the department of retirement systems, (14) the department of corrections, (15) the department of community development, ((~~and~~)) (16) the department of health, and (17) the department of financial institutions, which shall be charged with the execution, enforcement, and administration of such laws, and invested with such powers and required to perform such duties, as the legislature may provide.

Sec. 21. RCW 43.17.020 and 1989 1st ex.s. c 9 s 811 are each amended to read as follows:

There shall be a chief executive officer of each department to be known as: (1) The secretary of social and health services, (2) the director of ecology, (3) the director of labor and industries, (4) the director of agriculture, (5) the director of fisheries, (6) the director of wildlife, (7) the secretary of transportation, (8) the director of licensing, (9) the director of general administration, (10) the director of trade and economic development, (11) the director of veterans affairs, (12) the director of revenue, (13) the director of retirement systems, (14) the secretary of corrections, (15) the director of community development, ((~~and~~)) (16) the secretary of health, and (17) the director of financial institutions.

Such officers, except the secretary of transportation, shall be appointed by the governor, with the consent of the senate, and hold office at the pleasure of the governor. The director of wildlife, however, shall be appointed according to the provisions of RCW 77.04.080. If a vacancy occurs while the senate is not in session, the governor shall make a temporary appointment until the next meeting of the senate. A temporary director of wildlife shall not serve more than one year. The secretary of transportation shall be appointed by the transportation commission as prescribed by RCW 47.01.041.

Sec. 22. RCW 43.19.010 and 1988 c 25 s 10 are each amended to read as follows:

The department of general administration shall be organized into divisions, which shall include (1) ((~~the division of banking, (2) the division of savings and loan associations, (3)~~)) the division of capitol buildings, ((~~(4)~~)) (2) the division of purchasing, ((~~(5)~~)) (3) the division of engineering and architecture, and ((~~(6)~~)) (4) the division of motor vehicle transportation service.

The director of general administration shall have charge and general supervision of the department. He or she may appoint and deputize such clerical and other assistants as may be necessary for the general administration of the department. The director of general administration shall receive a salary in an amount fixed by the governor.

Sec. 23. RCW 43.19.020 and 1977 ex.s. c 185 s 1 are each amended to read as follows:

The director of ((~~general administration~~)) financial institutions shall appoint ((~~and~~)), deputize ((~~an assistant director to be known as the supervisor of banking, who shall have charge and supervision of the division of banking. With the approval of the director, he may appoint~~)), and employ ((~~bank~~)) examiners and such other assistants and personnel as may be necessary to carry on the work of the ((~~division.~~

No person shall be eligible for appointment as supervisor of banking unless he is, and for the last two years prior to his appointment has been, a citizen of the United States and a resident of this state; nor if he is interested in any bank or trust company as director, officer, or stockholder)) department of financial institutions.

In the event of the ((~~supervisor's~~)) director's absence the director ((~~of general administration~~)) shall have the power to deputize one of the assistants of the ((~~supervisor~~)) director to exercise all the powers and perform all the duties prescribed by law with respect to banks ((~~and~~)), check cashers and sellers, credit unions, consumer loan companies, savings banks, savings and loan associations, the administration of securities law, trust companies((~~, mutual savings banks, loan agencies~~)) and departments, and other similar institutions that are performed by the ((~~supervisor~~)) director so long as the ((~~supervisor~~)) director is absent: PROVIDED, That such deputized ((~~supervisor~~)) assistant shall not have the power to approve or disapprove new charters, licenses, branches, and satellite facilities, unless such action has received the prior written approval of the ((~~supervisor~~)) director. Any person so deputized shall possess the same qualifications as those set out in this section for the ((~~supervisor~~)) director.

Sec. 24. RCW 43.19.030 and 1977 ex.s. c 270 s 8 are each amended to read as follows:

Before entering ((~~upon his~~)) office each ((~~bank~~)) examiner shall take and subscribe an oath faithfully to discharge the duties of ((~~his~~)) the office.

Oaths shall be filed with the secretary of state.

Neither the ((~~supervisor of banking~~)) director of financial institutions, any ((~~deputy supervisor~~)) deputized assistant of the director, nor any ((~~bank~~)) examiner or employee shall be personally liable for any act done ((~~by him~~)) in good faith in the performance of his or her duties.

Sec. 25. RCW 43.19.050 and 1965 c 8 s 43.19.050 are each amended to read as follows:

The ((~~supervisor of banking~~)) director of financial institutions shall maintain an office at the state capitol, but may with the consent of the governor also maintain ((~~an office~~)) branch offices at ((~~some~~)) other convenient ((~~banking center~~)) business centers in this state. ((He)) The director shall keep books of record of all moneys received or disbursed by ((~~him~~)) the director into or from the banking examination fund, the credit union examination fund, and any other accounts maintained by the department of financial institutions. ((~~He shall adopt an official seal.~~))

Sec. 26. RCW 43.19.080 and 1965 c 8 s 43.19.080 are each amended to read as follows:

(1) It shall be unlawful for the ((~~supervisor or any deputy or employee of his division~~)) director of financial institutions, any deputized assistant of the director, or any employee of the department of financial institutions to borrow money from any bank ((~~or trust company under his jurisdiction~~)), consumer loan company, credit union, foreign bank branch, savings bank, savings and loan association, or trust company or department, or similar lending institution under the department's direct jurisdiction unless the extension of credit:

(a) Is made on substantially the same terms (including interest rates and collateral) as, and following credit underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions by the bank with other persons that are not employed by either the department or the bank; and

(b) Does not involve more than the normal risk of repayment or present other unfavorable features.

(2) The director of the office of financial management shall adopt rules, policies, and procedures interpreting and implementing this section.

(3) Every person who knowingly violates this section shall forfeit his or her office or employment and be guilty of a gross misdemeanor.

Sec. 27. RCW 43.19.090 and 1977 c 75 s 43 are each amended to read as follows:

The ((~~supervisor~~)) director of financial institutions shall file in his or her office all reports required to be made to ((~~him~~)) the director, prepare and furnish to banks ((~~and~~)), check cashers and sellers, consumer loan companies, credit unions, foreign bank branches, savings banks, savings and loan associations, and trust companies and departments blank forms for such reports as are required of them, and each year make a report to the governor showing:

(1) A summary of the conditions of the banks, check cashers and sellers, consumer loan companies, credit unions, foreign bank branches, savings banks, savings and loan associations, and trust companies and departments at the date of their last report; and

(2) A list of those organized or closed during the year.

((He)) The director may publish such other statements, reports, and pamphlets as he or she deems advisable.

Sec. 28. RCW 43.19.095 and 1981 c 241 s 1 are each amended to read as follows:

There is created a local fund known as the "banking examination fund" which shall consist of all moneys received by the ((~~division of banking~~)) department of financial institutions from banks, savings banks, foreign bank branches, trust companies and departments, consumer loan companies, and check cashers and sellers, and which shall be used for the purchase of supplies and necessary equipment and the payment of salaries, wages, utilities, and other incidental costs required for the proper ((~~maintenance of the division~~)) regulation of these companies. The state treasurer shall be the custodian of the fund. Disbursements from the fund shall be on authorization of the director of ((~~general administration or the supervisor of banking~~)) financial institutions or the director's ((~~or supervisor's~~)) designee. In order to maintain an effective expenditure and revenue control, the fund shall be subject in all respects to chapter 43.88 RCW, but no appropriation is required to permit expenditures and payment of obligations from the fund.

Sec. 29. RCW 43.19.112 and 1981 c 241 s 2 are each amended to read as follows:

There is created a local fund known as the "((~~savings and loan associations and~~)) credit unions examination fund" which shall consist of all moneys received by the ((~~division of savings and loan associations~~)) department of financial institutions from credit unions and savings and loan associations and which shall be used for the purchase of supplies and necessary equipment and the payment of salaries, wages, utilities, and other incidental costs required for the ((~~proper maintenance of the division~~)) regulation of these institutions. The state treasurer shall be the custodian of the fund. Disbursements from the fund shall be on authorization of the director of ((~~general administration or the supervisor of savings and loan associations~~)) financial institutions or the director's ((~~or supervisor's~~)) designee. In order to maintain an effective expenditure and revenue control, the fund shall be subject in all respects to chapter 43.88 RCW, but no appropriation is required to permit expenditures and payment of obligations from the fund.

NEW SECTION. Sec. 30. The following acts or parts of acts are each repealed:

(1) RCW 43.19.040 and 1965 c 8 s 43.19.040;

(2) RCW 43.19.100 and 1982 c 3 s 113, 1977 ex.s. c 185 s 2, & 1965 c 8 s 43.19.100; and

(3) RCW 43.19.110 and 1965 c 8 s 43.19.110.

NEW SECTION. Sec. 31. This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1993.

NEW SECTION. Sec. 32. Sections 1 through 19 of this act shall constitute a new chapter in Title 43 RCW.