HOUSE BILL REPORT

HB 2505

BYRepresentatives McLean, Dellwo, Chandler, Zellinsky, Ballard, Nealey and Kirby

Authorizing the supervisor of banking to examine agricultural lenders participating in loan guaranty programs.

House Committe on Financial Institutions & Insurance

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice-Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Crane, Day, Dorn, Inslee, P. King, Nutley, Schmidt and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

JANUARY 23, 1990

BACKGROUND:

Corporations and non-profit corporations created to lend money to agricultural borrowers are eligible for participation in the federal Farmers Home Administration only if the corporation is regulated and examined by a state or federal regulatory agency in the same manner as financial institutions such as banks.  A corporation participating in the Farm Home Administration may issue agricultural loans which are guaranteed by the administration, thereby increasing credit availability for agriculture.

SUMMARY:

SUBSTITUTE BILL:  The state supervisor of banking is granted authority to regulate and examine agricultural lenders incorporated under Washington law wishing to qualify for participation in a federal loan guaranty program.

An agricultural lender must file an application for a license issued by the supervisor of banking. Any change in the ownership of the lender must be approved by the supervisor.

An agricultural lender regulated by the supervisor must adhere to all federal statutes and regulations governing a loan guaranty program in which the lender participates.

Agricultural lenders regulated by the supervisor must pay the supervisor's costs in regulating and examining the lender.  Fees paid by a lender for regulation are deposited into the supervisor's regulatory account.

Lenders must keep such financial records as required by the supervisor and must file an annual report with the supervisor. In addition, lenders must establish a loan loss reserve account for loans not guaranteed by a federal program.

At least once every two years, the supervisor must visit the lender to assure that the lender is in compliance with applicable statutes and regulations.  The supervisor may accept audited financial statements in lieu of a full examination but must independently review loans guaranteed by a loan guaranty program.

The supervisor may adopt all rules necessary to implement the act, may issue cease and desist orders, may impose fines for violations of the act, and may seek judicial enforcement of the act.

A regulated agricultural lender must notify its members annually that investments in the lender are not insured, guaranteed, or protected by any federal or state agency.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Technical amendments are made.

Appropriation:    $5,000.00 is appropriated.

Fiscal Note:      Requested January 23, 1990.

House Committee ‑ Testified For:    Steve Joy, Growers Credit; and Don Olsen, Farmers Home Administration.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Agricultural lenders would be able to participate in federal loan guaranty programs if the lenders were regularly examined by a state or federal agency. No federal agency currently examines agricultural lenders. Authorizing the supervisor of banking to regulate agricultural lenders who wish to participate in federal loan guaranty programs will increase the availability of credit for agriculture.  Except for the modest appropriation to begin this regulatory process, the regulated lender is responsible for paying fees to support the regulation and examination.

House Committee - Testimony Against:      None.