BP BHEAD INT S

AN ACT Relating to community reinvestment by banking institutions; amending RCW 30.60.010, 30.60.020, 32.40.010, and 32.40.020; adding new sections to chapter 30.60 RCW; adding new sections to chapter 32.40 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that banking institutions, consistent with safe and sound banking practices and the free exercise of management discretion, have a responsibility to meet the credit needs of their communities as contemplated by the community reinvestment act. The authority to take certain actions under state banking laws, specifically the authority to open branch offices, to merge, to make certain purchases of assets, to make certain acquisitions, and to take certain other actions, is subject to the satisfaction of the community reinvestment requirements set forth in this act.

The legislature further finds that the community reinvestment act must keep pace with the changing nature of the banking system and the evolving credit needs of local communities. Measuring performance should involve increased reliance on quantitative data and that the focus of compliance and enforcement should not be centered on the regulatory application process at the expense of ongoing compliance by banks and ongoing participation by representatives of the community.

Sec. 2. RCW 30.60.010 and 1985 c 329 s 2 are each amended to read as follows:

(1) In conducting an examination of a bank chartered under Title 30 RCW, the ((~~supervisor of banking, deputy supervisor, or examiner~~)) director of financial institutions or the director's designee shall investigate and assess the record of performance of the bank in meeting the credit needs of the bank's entire community, including low and moderate-income neighborhoods. The ((~~supervisor~~)) director shall accept, in lieu of an investigation or part of an investigation required by this section, any report or document that the bank is required to prepare or file with one or more federal agencies by the act of congress entitled the "Community Reinvestment Act of 1977" and the regulations promulgated in accordance with that act, to the extent such reports or documents assist the ((~~supervisor~~)) director in making an assessment based upon the factors outlined in subsection (2) of this section. Each bank chartered under Title 30 RCW to which the community reinvestment act, United States P.L. 95-128, applies shall file with the department of financial institutions a copy of each report and document that it is required to prepare for or file with one or more federal agencies pursuant to that law and the rules and regulations. In addition each bank shall file annually with the department a written report in a form to be prescribed by the director. The report shall form the basis, along with other information regarding the banking organization obtained by the department, of the annual community reinvestment rating assigned to the bank. The report shall:

(a) Describe in detail the methods used by the banking organization in determining the credit needs of its local community or communities, including low and moderate-income neighborhoods;

(b) Describe in detail the methods utilized and the media employed to make the members of the organization's community aware of the credit services offered by it;

(c) Describe the extent of participation by the organization's board of directors or trustees in formulating the institution's policies and reviewing its performance with respect to the purpose of the community reinvestment act;

(d) List all branch offices, including electronic branches, and public accommodation offices that were opened or closed in the past three years or at which services were significantly reduced;

(e) Describe such organization's participation in:

(i) Local development, redevelopment, and rehabilitation projects or programs;

(ii) Programs or organizations that promote and assist in the development and growth of small businesses in Washington state; and

(iii) Programs or organizations that address themselves to the financial needs of minorities; and

(f) Describe any other community activities that bear upon the extent to which the organization is helping to meet community credit needs.

(2) In making an investigation required under ((~~subsection (1) of this section~~)) RCW 30.60.020, the ((~~supervisor~~)) director shall consider, independent of any federal determination, the following factors in assessing the bank's record of performance:

(a) Activities conducted by the institution to ascertain credit needs of its community, including the extent of the institution's efforts to communicate with members of its community regarding the credit services being provided by the institution;

(b) The extent of the institution's marketing and special credit related programs to make members of the community aware of the credit services offered by the institution;

(c) The extent of participation by the institution's board of directors in formulating the institution's policies and reviewing its performance with respect to the purposes of the Community Reinvestment Act of 1977;

(d) Any practices intended to discourage applications for types of credit set forth in the institution's community reinvestment act statement(s);

(e) The geographic distribution of the institution's credit extensions, credit applications, and credit denials;

(f) Evidence of prohibited discriminatory or other illegal credit practices;

(g) The institution's record of opening and closing offices and providing services at offices;

(h) The institution's participation, including investments, in local community development projects;

(i) The institution's origination of residential mortgage loans, housing rehabilitation loans, home improvement loans, and small business or small farm loans within its community, or the purchase of such loans originated in its community;

(j) The institution's participation in governmentally insured, guaranteed, or subsidized loan programs for housing, small businesses, or small farms;

(k) The institution's ability to meet various community credit needs based on its financial condition, size, legal impediments, local economic condition, and other factors;

(l) Other factors that, in the judgment of the ((~~supervisor~~)) director, reasonably bear upon the extent to which an institution is helping to meet the credit needs of its entire community.

(3) The ((~~supervisor~~)) director shall include as part of the examination report, a summary of the results of the assessment required under subsection (1) of this section and shall assign annually to each bank a numerical community reinvestment rating based on a one through five scoring system. Such numerical scores shall represent performance assessments as follows:

(a) Excellent performance: 1

(b) Good performance: 2

(d) Inadequate performance: 4

(e) Poor performance: 5

Sec. 3. RCW 30.60.020 and 1985 c 329 s 3 are each amended to read as follows:

Whenever the ((~~supervisor of banking~~)) director must approve or disapprove of an application for a new branch or satellite facility; for a purchase of assets, a merger, an acquisition or a conversion not required for solvency reasons; or for authority to engage in a business activity, the ((~~supervisor~~)) director shall consider, among other factors, a written assessment of the record of performance of the applicant in helping to meet the credit needs of the applicant's entire community, including low and moderate-income neighborhoods. The assessment and any written communications from the department to a bank relating to the assessment shall be made available to the public upon request. In making the assessment the director shall review all reports and documents and any signed, written comments that specifically relate to the bank's performance in helping to meet the credit needs of its community. Assessment of an applicant's record of performance may be the basis for denying an application.

NEW SECTION. Sec. 4. A new section is added to chapter 30.60 RCW to read as follows:

(1) The department shall develop a list of services and investments that, in addition to traditional lending activities within their service areas, banks may, but are not required to, offer or engage in helping to meet the credit needs of their communities.

(2) For purposes of assessing a bank's performance under RCW 30.60.010, the department may consider only those activities, services and investments that are made in the bank's service area, except under section 5 of this act.

(3) If any activity, service, or investment is not enumerated in the list developed under subsection (1) of this section, a bank may, but is not required to, seek prior review by the department of the proposed activity, service, or investment to determine whether it is eligible for consideration by the department in its assessment of the bank's performance. The department shall consider a request for prior review only if the activity, investment, or service does not fall within a category identified in the list developed under subsection (1) of this section. The determination shall specifically disclaim any recommendation or endorsement with respect to the particular activity, service, or investment and will not address its appropriateness, suitability, or compliance with safety and soundness standards. Copies of prior review determinations shall be made available for public review.

NEW SECTION. Sec. 5. A new section is added to chapter 30.60 RCW to read as follows:

(1) Each retail bank shall, at least annually, delineate its service area without arbitrarily excluding low and moderate-income neighborhoods. The department shall review the reasonableness of such delineation. A retail bank may determine the delineation of its service area by: (a) Reference to existing boundaries such as metropolitan statistical areas or counties in which the bank's office or offices are located; (b) use of its effective lending territory, which is defined as the local areas or areas around each office or group of offices where it makes a substantial portion of its loans; or (c) use of any other reasonably delineated local area that meets its reinvestment purposes and does not arbitrarily exclude low and moderate-income neighborhoods.

(2) Wholesale banks may either (a) delineate their service areas on the basis of the standards set forth in subsection (1) of this section; or (b) designate the entire city in which their corporate headquarters are located as their service areas. If a wholesale bank has a satisfactory record within its designated service area, activities engaged in by such banks anywhere within the state shall be considered in calculating that bank's designated service area.

(3) If a bank delineates its service area either (a) in a manner that arbitrarily excludes low and moderate-income areas or (b) in any other manner that is inconsistent with the requirement of subsection (1) of this section, the department shall require the bank to revise its delineation in a manner consistent with the requirements of subsection (1) of this section and assess the bank's performance in accordance with the revised delineation.

(4) Both wholesale and retail banks are required to determine, as an exercise of independent business judgment, the most appropriate manner in which to meet the credit needs of their service areas, consistent with the requirements of this chapter. No bank may be required to establish any banking facility not in existence on the effective date of this act or to offer any particular banking service or product.

Sec. 6. RCW 32.40.010 and 1985 c 329 s 8 are each amended to read as follows:

(1) In conducting an examination of a savings bank chartered under Title 32 RCW, the ((~~supervisor of banking, deputy supervisor, or examiner~~)) director of financial institutions or the director's designee shall investigate and assess the record of performance of the savings bank in meeting the credit needs of the savings bank's entire community, including low and moderate-income neighborhoods. The ((~~supervisor~~)) director shall accept, in lieu of an investigation or part of an investigation required by this section, any report or document that the savings bank is required to prepare or file with one or more federal agencies by the act of congress entitled the "Community Reinvestment Act of 1977" and the regulations promulgated in accordance with that act, to the extent such reports or documents assist the ((~~supervisor~~)) director in making an assessment based upon the factors outlined in subsection (2) of this section. Each savings bank chartered under Title 32 RCW to which the community reinvestment act, United States P.L. 95-128, applies shall file with the department of financial institutions a copy of each report and document that it is required to prepare for or file with one or more federal agencies pursuant to that law and the rules and regulations. In addition each savings bank shall file annually with the department a written report in a form to be prescribed by the director. The report shall form the basis, along with other information regarding the banking organization obtained by the department, of the annual community reinvestment rating assigned to the savings bank. The report shall:

(a) Describe in detail the methods used by the banking organization in determining the credit needs of its local community or communities, including low and moderate-income neighborhoods;

(b) Describe in detail the methods utilized and the media employed to make the members of the organization's community aware of the credit services offered by it;

(d) List all branch offices, including electronic branches, and public accommodation offices that were opened or closed in the past three years or at which services were significantly reduced;

(e) Describe such organization's participation in:

(i) Local development, redevelopment, and rehabilitation projects or programs;

(ii) Programs or organizations which promote and assist in the development and growth of small businesses in Washington state; and

(iii) Programs or organizations that address themselves to the financial needs of minorities; and

(f) Describe any other community activities that bear upon the extent to which the organization is helping to meet community credit needs.

(2) In making an investigation required under ((~~subsection (1) of this section~~)) RCW 32.40.020, the ((~~supervisor~~)) director shall consider, independent of any federal determination, the following factors in assessing the savings bank's record of performance:

(b) The extent of the institution's marketing and special credit related programs to make members of the community aware of the credit services offered by the institution;

(c) The extent of participation by the institution's board of directors or board of trustees in formulating the institution's policies and reviewing its performance with respect to the purposes of the Community Reinvestment Act of 1977;

(d) Any practices intended to discourage applications for types of credit set forth in the institution's community reinvestment act statement(s);

(e) The geographic distribution of the institution's credit extensions, credit applications, and credit denials;

(f) Evidence of prohibited discriminatory or other illegal credit practices;

(g) The institution's record of opening and closing offices and providing services at offices;

(h) The institution's participation, including investments, in local community development projects;

(i) The institution's origination of residential mortgage loans, housing rehabilitation loans, home improvement loans and small business or small farm loans within its community, or the purchase of such loans originated in its community;

(j) The institution's participation in governmentally insured, guaranteed, or subsidized loan programs for housing, small businesses, or small farms;

(k) The institution's ability to meet various community credit needs based on its financial condition, size, legal impediments, local economic condition, and other factors;

(l) Other factors that, in the judgment of the ((~~supervisor~~)) director, reasonably bear upon the extent to which an institution is helping to meet the credit needs of its entire community.

(3) The ((~~supervisor~~)) director shall include as part of the examination report, a summary of the results of the assessment required under subsection (1) of this section and shall assign annually to each savings bank a numerical community reinvestment rating based on a one through five scoring system. Such numerical scores shall represent performance assessments as follows:

(a) Excellent performance: 1

(b) Good performance: 2

(d) Inadequate performance: 4

(e) Poor performance: 5

Sec. 7. RCW 32.40.020 and 1985 c 329 s 9 are each amended to read as follows:

Whenever the ((~~supervisor of banking~~)) director must approve or disapprove of an application for a new branch or satellite facility; for a purchase of assets, a merger, an acquisition or a conversion not required for solvency reasons; or for authority to engage in a business activity, the ((~~supervisor~~)) director shall consider, among other factors, a written assessment of the record of performance of the applicant in helping to meet the credit needs of the applicant's entire community, including low and moderate-income neighborhoods. The assessment and any written communications from the department to a savings bank relating to the assessment shall be made available to the public upon request. In making the assessment the director shall review all reports and documents and any signed, written comments that specifically relate to the savings bank's performance in helping to meet the credit needs of its community. Assessment of an applicant's record of performance may be the basis for denying an application.

NEW SECTION. Sec. 8. A new section is added to chapter 32.40 RCW to read as follows:

(1) The department shall develop a list of services and investments that, in addition to traditional lending activities within their service areas, savings banks may, but are not required to, offer or engage in helping to meet the credit needs of their communities.

(2) For purposes of assessing a savings bank's performance under RCW 32.40.010, the department may consider only those activities, services, and investments that are made in the savings bank's service area, except under section 9 of this act.

(3) If any activity, service, or investment is not enumerated in the list developed under subsection (1) of this section, a savings bank may, but is not required to, seek prior review by the department of the proposed activity, service, or investment to determine whether it is eligible for consideration by the department in its assessment of the savings bank's performance. The department shall consider a request for prior review only if the activity, investment, or service does not fall within a category identified in the list developed under subsection (1) of this section. The determination shall specifically disclaim any recommendation or endorsement with respect to the particular activity, service, or investment and will not address its appropriateness, suitability, or compliance with safety and soundness standards. Copies of prior review determinations shall be made available for public review.

NEW SECTION. Sec. 9. A new section is added to chapter 32.40 RCW to read as follows:

(1) Each savings bank shall, at least annually, delineate its service area without arbitrarily excluding low and moderate-income neighborhoods. The department shall review the reasonableness of such delineation. A savings bank may determine the delineation of its service area by: (a) Reference to existing boundaries such as metropolitan statistical areas or counties in which the savings bank's office or offices are located; (b) use of its effective lending territory, which is defined as the local areas or areas around each office or group of offices where it makes a substantial portion of its loans; or (c) use of any other reasonably delineated local area that meets its reinvestment purposes and does not arbitrarily exclude low and moderate-income neighborhoods.

(2) If a savings bank delineates its service area either (a) in a manner that arbitrarily excludes low and moderate-income areas or (b) in any other manner that is inconsistent with the requirement of subsection (1) of this section, the department shall require the savings bank to revise its delineation in a manner consistent with the requirements of subsection (1) of this section and assess the savings bank's performance in accordance with the revised delineation.

(3) Savings banks are required to determine, as an exercise of independent business judgment, the most appropriate manner in which to meet the credit needs of their service areas, consistent with the requirements of this chapter. No savings bank may be required to establish any banking facility not in existence on the effective date of this act or to offer any particular banking service or product.