SENATE 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

Senate Committee on Financial Institutions

Senate Hearing Date(s):March 31, 1987; April 2, 1987

Majority Report:  Do pass as amended.

      Signed by Senators Moore, Chairman; Bender, Vice Chairman; Bottiger, Fleming, McDermott, Metcalf.

Senate Staff:Stephanie Yates (786-7416)

                  April 3, 1987

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS, APRIL 2, 1987

BACKGROUND:

State chartered savings and loan associations are permitted to invest 10 percent of their assets in any activity.  Savings banks have similar authority.  State chartered commercial banks are not permitted 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 serving as an officer or employee of a business engaged in selling securities.  Officers or employees are also prohibited from serving as 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.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The provision is deleted in which the Legislature expresses concern over the lack of farm credit.

A provision is modified to permit state-chartered commercial banks to invest up to 10 percent of their assets or 50 percent of their net worth, whichever is less, in nonbanking activities.

A provision pertaining to the study of the financial institution's industry in this state is modified to require the Director of General Administration to conduct the study and to consult with the Supervisors of Banking and Savings and Loans.

Fiscal Note:      none requested

Senate Committee - Testified: Representative Dennis Dellwo; Bob Dickson, President, Frontier Bank, Everett; Keith Hopper, Washington Bankers Association