HOUSE BILL REPORT

ESHB 341

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Dellwo, Nutley, Chandler, Silver, Lux, Meyers, P. King, Ferguson, Betrozoff, C. Smith and May)

Revising the corporate powers of banks.

House Committe on Financial Institutions & Insurance

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (12)

     Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Betrozoff, Chandler, Crane, Dellwo, Ferguson, P. King, Meyers, Niemi, Nutley and Winsley.

Minority Report:     Do not pass.  (1)

     Signed by Representative Day.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 16, 1987

BACKGROUND:

State chartered savings and loan associations are permitted to invest 10 percent of their assets in any activity or corporation.  Savings banks have similar authority.  State chartered commercial banks are not permitted to invest in corporations or to conduct activities that are not related to banking.

Commercial banks are prohibited from dealing in securities and the officers and employees of a commercial bank are prohibited from being an officer or employee of a business engaged in selling securities.  Officers or employees are also prohibited from being a trustee, director, officer, or employee of a corporation making loans secured by collateral to any other corporation.  A securities business may not have an office or transact business in the same room as a bank. 

Last year, the legislature directed the Supervisor of Banking to establish a study commission to analyze bank powers and report to the legislature with recommendations on changes to the bank code by November 1, 1987.

SUMMARY:

The legislature expresses concern over the lack of farm lending and requires the supervisor of banking to consider this problem when approving applications by banks to engage in new activities.

State chartered commercial banks may invest up to 10 percent of their assets in any corporation whether or not such corporation is related to the banking business.  Before a bank may engage in any activity under the act, the Supervisor of Banking must review and authorize the activity after considering the bank's safety and soundness, the convenience and needs of the public, and whether the proposed activity ought to be conducted through a bank affiliate or subsidiary.  The supervisor may not authorize banks to act as insurance or travel agents.

The restriction on commercial banks dealing with securities and the relation of officers and employees of a bank with a securities business or other corporation which makes loans is repealed.

The supervisor's Bank Powers Study Commission is expanded to require a review of all state chartered financial institutions.

EFFECT OF SENATE AMENDMENT(S):  Banks may invest 10 percent of assets or 50 percent of net worth, whichever is less, in any activity with the approval of the supervisor of banking.  The director of the Department of General Administration replace the supervisor of banking as the person responsible for conducting a study of bank powers.  The legislative interest section is deleted.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     None Presented.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     None Presented.

House Committee - Testimony Against: None Presented.

VOTE ON FINAL PASSAGE:

     Yeas 93; Nays 2; Excused 3

Voting Nay:     Representatives Heavey and Locke

Excused:   Representatives Allen, Pruitt and C. Smith