HOUSE BILL REPORT

HB 1730

BYRepresentatives Dellwo, Chandler and Crane; by request of Department of General Administration

Regulating financial institutions.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (11)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Dorn, Inslee, Nutley, Schmidt, K. Wilson and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE MARCH 6, 1989

BACKGROUND:

The state Supervisor of Banking has regulatory responsibility for state chartered banks and savings banks.  The Supervisor is required by law to conduct a financial examination of each bank at least once every 18 months.  The Supervisor must conduct the examination without giving prior notice of the examination to the bank.  The Supervisor must also examine savings banks; but, the savings bank code does not contain specific provisions governing these examinations.  The examinations are confidential and improper disclosure of examination information is a gross misdemeanor.

In addition to periodically examining banks, the Supervisor is responsible for approving applications to acquire or change the control of a bank or savings bank.  The Supervisor may prevent a change in ownership or control of a bank or savings bank by filing a restraining action in the Superior Court where the bank or savings bank is located.  The action must be brought within 30 days from the date of filing of the application for a change of ownership or control.

The savings bank code authorizes savings banks to acquire another savings bank or savings and loan association so long as the acquired institution is less than half the size of the acquirer.  Thus, the current law prevents acquisitions of similarly sized institutions.

SUMMARY:

The Supervisor of Banking may give notice to a bank of a proposed examination of the bank.

The Supervisor may enter into cooperative arrangements with federal and other state bank regulators for the examination of bank holding companies and the subsidiaries of holding companies.  Examinations conducted by other regulatory bodies may be used by the Supervisor in lieu of the Supervisor's own examinations.  Any examination received from other regulatory authorities is confidential and the Supervisor may share with other bank regulatory authorities information obtained through an examination conducted by the Supervisor.

Rather than bring a court action, the Supervisor may disapprove an application for control or acquisition of a bank within 30 days of the filing of the application or within 45 days of the application date if the Supervisor extends the application review period.  If the Supervisor disapproves the application, he must state the reasons for the disapproval and these reasons are confidential unless the disapproval is challenged in an administrative proceeding.  If the person acquiring ownership or control of a bank replaces or changes the chief executive officer or any of the bank's directors within 12 months of the acquisition of ownership or control, the person must file a report with the Supervisor detailing the past and present business and professional affiliations of the new officer or director.

The examination and acquisition of ownership and control provisions of the bank code are added to the savings bank code.

A new provision is added to both the bank and savings bank code imposing individual and personal civil liability upon bank directors who knowingly violate or permit a violation of the bank code and bank regulations.  Such directors are liable to the state and federal deposit insurance agencies for any damages sustained as a result of the violation.

A new provision is added to the savings bank code authorizing a savings bank to acquire a federally insured savings institution as a subsidiary regardless of the size of the acquired institution.

Fiscal Note:      Not Requested.

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

House Committee ‑ Testified For:    Tom Oldfield, Supervisor of Banking; and Keith Hopper, Washington Banking Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The changes to various bank and savings bank code provisions governing supervision of state banks and savings banks permit the Division of Banking to operate more efficiently.  The new code provisions imposing liability upon bank and savings bank directors for knowing violations of bank statutes and regulations is a compromise reached with the banking industry to ensure that the state and federal government are able to recover damages caused by knowing violations of law.

House Committee - Testimony Against:      None Presented.