House Study Bill 544 SENATE/HOUSE FILE BY (PROPOSED DEPARTMENT OF COMMERCE BILL) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the regulation of state banks and bank holding 2 companies including the disclosure and release of regulatory 3 information, attestation and publication requirements, the 4 removal and service of officers, directors, and employees, and 5 offers to purchase stock, and increasing civil penalties. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5323DP 81 8 kk/je/5 PAG LIN 1 1 Section 1. Section 524.212, Code 2005, is amended to read 1 2 as follows: 1 3 524.212 PROHIBITION AGAINST DISCLOSURE OF REGULATORY 1 4 INFORMATION. 1 5 The superintendent, members of the state banking council, 1 6 general counsel, examiners, or other employees of the banking 1 7 division shall not disclose, in any manner, to any person 1 8 other than the person examined and those regulatory agencies 1 9 referred to in section 524.217, subsection 2, any information 1 10 relating specifically to the supervision and regulation of any 1 11 state bank, persons subject to the provisions of chapter 533A, 1 12 533C, 533D, 535B, 536, or 536A, any affiliate of any state 1 13 bank, or an affiliate of a person subject to the provisions of 1 14 chapter 533A, 533C, 533D, 535B, 536, or 536A, except when 1 15 ordered to do so by a court of competent jurisdiction and then 1 16 only in those instances referred to in section 524.215, 1 17 subsections 1, 2, 3, and 5, or when the disclosure is 1 18 otherwise expressly permitted or required by the provisions of 1 19 chapter 533A, 533C, 533D, 535B, 536, or 536A. 1 20 Sec. 2. Section 524.217, subsection 2, Code 2005, is 1 21 amended to read as follows: 1 22 2. The superintendent may furnish to the federal deposit 1 23 insurance corporation, the federal reserve system, the office 1 24 of the comptroller of the currency, the office of thrift 1 25 supervision, national credit union administration, the federal 1 26 home loan bank, the financial crimes enforcement network of 1 27 the federal department of the treasury, the United States 1 28 internal revenue service, and financial institution regulatory 1 29 authorities of other states, or to any official or supervising 1 30 examiner of such regulatory authorities, a copy of the report 1 31 of any or all examinations made of any state bank and of any 1 32 affiliate of a state bank. 1 33 Sec. 3. Section 524.220, subsection 1, Code 2005, is 1 34 amended to read as follows: 1 35 1. A state bank shall render a full, clear, and accurate 2 1 statement of its condition to the superintendent, in a format 2 2 prescribed by the superintendent,verified by the oath of an 2 3 officer and attested by the signatures of at least three of 2 4 the directors, orverified by the oath of two of its officers, 2 5 and attested by at least two of the directors. The 2 6 superintendent may, in the superintendent's discretion, use 2 7 any form of statement of condition that is used by the federal 2 8 deposit insurance corporation or the federal reserve system. 2 9 Sec. 4. Section 524.220, subsection 3, Code 2005, is 2 10 amended by striking the subsection. 2 11 Sec. 5. Section 524.312, subsection 3, Code 2005, is 2 12 amended to read as follows: 2 13 3. If a change in the location of the principal place of 2 14 business of a state bank is proposed, application for approval 2 15 of the superintendent shall be made as required by the 2 16 superintendent pursuant to this section. A change in location 2 17 of the principal place of business of a state bank, including 2 18 a change from one municipal corporation to another municipal 2 19 corporation within an urban complex, requires an amendment to 2 20 the articles of incorporation pursuant to sections 524.1502, 2 21 524.1504, and 524.1506. A state bank seeking approval of a 2 22 change of location pursuant to this subsection shall publish 2 23once each week for two consecutive weeksa notice of the 2 24 proposed change of location in a newspaper of general 2 25 circulation in the municipal corporation or unincorporated 2 26 area in which the state bank has its principal place of 2 27 business, or if there is none, in a newspaper of general 2 28 circulation in the county, or in a county adjoining the 2 29 county, in which the state bank has its principal place of 2 30 business, and in the municipal corporation in which it seeks 2 31 to establish its principal place of business, or if there is 2 32 none, in a newspaper of general circulation in the county, or 2 33 in a county adjoining the county, in which the municipal 2 34 corporation is located. Thenoticesnotice shall be published 2 35 within thirty days after the application to the superintendent 3 1 for approval of the change in location is accepted for 3 2 processing. The notice shall set forth the name of the state 3 3 bank, the present location of its principal place of business, 3 4 the location to which it proposes to move its principal place 3 5 of business, and the date upon which the application was 3 6 accepted for processing by the superintendent. 3 7 Sec. 6. Section 524.606, subsection 2, unnumbered 3 8 paragraph 1, Code 2005, is amended to read as follows: 3 9 If, in the opinion of the superintendent, any director of a 3 10 state bank or bank holding company has violated any law 3 11 relating to such state bank or bank holding company or has 3 12 engaged in unsafe or unsound practices in conducting the 3 13 business of such state bank or bank holding company, the 3 14 superintendent may cause notice to be served upon such 3 15 director, to appear before the superintendent to show cause 3 16 why the director should not be removed from office. A copy of 3 17 such notice shall be sent to each director of the state bank 3 18 or bank holding company affected, by registered or certified 3 19 mail. If, after granting the accused director a reasonable 3 20 opportunity to be heard, the superintendent finds that the 3 21 director violated any law relating to such state bank or bank 3 22 holding company or engaged in unsafe or unsound practices in 3 23 conducting the business of such state bank or bank holding 3 24 company, the superintendent, in the superintendent's 3 25 discretion, may order that such director be removed from 3 26 office, and that such director be prohibited from serving in 3 27 any capacity in any other bank, bank holding company, bank 3 28 affiliate, trust company, or an entity licensed under chapter 3 29 533A, 533C, 533D, 535B, 536, or 536A. A copy of the order 3 30 shall be served upon such director and upon the state bank or 3 31 bank holding company of which the person is a director at 3 32 which time the person shall cease to be a director of the 3 33 state bank or bank holding company. The resignation, 3 34 termination of employment, or separation of such director, 3 35 including a separation caused by the closing of the state bank 4 1 or bank holding company at which the person serves as a 4 2 director, does not affect the jurisdiction and authority of 4 3 the superintendent to cause notice to be served and proceed 4 4 under this subsection against the director, if the notice is 4 5 served before the end of the six=year period beginning on the 4 6 date the director ceases to be a director with the bank. 4 7 Sec. 7. Section 524.707, subsection 2, Code 2005, is 4 8 amended to read as follows: 4 9 2. Section 524.606, subsection 2, which provides for the 4 10 removal of directors by the superintendent, shall have equal 4 11 application to officers and employees of a bank, bank holding 4 12 company, bank affiliate, or trust company. 4 13 Sec. 8. Section 524.1601, Code 2005, is amended to read as 4 14 follows: 4 15 524.1601 PENALTIES AND CRIMINAL PROVISIONS APPLICABLE TO 4 16 DIRECTORS, OFFICERS, AND EMPLOYEES OF STATE BANKS AND BANK 4 17 HOLDING COMPANIES. 4 18 1. A director, officer, or employee of a state bank or 4 19 bank holding company who willfully violates any of the 4 20 provisions of subsection 4 of section 524.612, section 4 21 524.613, subsection 2 of section 524.706, insofar as such 4 22 subsection incorporates subsection 4 of section 524.612, or 4 23 section 524.710, shall be guilty of a serious misdemeanor, 4 24 plus, in the following circumstances, an additional fine or 4 25 fines equal to: 4 26 a. The amount of money or the value of the property which 4 27 the director, officer, or employee received for procuring, or 4 28 attempting to procure, a loan, extension of credit, or 4 29 investment by the state bank or bank holding company, upon 4 30 conviction of a violation of subsection 1 of section 524.613, 4 31 or of subsection 1 of section 524.710. 4 32 b. The amount by which the director's, officer's, or 4 33 employee's deposit account in the state bank or bank holding 4 34 company is overdrawn, upon conviction of a violation of 4 35 subsection 2 of section 524.613, or of subsection 2 of section 5 1 524.710. 5 2 c. The amount of any profit which the director, officer, 5 3 or employee receives on the transaction, upon conviction of a 5 4 violation of subsection 4 of section 524.612, or of subsection 5 5 2 of section 524.706, insofar as each applies to purchases 5 6 from and sales to a state bank or bank holding company upon 5 7 terms more favorable to such director,orofficer, or employee 5 8 than those offered to other persons. 5 9 d. The amount of profit, fees or other compensation 5 10 received, upon conviction of a violation of section 524.710, 5 11 subsection 1, paragraph "b". 5 12 2. A director or officer who willfully makes or receives a 5 13 loan in violation of subsection 1 of section 524.612, or 5 14 subsection 1 of section 524.706, shall be guilty of a serious 5 15 misdemeanor and shall be subject to an additional fine equal 5 16 to that amount of the loan in excess of the limitation imposed 5 17 by such subsections, and shall be forever disqualified from 5 18 acting as a director or officer of any state bank or bank 5 19 holding company. For the purpose of this subsection, amounts 5 20 which are treated as obligations of an officer or director 5 21 pursuant to subsection 5 of section 524.612, shall be 5 22 considered in determining whether the loan or extension of 5 23 credit is in violation of subsection 1 of section 524.612 and 5 24 subsection 1 of section 524.706. 5 25 3. A director, officer, or employee of a state bank or 5 26 bank holding company who willfully makes or receives a loan or 5 27 extension of credit of funds held by the state bank or bank 5 28 holding company as fiduciary, in violation of subsection 4 of 5 29 section 524.1002, shall be guilty of a serious misdemeanor and 5 30 shall be subject to a further fine equal to the amount of the 5 31 loan or extension of credit made in violation of subsection 4 5 32 of section 524.1002, and shall be forever disqualified from 5 33 acting as a director, officer, or employee of any state bank 5 34 or bank holding company. 5 35 4. A director, officer, or employee of a state bank or 6 1 bank holding company who willfully violates, or participates 6 2 in the violation of, section 524.814, or section 524.819, 6 3 shall be guilty of a serious misdemeanor. 6 4 Sec. 9. Section 524.1602, unnumbered paragraph 1, Code 6 5 2005, is amended to read as follows: 6 6 The superintendent may impose a penalty on a state bank of 6 7 up to onehundredthousand dollars for each day: 6 8 Sec. 10. Section 524.1603, subsection 2, Code 2005, is 6 9 amended to read as follows: 6 10 2. The superintendent may impose a penalty on a state bank 6 11 of up to onehundredthousand dollars for each day that it 6 12 violates the provisions of section 524.1201. 6 13 Sec. 11. Section 524.1803, Code 2005, is repealed. 6 14 EXPLANATION 6 15 This bill relates to the regulation of state banks. The 6 16 bill restricts the ability of the superintendent of banking, 6 17 the banking council, and banking division employees from 6 18 disclosing certain information regarding delayed deposit 6 19 services lenders and mortgage bankers and brokers. The bill 6 20 permits the superintendent to provide copies of examinations 6 21 or reports to the financial crimes enforcement network of the 6 22 U.S. department of the treasury and the internal revenue 6 23 service. 6 24 The bill changes the verification and attestation 6 25 requirements for reports to the superintendent by requiring 6 26 two officers to verify and at least two directors to attest to 6 27 the report rather than allowing an alternative verification by 6 28 one officer and attestation by at least three directors. The 6 29 bill repeals the requirement that a state bank publish the 6 30 bank's statement of condition in a local newspaper. The bill 6 31 reduces the number of times a state bank must publish a notice 6 32 of a proposed change of location of its principal place of 6 33 business in a local newspaper. 6 34 The bill provides the superintendent with authority to 6 35 remove a director, officer, or employee of a bank holding 7 1 company for engaging in unsafe or unsound practices in 7 2 conducting the business of the bank holding company and 7 3 prohibit the director from serving in any capacity for another 7 4 entity regulated by the superintendent. The bill makes the 7 5 criminal provisions of Code chapter 524 applicable to a 7 6 director, officer, or employee of a bank holding company. 7 7 The bill increases the penalty the superintendent may 7 8 impose on a state bank from $100 per day to $1,000 per day. 7 9 The bill repeals the provision restricting the ability of a 7 10 bank holding company to purchase stock of a state or national 7 11 bank. 7 12 LSB 5323DP 81 7 13 kk:rj/je/5