SENATE BILL REPORT

SB 6455

BYSenators von Reichbauer, Moore, Sellar and Smitherman; by request of General Administration

Revising provisions on banks and trust companies.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):January 28, 1988

Majority Report:  That Substitute Senate Bill No. 6455 be substituted therefor, and the substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Kreidler, McCaslin, Moore, Rasmussen, Sellar, Smitherman.

Senate Staff:Benson Porter (786-7470)

                  January 28, 1988

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, JANUARY 28, 1988

BACKGROUND:

The Supervisor of Banking, the Deputy Supervisor, or bank examiner are required to examine a state-chartered commercial bank or trust company without prior notification.  This can lead to inefficient use of examination personnel's time waiting for an institution's personnel to prepare materials and documents required by bank examiners.

Cooperative or reciprocal agreements allowing the Supervisor to give or accept examinations with other bank regulatory authorities of the United States, any state, the District of Columbia, or any trust territory of the United States are not provided for within state banking, trust company, or mutual savings bank statutes.  With the implementation of interstate banking allowing the out-of-state ownership of banks, trust companies, or mutual savings banks located within the state, it has been suggested that such agreements could equip regulatory authorities to more efficiently monitor the safety and soundness of institutions under their jurisdiction.

The Supervisor may file an injunctive action to restrain a pending acquisition or control of a bank, trust company, or mutual savings bank if the criteria for disapproval are met.  An injunctive action may have little relation to the financial condition of the institution.  Publicity accompanying such injunctive action could seriously harm an institution's reputation or cause a run on the institution.  Other regulatory provisions may allow the Supervisor to review applications without potential harm to the institutions.

Mutual savings bank statutes are silent concerning the examination of these institutions.  Also, the disclosure of examination contents is less specific than banking statutes.

SUMMARY:

The banking and trust company provision forbidding prior examination notification is deleted.

The Supervisor of Banking is authorized to enter into cooperative and reciprocal agreements with other banking authorities of the United States, any state, the District of Columbia, or any trust territory of the United States for the purposes of giving and obtaining examination reports or sections of examination reports for banks, trust companies, or mutual savings banks.  The Supervisor may accept such examination reports from other authorities in lieu of conducting his or her own examination.  All examinations obtained in this manner are considered privileged and confidential information, and are not public information or subject to the Public Disclosure Act.

The Supervisor is authorized to disapprove any application for acquisition or control of any bank, trust company, or mutual savings bank; provided, however, that the criteria for disapproval are met.  An acquisition is permitted prior to the expiration of the disapproval date if the Supervisor has issued a statement that he or she will not disapprove the action.  The basis for any disapproval is to be set forth in an order, a copy of which is to be provided to the applicants and the bank involved.  The findings of such an order are not subject to public disclosure unless the findings or order are appealed.  Any change in a director or chief executive officer within the first twelve months after a change in control is to be reported to the Supervisor.

The Supervisor is authorized to examine mutual savings banks at least every 18 months.  Examinations or any contents thereof, whether conducted by the Supervisor's office or obtained from another regulatory authority through agreement, are not to be disclosed to any person not connected to the institution or specified by statutes and are not subject to the Public Disclosure Act.

EFFECT OF PROPOSED SUBSTITUTE:

The Supervisor shall find that reports of examination furnished through these agreements shall receive protection from disclosure comparable to that provided within this state.  This finding shall be made for any agreement to furnish a report of examination for a state-chartered commercial bank, trust company, or mutual savings bank.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Tom Oldfield, Supervisor of Banking; Keith Hopper, Washington Bankers Association