Legislature(2001 - 2002)

03/19/2001 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 106-FINANCIAL INSTITUTIONS                                                                                                 
                                                                                                                                
[Contains discussion pertaining  to SB 66, the  companion bill in                                                               
the Senate.]                                                                                                                    
                                                                                                                                
Number 0070                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI announced that the  committee would take up HOUSE                                                               
BILL NO.  106, "An Act  relating to the authorizations  for state                                                               
financial  institutions;   relating  to   confidential  financial                                                               
records  of   depositors  and  customers  of   certain  financial                                                               
institutions;  relating  to  the   Alaska  Banking  Code,  Mutual                                                               
Savings  Bank Act,  Alaska  Small Loans  Act,  and Alaska  Credit                                                               
Union Act; and providing for an effective date."                                                                                
                                                                                                                                
CHAIR MURKOWSKI  declared a conflict  of interest because  she is                                                               
on the board of directors of a state bank.                                                                                      
                                                                                                                                
Number 0167                                                                                                                     
                                                                                                                                
TERRY  ELDER,  Director,  Division  of  Banking,  Securities  and                                                               
Corporations,  Department of  Community and  Economic Development                                                               
(DCED), said  HB 106 and the  companion bill on the  Senate side,                                                               
SB  66,  are  bills  relating  to  the  regulation  of  financial                                                               
institutions,  mostly  state   banks.    He  said   most  of  the                                                               
provisions  would  affect  either  state banks  or  state  credit                                                               
unions.   Mr. Elder gave  an overview, generally  discussing some                                                               
of the  changes in  the bill,  and then used  the bill  packet to                                                               
highlight  sections  in  the  bill.    The  following  discussion                                                               
ensued.                                                                                                                         
                                                                                                                                
MR. ELDER  explained that there  are a couple of  provisions that                                                               
affect national banks  and national credit unions,  too, but most                                                               
of these  provisions deal with the  state-chartered institutions.                                                               
He  explained the  reason for  the bill.   When  the Gramm-Leach-                                                               
Bliley Act  (GLBA) passed Congress,  it removed  the restrictions                                                               
on bank  affiliations put  in place  after the  Depression, which                                                               
prohibited banks from affiliating  in certain ways with insurance                                                               
companies and securities firms.                                                                                                 
                                                                                                                                
Number 0347                                                                                                                     
                                                                                                                                
MR.  ELDER relayed  that in  [Alaska's] banking  code there  have                                                               
been certain  restrictions against  insurance activities.   There                                                               
was a need  to look through [Alaska's] code  and remove conflicts                                                               
between  the affiliations  and the  kinds  of activities  allowed                                                               
under the  banking code and under  the federal banking laws.   In                                                               
addition,  [the division]  talked to  some [Alaskan]  state banks                                                               
and credit unions to see if  there were changes and problems that                                                               
could  be  identified  in  the law.    Several  suggestions  were                                                               
received  and were  included in  the  bill.   Finally, the  third                                                               
group  of   changes  are  ones   that  the  division   felt  were                                                               
appropriate  improvements to  the banking  code or  to the  other                                                               
chapters within Title 6.                                                                                                        
                                                                                                                                
Number 0420                                                                                                                     
                                                                                                                                
MR. ELDER  gave some  examples.   [Alaska] has  a state-chartered                                                               
mutual savings [bank], and currently  the chapter in Title 6 that                                                               
deals  with mutual-savings  banks  treats the  trustees, who  are                                                               
equivalent to  directors of a  commercial bank,  differently from                                                               
the way  that directors are  treated for commercial  banks; there                                                               
are  different restrictions  with respect  to transactions  among                                                               
the  director,  the  trustees,  and  the  institution,  and  with                                                               
respect to  [their varying] lending  limits.   The mutual-savings                                                               
bank had asked  that [the division] put the trustees  on an equal                                                               
footing with directors of commercial banks.                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI  asked for  background  information  on why  the                                                               
trustees would not have been treated similarly to directors.                                                                    
                                                                                                                                
MR. ELDER said he wasn't sure  and deferred the question to Terry                                                               
Lutz, Bank Supervisor.                                                                                                          
                                                                                                                                
TERRY LUTZ, Bank Supervisor, Division  of Banking, Securities and                                                               
Corporations,  Department of  Community and  Economic Development                                                               
(DCED), replied that  he didn't know the history.   He said there                                                               
was  no  reference  made  to the  banking  code  when  [Alaska's]                                                               
Savings Bank Act  was initiated.  Later on, reference  was put in                                                               
to give commercial  banks powers in the banking  code that didn't                                                               
conflict with those of savings banks  - so now [the two] are very                                                               
[similar].                                                                                                                      
                                                                                                                                
Number 0581                                                                                                                     
                                                                                                                                
MR.  ELDER said  he thought  it was  the "nature  of the  beast,"                                                               
being a  mutual versus  a stock-type of  ownership.   It probably                                                               
comes  from  the   attitude  that  the  owners   are  really  the                                                               
depositors and so forth; if that is  the case, it is from a "time                                                               
gone by."  It is more  appropriate that protections be put in, if                                                               
there  are   "arms-length"  transactions,   he  said,   so  there                                                               
shouldn't  be any  problems having  dealings with  the bank  that                                                               
differ from a director's having dealings with a commercial bank.                                                                
                                                                                                                                
MR. ELDER  noted a  couple of  ideas [the  division] had  for the                                                               
bill.    He  explained  that   there  are  two  kinds  of  banks,                                                               
nationally  chartered  banks  and state-chartered  banks.    [The                                                               
division]  regulates and  examines state-charted  banks; however,                                                               
there  are some  sections of  the  code that  relate to  national                                                               
banks.                                                                                                                          
                                                                                                                                
Number 0724                                                                                                                     
                                                                                                                                
MR. ELDER said one of the  areas that does include national banks                                                               
is interstate branching, and there  is a provision in the banking                                                               
code that requires a national  bank coming into Alaska and buying                                                               
another bank to  get a permit from [the division].   For example,                                                               
Wells Fargo came  in and acquired National Bank  of Alaska (NBA);                                                               
both are  national banks  that the  division doesn't  regulate or                                                               
examine, but under [Alaska's]  statutory provisions [Wells Fargo]                                                               
had  to  apply to  the  division  for a  permit.    He said  [the                                                               
division] doesn't  think that makes  much sense.   [The division]                                                               
is proposing  a change so  [a company  would just have  to notify                                                               
the  division].   He clarified  that [the  division] is  going to                                                               
keep  the  permitting  provision  for state  banks  because  [the                                                               
division] examines them.                                                                                                        
                                                                                                                                
MR.  ELDER explained  that  if  a person  were  going  to put  an                                                               
automated teller  machine (ATM)  off-premises, under  current law                                                               
that  [institution]  would have  to  get  the approval  from  the                                                               
division.    [The  division]  is  suggesting  that  this  is  not                                                               
necessary  and that  all a  person has  to do  is to  notify [the                                                               
division], explaining where the banking  services are.  Again, he                                                               
said, it is to reduce unnecessary regulatory burden.                                                                            
                                                                                                                                
MR. ELDER  explained that the  current statute  lists limitations                                                               
on  staff  in terms  of  where  banking  can  be done;  a  change                                                               
occurred in  1983 or 1984  saying that [division  staff] couldn't                                                               
bank at  any bank  regulated and examined  [by the  division]; it                                                               
also  [dictated] where  [the division]  could  issue permits  and                                                               
certificates of authority.  If  enough national banks branch into                                                               
the  state  and  buy  enough  state  banks,  he  said,  and  [the                                                               
division]  issues   them  permits,  that  would   mean  that  the                                                               
division's  staff couldn't  bank anywhere  in Alaska.   For  this                                                               
reason, [the division is] proposing to  change it back to what it                                                               
was before 1993,  prohibiting staff to bank with  banks [that the                                                               
division]  examines,  so  the  state-chartered  institutions  are                                                               
examined.    Clearly,  there  is   a  conflict  of  interest,  he                                                               
remarked.                                                                                                                       
                                                                                                                                
Number 0830                                                                                                                     
                                                                                                                                
MR.  ELDER explained  that this  is not  a trivial  issue because                                                               
under  Title 6,  if anyone  violates that  provision of  banking,                                                               
there is  immediate termination, so  [the division] wants  to fix                                                               
it.                                                                                                                             
                                                                                                                                
MR. ELDER referred  to the GLBA and said there  are provisions in                                                               
the  bill  that  will  eliminate  the  restriction  on  insurance                                                               
activities,  and  allow  the  affiliations  that  GLBA  [allows].                                                               
There are  probably only two  areas that are  most controversial:                                                               
Section 3, dealing  with privacy, and Section 11,  where "we" are                                                               
proposing to  remove the  current 17 percent  cap on  credit card                                                               
interest rates,  allowing [companies] to [put  in place] whatever                                                               
is agreed upon between the customer and the issuing institution.                                                                
                                                                                                                                
Number 1022                                                                                                                     
                                                                                                                                
MR. ELDER said  the natural knee-jerk reaction to that  is to say                                                               
that rates  would be allowed to  go "sky high," which  is not the                                                               
actual impact; the  only impact of the current cap  is to prevent                                                               
state-charted banks from getting  into that business and offering                                                               
that service to customers.                                                                                                      
                                                                                                                                
MR. ELDER referred to  Section 2, page 1 [of the bill].   It is a                                                               
"wild  card section"  that allows  [the division]  to respond  to                                                               
requests  from  banks  entering into  certain  activities;  under                                                               
current law  it is required  to do that only  through regulation.                                                               
[The division] is proposing to  change that to allow the division                                                               
to issue orders, so it will  be more responsive to the requesting                                                               
organization.   In addition, it  is cheaper.  To  do regulations,                                                               
the  division  has   to  publish  notices,  which   can  be  very                                                               
expensive.   He said  [the division]  doesn't have  provisions in                                                               
its budget for more than just a  couple of notices a year, so the                                                               
regulation activity  has to be  grouped together to get  the most                                                               
"bang for the buck."  And it  would make it difficult to keep the                                                               
state-charted banks competitive with national banks.                                                                            
                                                                                                                                
Number 1143                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI asked  if any consumer protection is  lost in not                                                               
going through the public process.                                                                                               
                                                                                                                                
Number 1170                                                                                                                     
                                                                                                                                
MR. ELDER  stated that it is  a risk that's run.   [The division]                                                               
would have  no objection  if the legislature  wanted to  say that                                                               
the orders  could be temporary.   He said the major  objective is                                                               
to  make state-chartered  institutions competitive  with national                                                               
institutions.  Usually  what [the division] is dealing  with is a                                                               
state-chartered institution  that wants to do  something, such as                                                               
provide a  certain service or  product that is allowed  under the                                                               
federal code.   It would depend on the institution's  rating on a                                                               
safety-and-soundness scale, he said, and  unless it has an impact                                                               
on that,  [the division  is] going  to allow  the state-chartered                                                               
banks to compete with the national charters.                                                                                    
                                                                                                                                
Number 1280                                                                                                                     
                                                                                                                                
MR. ELDER referred to Section 3,  the privacy provision.  He said                                                               
there  are  some  amendments  that  have  been  offered  by  [the                                                               
division].  Right  now in the banking code, AS  06.05, there is a                                                               
privacy  provision at  AS 06.05.175  that  says that  information                                                               
shall  not be  made  public except  under certain  circumstances,                                                               
such as issuing  court orders and so forth,  without the approval                                                               
of one  of the items  on the list,  "without the approval  of the                                                               
customer".   Getting  the customer  to  sign something  approving                                                               
that is  called "opt  in."   One of  the issues  in GLBA  and the                                                               
privacy provisions in various states  is that GLBA has provisions                                                               
for "opt  out" rather than  "opt in."   Under GLBA the  "opt out"                                                               
really refers to sharing non-public  information, not just public                                                               
information  like name,  address, and  so forth.   It  allows the                                                               
sharing  of  non-public  information  with  non-affiliated  third                                                               
parties, unless the customer opts out.                                                                                          
                                                                                                                                
Number 1495                                                                                                                     
                                                                                                                                
MR. ELDER said GLBA also  allows states to adopt more restrictive                                                               
privacy  provisions, and  if  there  is a  conflict  in terms  of                                                               
whether something  applies or not,  the Federal  Trade Commission                                                               
(FTC) [makes the decision].   Either interested party could bring                                                               
it to the FTC,  he said.  For example, right  now North Dakota is                                                               
asking the FTC  for a ruling on whether its  privacy provision is                                                               
more protective than GLBA.                                                                                                      
                                                                                                                                
CHAIR MURKOWSKI asked  for clarification that states  can be more                                                               
restrictive but can't be less restrictive [than GLBA].                                                                          
                                                                                                                                
MR. ELDER answered affirmatively.   When asked why [North Dakota]                                                               
would  have  to go  before  the  FTC to  make  sure  there is  no                                                               
conflict between its  privacy provisions and the  GLBA, Mr. Elder                                                               
responded that  his understanding  is that  [the FTC]  also looks                                                               
for inconsistencies.                                                                                                            
                                                                                                                                
Number 1583                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  asked if [Alaska's privacy  provisions] would go                                                               
before the FTC if the committee adopted HB 106.                                                                                 
                                                                                                                                
MR. ELDER said  someone has to bring it to  the FTC; however, any                                                               
interested party  can do  that.  He  said whether  information is                                                               
shared  among affiliates,  how that  happens, and  whether it  is                                                               
"opt in" or "opt out" are  major issues.  He reiterated that GLBA                                                               
provides  "opt  out."   He  added  that  for  the past  30  years                                                               
[Alaska's] law has been "opt in."                                                                                               
                                                                                                                                
CHAIR MURKOWSKI  said it is "opt  in" for state banks,  as stated                                                               
in Chapter 5 of the banking  code.  She asked whether moving this                                                               
privacy  provision from  Chapter 5  to Chapter  1 means  that the                                                               
"opt  in"   provision  will  be   applicable  to   all  financial                                                               
institutions.                                                                                                                   
                                                                                                                                
Number 1601                                                                                                                     
                                                                                                                                
MR. ELDER  responded that most  of what Chair Murkowski  had said                                                               
was  correct.   He said  AS 06.05  [the banking  code] just  says                                                               
"banks", not "state banks", so  [the division's] view is that the                                                               
privacy protection  currently applies to both  national and state                                                               
banks.   There are  some provisions  in AS  06.05 that  deal with                                                               
national  banks,  he  said,  and   interstate  branching  is  one                                                               
example.     He   said  in   applying  AS   06.01  to   financial                                                               
institutions,   it  would   apply   to   the  various   financial                                                               
institutions  in Title  6, including  credit  unions, small  loan                                                               
companies, premium finance companies, and trust companies.                                                                      
                                                                                                                                
MR. ELDER said [the division] is  trying to find a privacy policy                                                               
and consistently  apply it across various  financial institutions                                                               
in Title 6.  Privacy is  more important now that GLBA has passed,                                                               
he  remarked,  allowing  the  banks  to  form  affiliations  with                                                               
security firms and insurance companies.                                                                                         
                                                                                                                                
Number 1688                                                                                                                     
                                                                                                                                
MR.  ELDER referred  to Section  7, which  allows state  banks to                                                               
publish [reports] electronically.   He said currently information                                                               
has to be published in the newspaper, which is very expensive.                                                                  
                                                                                                                                
CHAIR  MURKOWSKI referred  back to  Section 5,  which provides  a                                                               
definition  of  a state  financial  institution.   She  said  she                                                               
understood through Mr.  Elder's letter that the  bill removes the                                                               
Alaska Commercial Fishing and Agriculture  Bank (CFAB) [AS 44.81]                                                               
and  [Alaska's]  Business   and  Industrial  Development  Company                                                               
(BIDCO)  [AS 10.13]  from  the definition  of  a state  financial                                                               
institution.   She said  last year  legislation was  adopted that                                                               
expanded   the  authority   of   CFAB   beyond  the   traditional                                                               
agriculture and fishing loans, and  it was [left] "wide open," in                                                               
her  opinion.   She had  [previously]  relied on  the audits  and                                                               
understood  that this  amendment would  [remove the  requirement]                                                               
that subjects  [CFAB and BIDCO] to  a state audit.   She asked if                                                               
that was correct.                                                                                                               
                                                                                                                                
Number 1777                                                                                                                     
                                                                                                                                
MR. ELDER replied  that this is not the case.   He explained that                                                               
it  was discussed  with  CFAB,  and its  title  and chapter  were                                                               
looked at;  there is  already a similar  privacy provision  in AS                                                               
44.81.     Since  [CFAB  and  BIDCO]   weren't  called  financial                                                               
institutions in Title  6, it has no impact on  the fact that [the                                                               
division] does an audit.                                                                                                        
                                                                                                                                
MR. ELDER, in  further response, clarified that  [BIDCO and CFAB]                                                               
are not  in Title 6  now; originally [the division]  had proposed                                                               
to put them  in the definition of a  state financial institution,                                                               
because of the desire to  cover them under the privacy provision;                                                               
however,  they have  their  own privacy  provision  in their  own                                                               
chapter,  so [the  division] decided  to take  them out;  that is                                                               
why, in the letter to  [the committee], CFAB was dropped entirely                                                               
and BIDCO was put into the privacy section.                                                                                     
                                                                                                                                
Number 1850                                                                                                                     
                                                                                                                                
MR. ELDER  referred to Section  8 of  the bill, which  deals with                                                               
employees.     It   would  limit   business  activities   between                                                               
[employees] and  state financial  institutions; currently,  it is                                                               
any  institution   that  [the  division]   issues  a   permit  or                                                               
certificate to.  He clarified  that "employee" refers not only to                                                               
the examining  staff, but  also to the  director of  the division                                                               
and the commissioner.                                                                                                           
                                                                                                                                
MR. ELDER,  referring to  Section 10,  said it  brings [Alaska's]                                                               
credit-lending  limits  for  state   institutions  in  line  with                                                               
federal  lending limits.    Responding to  a  question about  the                                                               
reason  for including  "dairy cattle"  in Alaska's  statutes, Mr.                                                               
Elder  referred to  subsection  (10),  page 8,  of  the bill;  he                                                               
remarked that it is there to mirror the federal law.                                                                            
                                                                                                                                
MR. ELDER  said Section 11 removes  the 17 percent cap  on credit                                                               
cards issued  by state  banks.   He explained  that the  cap only                                                               
applies  to  state-chartered  institutions, [not]  to  nationally                                                               
[chartered  institutions].   And he  surmised that  people almost                                                               
completely  have  credit  cards  from  national  banks.    [These                                                               
national  companies]  can import  any  rate  in any  state  under                                                               
current  laws,  so  [these  companies]   are  not  restricted  by                                                               
[Alaska's] 17  percent cap.  All  a cap ever really  does is make                                                               
it unattractive  for anyone  to be  in that  business.   He added                                                               
that about half the  state-chartered institutions currently issue                                                               
credit cards.                                                                                                                   
                                                                                                                                
Number 2046                                                                                                                     
                                                                                                                                
MR.   ELDER  explained   that  there   are  six   state-chartered                                                               
institutions  in  Alaska, including  four  banks  and two  credit                                                               
unions:   First  Bank, Northrim  Bank, Denali  State Bank,  Mount                                                               
McKinley  Mutual Savings  Bank, North  Country Credit  Union, and                                                               
Credit Union One.                                                                                                               
                                                                                                                                
MR.  ELDER explained  that [the  division] tries  to not  prevent                                                               
state-chartered  institutions from  being  able to  compete on  a                                                               
level playing field  with their national counterparts.   If there                                                               
is a cap on these rates,  it makes that unattractive; this is why                                                               
half  the  institutions  issue   credit  cards  and  half  don't.                                                               
Furthermore, the ones  that do issue them don't  "push" them, but                                                               
probably  do it  to be  a  full-service institution  or to  offer                                                               
overdraft protection to a checking  account.  It is certainly not                                                               
a profitable source of business for a state institution.                                                                        
                                                                                                                                
MR. ELDER explained  that back in 1996 the  legislature looked at                                                               
the Retail Installment  Sales Act, AS 45.10, which  also had caps                                                               
on it.   The legislature removed those and  replaced the language                                                               
with  whatever  was agreed  upon  between  the customer  and  the                                                               
institution, he said, which is  all that [the division] is asking                                                               
for here.  He  said there could be a 17 percent  cap, but that an                                                               
institution  can't be  forced to  offer  the credit  card to  its                                                               
customers.   He said  it doesn't  make any  sense to  continue to                                                               
keep the state-chartered institutions out of that business.                                                                     
                                                                                                                                
Number 2188                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI said  she thought there was paranoia  that if the                                                               
cap were  removed, it would  be bad for  the consumer.   She said                                                               
she  doesn't see  how anything  is  really being  taken "off  the                                                               
table," because  most people nowadays  get credit cards  based on                                                               
air miles [offered as a bonus].                                                                                                 
                                                                                                                                
MR. ELDER  responded that "we"  don't know how many  credit cards                                                               
have been issued  but do know that there are  three [state banks]                                                               
that have issued  them.  He said he didn't  think it would affect                                                               
many people; second, even if  the interest-rate cap were removed,                                                               
it is still a competitive business.   He said this might increase                                                               
competition in  Alaska because  it would open  it up  to Alaskan-                                                               
chartered institutions.                                                                                                         
                                                                                                                                
CHAIR MURKOWSKI  added that the  bank she is associated  with was                                                               
offering  credit  cards at  a  lower  rate  than a  person  would                                                               
probably  pay  though  Bank  America or  Bank  One;  however,  it                                                               
couldn't  attract  customers  because  it  wasn't  providing  air                                                               
miles.                                                                                                                          
                                                                                                                                
MR.  ELDER  said if  [the  division]  thought  there would  be  a                                                               
negative impact on consumers, it wouldn't even be proposed.                                                                     
                                                                                                                                
Number 2370                                                                                                                     
                                                                                                                                
MR.  ELDER  referred to  Section  14  and  said  this is  a  GLBA                                                               
provision  that   allows  the   creation  of   financial  holding                                                               
companies; this  is a  new term  created with  GLBA to  allow the                                                               
various institutions  to get into "financial  holding companies."                                                               
He said this  is being added to allow  [Alaskan institutions] the                                                               
same thing.                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI, referring  to  Section 15,  said  there is  new                                                               
[language] regarding  property that  the bank acquires  and needs                                                               
to  get  rid  of.    She  said it  is  prefaced  by  saying  "all                                                               
investments and real and personal  property".  She was thrown off                                                               
by the addition  of "investments in the  property", she remarked,                                                               
and asked what purpose this serves.                                                                                             
                                                                                                                                
Number 2443                                                                                                                     
                                                                                                                                
MR. ELDER said the changes were related to reverse mortgages.                                                                   
                                                                                                                                
MR. LUTZ  responded that when  reverse mortgages were  taken care                                                               
of a  couple of years  ago in Title  45, the banking  code wasn't                                                               
addressed.   In order  for [Alaska's]  banks to  be able  to take                                                               
advantage of  that program,  our statutes would  also need  to be                                                               
changed.                                                                                                                        
                                                                                                                                
MR. ELDER,  referring to Section  16, said it allows  state banks                                                               
the [opportunity]  to invest in subsidiaries  like national banks                                                               
can  do.   He  said  Section 20  deals  with  ATMs, removing  the                                                               
requirement  that [the  division] approve  the ATM  [location] by                                                               
simply having  the bank  give notice  [that an  ATM is  being put                                                               
in].                                                                                                                            
                                                                                                                                
                                                                                                                                
TAPE 01-35, SIDE B                                                                                                              
Number 2481                                                                                                                     
                                                                                                                                
MR.  ELDER  said  various  sections  from  26  to  38  deal  with                                                               
branching.   In his introductory  remarks, he had  explained that                                                               
national banks  have to get  a permit  to branch into  the state.                                                               
[The  division]  is not  changing  the  branching provisions,  he                                                               
said.   For  example, there  is a  prohibition against  branching                                                               
into the state with a newly formed  bank, which has to be done by                                                               
buying an  existing bank.   [The division] is proposing  to limit                                                               
its involvement in permitting to state banks.                                                                                   
                                                                                                                                
Number 2437                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI referred  to comments on Sections 34 to  38.  The                                                               
old law provided  that an interstate national bank  is subject to                                                               
all of Title  6, she said, and then within  Section 34 through 38                                                               
there is  some clarification of  what reporting  requirements the                                                               
interstate national bank is subject  to.  The statute is changing                                                               
from saying  that an interstate  national bank is subject  to all                                                               
of this in  Title 6 to a  "laundry list."  She asked  if there is                                                               
anything that  [interstate national banks] are  no longer subject                                                               
to as a consequence of this.                                                                                                    
                                                                                                                                
MR. ELDER  replied in the  negative.  He  said many of  these are                                                               
small amendments, for  example, just sticking in  the word "state                                                               
bank"  and so  forth to  clarify what  is being  talked about  in                                                               
those  sections.   The  interstate  national  banks in  the  past                                                               
required a permit, so this  makes a clear distinction between the                                                               
interstate national banks and interstate state banks.                                                                           
                                                                                                                                
Number 2363                                                                                                                     
                                                                                                                                
MR. ELDER  explained that Section  46 is the mutual  savings bank                                                               
section  that  allows  "arms-length"  dealing  between  a  mutual                                                               
savings  bank  and its  trustees.    And  Section 47  allows  the                                                               
trustees  to  borrow  on  the  same basis  as  a  bank  director.                                                               
Section  48, he  explained, clarifies  that the  Small Loans  Act                                                               
applies even  if one is  exempt from  licensing.  He  pointed out                                                               
that banks  are currently exempt  from licensing under  the Small                                                               
Loans Act, and  some state banks have  been used as a  way to get                                                               
around the restrictions;  therefore, the bill is  making it clear                                                               
that one can't do that.                                                                                                         
                                                                                                                                
Number 2293                                                                                                                     
                                                                                                                                
MR.  ELDER, referring  to  Sections  49 and  50,  said these  are                                                               
changes dealing with credit unions,  basically to bring them on a                                                               
par with  federal credit unions.   Sections  52 and 53  also deal                                                               
with credit unions,  giving them authority to  issue credit cards                                                               
and  giving them  the same  authority for  ATMs that  banks have.                                                               
These  provisions  allow  the  credit   unions  to  compete  more                                                               
effectively with banking institutions.                                                                                          
                                                                                                                                
CHAIR MURKOWSKI  said regarding  the [ATM]  for credit  unions in                                                               
the  proposed amendments,  [the division]  has inserted  language                                                               
that  would make  [ATMs] available  for depositors  of depository                                                               
institutions.   She asked  if this section  needed to  conform to                                                               
that for banks.                                                                                                                 
                                                                                                                                
MR.  ELDER  replied, "Maybe,"  noting  that  [credit unions]  are                                                               
depository institutions.   He noted that it needed to  be done in                                                               
the Credit  Union Act,  too, and he  thanked Chair  Murkowski for                                                               
noticing  it.   When  [the  division]  met  with members  of  the                                                               
banking industry, he said, they  wanted [the division] to make it                                                               
clear  that  ATMs  were  to   be  used  by  depositors  of  these                                                               
institutions,  even though  in current  law it  just says  "to be                                                               
used by  the institution".   He  said it [having  it] put  in the                                                               
Credit Union Act is an improvement.                                                                                             
                                                                                                                                
Number 2203                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI   asked  what   the  effect  of   repealing  the                                                               
individual statutes from Section 54 would be.                                                                                   
                                                                                                                                
MR. ELDER replied that most of  the repeals in AS 06.05.175 - the                                                               
privacy provision  - are  being replaced.   However, [the  one in                                                               
Section  54]  should  be  eliminated.     He  explained  that  AS                                                               
06.05.005(4) survived from  an older draft.  He  pointed out that                                                               
in AS  [06.05.005], there are an  (a)(4) and a (b)(4),  but there                                                               
is no  "(4)"; [the  division] doesn't want  to delete  either [of                                                               
them] now, so it should be eliminated.                                                                                          
                                                                                                                                
MR.  LUTZ  continued with  Section  54,  page  25.   He  said  AS                                                               
06.05.272(d)  addresses investments  for  banks and  prohibitions                                                               
against insurance power.  In  addition, AS 06.05.990(18) is a new                                                               
definition   of   financial   institutions.     Furthermore,   AS                                                               
06.20.330(a) is  the old exemption  contained in the  Small Loans                                                               
Act, stating  that the  chapter doesn't apply  to a  person doing                                                               
business under  and as permitted by  any law of the  state or [or                                                               
of  the United  States relating  to banks,  savings banks,  trust                                                               
companies, building and loan or  credit unions].  The new section                                                               
exempts banks  from the department's licensing;  otherwise, there                                                               
would be a conflict.                                                                                                            
                                                                                                                                
Number 2055                                                                                                                     
                                                                                                                                
MR. ELDER  explained his letter  of March 16, 2001  [in packets],                                                               
in which  the division provided  a number of  proposed amendments                                                               
initiated from  the hearings in  the [Senate  on SB 66]  and from                                                               
discussions with the  industry and CFAB.  [The  letter noted that                                                               
it was to replace the letter of March 5, 2001.]                                                                                 
                                                                                                                                
Number 1976                                                                                                                     
                                                                                                                                
MR. ELDER explained  the first amendment proposed  in the letter,                                                               
which read:                                                                                                                     
                                                                                                                                
     1.  (Section  3, page 2, lines  10-12) Replace language                                                                  
     in lines 10-12 of the  new section AS 06.01.028(a) with                                                                  
     the following language:                                                                                                  
                                                                                                                                
     The  records of  financial  institutions pertaining  to                                                                    
     their  depositors and  customers  are confidential  and                                                                    
     may not be disclosed except when…                                                                                          
                                                                                                                                
     This amendment  replaces the  sentence in  the proposed                                                                    
     AS 06.01.028  with essentially similar language  in the                                                                    
     current privacy  provision at AS  06.05.175.   The main                                                                    
     area of  concern expressed by  industry was to  make it                                                                    
     clear that  these records are records  of the financial                                                                    
     institution.    We  agree with  that  position.    This                                                                    
     amendment will make that clear.                                                                                            
                                                                                                                                
                                                                                                                                
MR. ELDER explained  that this is the new  privacy provision, and                                                               
the current proposal  is to move banking code AS  06.05.175 to AS                                                               
06.01.028.  The  intention was to keep it  very similar; however,                                                               
in  rewording  it  and  talking with  the  industry,  "they"  are                                                               
concerned about  the current wording,  "The financial  records of                                                               
depositors   and   customers   of  financial   institutions   are                                                               
confidential".    Alaska  Statute   06.05.175  talks  about  bank                                                               
records, he added, and "they"  were concerned that rewording this                                                               
changes the  legal status of  the information, from  records that                                                               
belong  to  the  institution,  to  records  that  belong  to  the                                                               
customers and  depositors.  What  [the division is]  proposing is                                                               
to modestly change  the current language, from  "bank records" to                                                               
"financial institutions",  so it  clearly reads, "the  records of                                                               
financial institutions pertaining to the depositors".                                                                           
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  referred  to three  pages  of  proposed                                                               
amendments  from the  Alaska Bankers  Association.   He asked  if                                                               
[the  association members]  are aware  of this  letter [from  the                                                               
division] and whether there is communication between them.                                                                      
                                                                                                                                
CHAIR MURKOWSKI  stated that  Ms. Bell,  Gerry Weaver,  and David                                                               
Lohr had  all spoken  from the Alaska  Bankers Association.   She                                                               
asked  if  she  was  correct   in  surmising  that  most  of  the                                                               
[division's proposed amendments]  had resulted from conversations                                                               
between the Alaska Bankers Association and the division.                                                                        
                                                                                                                                
Number 1833                                                                                                                     
                                                                                                                                
MR.  ELDER  replied  affirmatively.     He  said  these  proposed                                                               
amendments  resulted from  an early  discussion with  [the Alaska                                                               
Bankers  Association];  they  would prefer  a  different  privacy                                                               
provision, and  if passed, the language  doesn't necessarily need                                                               
to be changed in [the  division's] privacy provision; however, if                                                               
[the legislature]  doesn't replace it, then  both the association                                                               
and [the division] agree with this language change.                                                                             
                                                                                                                                
Number 1745                                                                                                                     
                                                                                                                                
MR. ELDER drew  attention to the second amendment  in the letter,                                                               
which read:                                                                                                                     
                                                                                                                                
     2. (Section 3, page 3, lines 3-7) Replace the sentence                                                                   
     beginning "However, notification…" with the following                                                                    
     sentence:                                                                                                                
                                                                                                                                
                                                                                                                                
     However,   notification   either    before   or   after                                                                    
     disclosure may not be made  if disclosure is made under                                                                    
     a  process  included (a)(1)  of  this  section and  the                                                                    
     document requiring disclosure on  its face requires the                                                                    
     financial institution  not to  notify the  depositor or                                                                    
     customer.                                                                                                                  
                                                                                                                                
     This  amendment covers  more  accurately the  processes                                                                    
     provided  for  in  (a)(1)  of  the  section,  and  also                                                                    
     clarifies  that  the  financial institution  shall  not                                                                    
     notify the customer if the  order, subpoena, or similar                                                                    
     document states  on its face  that the customer  is not                                                                    
     to be notified.                                                                                                            
                                                                                                                                
                                                                                                                                
MR.  ELDER  explained  that the  second  amendment  replaces  the                                                               
following language from the original bill:                                                                                      
                                                                                                                                
     However,   notification   either    before   or   after                                                                    
     disclosure may not be made  if disclosure is made under                                                                    
     a  subpoena,  subpoena   duces  tecum,  search  warrant                                                                    
     issued by a  court, or under a court  order or subpoena                                                                    
     issued at the request of  a grand jury, if the document                                                                    
     requiring  disclosure by  one of  [these] processes  on                                                                    
     its face requires confidentiality.                                                                                         
                                                                                                                                
MR.   ELDER    discussed   how   the   meaning    of   the   word                                                               
"confidentiality" is  confusing.  "We"  are really  talking about                                                               
not telling  the "target" of  the investigation.   [The division]                                                               
thought  it  would clarify  this  by  just referring  to  (a)(1),                                                               
because all of those processes are in that part of the bill.                                                                    
                                                                                                                                
Number 1695                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  pointed out  that the search  warrant is  not in                                                               
(a)(1) of the bill.                                                                                                             
                                                                                                                                
MR. ELDER  said he thought the  search warrant was under  a court                                                               
order.   He said a  search warrant  is another process  under the                                                               
supervision of  a court, which  is why [the division]  thought it                                                               
wasn't  necessary.    Everything  in that  "laundry  list"  is  a                                                               
process described in  (a)(1), which is why the  new wording would                                                               
be "notification  either before  or after  disclosure may  not be                                                               
made if disclosure is made under  a process included in (a)(1) of                                                               
this section".   He  said the  document requiring  disclosure "on                                                               
its face"  requires the financial  institution not to  notify the                                                               
depositor  or customer.   The  provision  is there  because if  a                                                               
criminal-investigating  agency  is   investigating  a  scheme  on                                                               
securities or  money laundering, one doesn't  necessarily want to                                                               
alert the target and have that money disappear.                                                                                 
                                                                                                                                
MR. ELDER drew  attention to the third proposed  amendment in the                                                               
letter, which read:                                                                                                             
                                                                                                                                
     3.   (Section 3, page  3, lines 8-11) Replace  (c) with                                                                  
     new language as follows:                                                                                                 
                                                                                                                                
                                                                                                                                
     (c)  When disclosure  of financial  institution records                                                                    
     is  compelled   under  (a)(1)  of  this   section,  the                                                                    
     document  shall provide  for the  reimbursement of  the                                                                    
     financial   institution   for  the   reasonable   costs                                                                    
     incurred in complying with the order.                                                                                      
                                                                                                                                
     This   amendment   provides    for   reimbursement   of                                                                    
     reasonable costs for compliance  with any process under                                                                    
     (a)(1),  whereas the  current language  only references                                                                    
     court actions.                                                                                                             
                                                                                                                                
Number 1591                                                                                                                     
                                                                                                                                
MR. ELDER said  if a subpoena is received  from an administrative                                                               
agency, obviously  there should  be reimbursement.   He explained                                                               
that if [the  division] seeks the court order, it  would be up to                                                               
"us" to reimburse [the financial institution].                                                                                  
                                                                                                                                
Number 1526                                                                                                                     
                                                                                                                                
VINCE   USERA,  Securities   Supervisor,  Division   of  Banking,                                                               
Securities   and  Corporations,   Department  of   Community  and                                                               
Economic Development (DCED), replied  to a question about whether                                                               
a  rule change  would be  required.   He said  he went  over this                                                               
section with  one of  the attorneys from  the Department  of Law,                                                               
and it was concluded that there  is no conflict with any of those                                                               
provisions.   He  explained that  Civil Rule  45 doesn't  address                                                               
reimbursement  at all;  it simply  talks about  the circumstances                                                               
under which a subpoena can be issued.                                                                                           
                                                                                                                                
CHAIR  MURKOWSKI  suggested  that   if  it  doesn't  provide  for                                                               
reimbursement, and  yet [the  bill] is  saying that  the document                                                               
shall provide for the reimbursement  of the financial institution                                                               
for the reasonable cost incurred, the rule is being added to.                                                                   
                                                                                                                                
MR.  USERA  said  it doesn't  add  to  the  rule.   There  is  no                                                               
prohibition  in Rule  45  against reimbursement  of  costs.   The                                                               
costs are  provided for  under the  administrative rules  and one                                                               
other, but those  are costs associated with  trials and hearings.                                                               
He  said there  is nothing  in there  that prohibits  costs being                                                               
afforded to an  institution; it just adds a  [twist] that affects                                                               
those processes that [DCED] handles.                                                                                            
                                                                                                                                
Number 1403                                                                                                                     
                                                                                                                                
MR. ELDER drew attention to  the fourth proposed amendment in the                                                               
letter, which read:                                                                                                             
                                                                                                                                
     4.  (Section 3, page  3, lines 12-15) Replace the first                                                                  
     sentence in  the new section AS  06.01.028(d) beginning                                                                  
     on line 12 with the following sentence:                                                                                  
                                                                                                                                
     A financial  institution or any other  person is liable                                                                    
     to   their  depositor   or  customer   for  intentional                                                                    
     violations  of  this  section in  an  amount  equal  to                                                                    
     actual  damages   caused  by  the  disclosure   of  the                                                                    
     confidential  records  of   the  financial  institution                                                                    
     pertaining to their depositor or customer.                                                                                 
                                                                                                                                
     This  amendment removes  the  $1,000 minimum  liability                                                                    
     and leaves  it set at  actual damages.  We  agreed with                                                                    
     members of the banking  industry that the minimum could                                                                    
     make  financial   institutions  subject   to  frivolous                                                                    
     claims.                                                                                                                    
                                                                                                                                
                                                                                                                                
MR.  ELDER  commented  that  there is  agreement  that  the  rule                                                               
changes  weren't   necessary.    He  explained   that  this  adds                                                               
liability to  the banks if they  disclose non-public information,                                                               
contrary to the law.  He  said in the current provision it states                                                               
"the greater of $1,000 or  actual damages".  Industry people felt                                                               
that putting  a floor of $1,000  meant that they would  get a lot                                                               
of "nuisance-type"  complaints with everybody asking  for $1,000,                                                               
and it would be cheaper to  "cave in" rather than to litigate for                                                               
$1,000.  He  said saying "actual damages" requires  the person to                                                               
show damage, and  it would have to be substantial  enough for him                                                               
or her to seek litigation.                                                                                                      
                                                                                                                                
MR.  ELDER  referred  to  the fifth  proposed  amendment  in  the                                                               
letter, which read:                                                                                                             
                                                                                                                                
     5.     (Section  3,  page   3,  line  18)   Insert  new                                                                  
     subsections, AS 06.01.028(e) and (f):                                                                                    
                                                                                                                                
     (e)   Nothing in  (a)-(d) of  this section  prohibits a                                                                    
     financial institution from  disclosing information to a                                                                    
     person necessary  to provide the essential  services of                                                                    
     the financial  institution to a depositor  or customer,                                                                    
     if the  person receiving the information  has a written                                                                    
     agreement with  the financial  institution to  be bound                                                                    
     by the requirements of (a)-(d) of this section.                                                                            
                                                                                                                                
     (f)   This section  applies to a  financial institution                                                                    
     subject to the regulation  of the department under this                                                                    
     title and to entities  organized under AS 10.13 (Alaska                                                                    
     BIDCO Act).                                                                                                                
                                                                                                                                
     Proposed (e)  is based on  our discussion  with members                                                                    
     of  the banking  industry, and  allows institutions  to                                                                    
     share  information necessary  to provide  services such                                                                    
     as printing monthly statements.   Proposed (f) is based                                                                    
     on our discussions with staff  at the Alaska Commercial                                                                    
     Fishing  and  Agriculture  Bank  (CFAB).    Since  CFAB                                                                    
     currently  has  a  similar  privacy  provision  in  its                                                                    
     statute,  we agreed  that reference  to CFAB  should be                                                                    
     removed from  this bill.   This amendment  also extends                                                                    
     the  privacy  provision  of AS  06.01.028  to  Alaska's                                                                    
     BIDCOs (Business and  Industrial Development Companies)                                                                    
     that currently  have no such  provision in  statute (AS                                                                    
     10.13),  but we  have no  reason to  subject BIDCOs  to                                                                    
     other  provisions  of Title  6.    This amendment  will                                                                    
     limit the  application of Title  6 regarding  BIDCOs to                                                                    
     the privacy provision only.                                                                                                
                                                                                                                                
                                                                                                                                
MR.  ELDER explained  that  this would  provide  Alaskans with  a                                                               
private right  of action against  the institution  that disclosed                                                               
non-public   information  illegally.      An  institution   might                                                               
outsource  its statement  printing, for  example, which  would be                                                               
disclosing a certain amount of information  to a third party.  He                                                               
said  "we"  don't  intend  to prohibit  that  activity,  so  this                                                               
section makes it clear that  the financial institutions can share                                                               
information,  and doesn't  distinguish between  an affiliated  or                                                               
non-affiliated  person who  provides  the  essential services  of                                                               
that financial institution.  All  [the financial institution] has                                                               
to do  is have a  contractual relationship that binds  that party                                                               
to non-disclosure also.                                                                                                         
                                                                                                                                
Number 1266                                                                                                                     
                                                                                                                                
MR.  ELDER said  the only  reason the  Alaska BIDCO  was included                                                               
under  the  definition  of  a   state  financial  institution  in                                                               
subsection  (f)  was so  it  would  be  included in  the  privacy                                                               
provision.  It was more efficient  to put [BIDCO] in a subsection                                                               
within the privacy  section and take it out of  the definition of                                                               
state financial institutions.                                                                                                   
                                                                                                                                
Number 1189                                                                                                                     
                                                                                                                                
MR. ELDER referred to the sixth proposed amendment, which read:                                                                 
                                                                                                                                
     6.  Amend  AS 06.01.040 by inserting a  new section (at                                                                  
     page 3,  line 18, and renumber  subsequent sections) to                                                                  
     read:                                                                                                                    
                                                                                                                                
     Sec. 06.01.040.  Examination policy.   It shall  be the                                                                  
     policy   of  the   department   to  conduct,   whenever                                                                    
     reasonably  possible,   joint  examinations   with  the                                                                    
     Federal  Deposit  Insurance  Corporation  or  with  the                                                                  
     National   Credit   Union   Administration   of   those                                                                  
     institutions subject  to this title whose  accounts are                                                                    
     insured through [THAT CORPORATION] these agencies.                                                                       
                                                                                                                                
     This amendment  adds reference  to the  National Credit                                                                    
     Union   Administration  (NCUA)   to  the   department's                                                                    
     examination  policy, and  reflects current  practice of                                                                    
     the department.                                                                                                            
                                                                                                                                
MR. ELDER  explained that  currently in AS  06.01.040 there  is a                                                               
policy  that   says  the  "department   [is]  to   conduct  joint                                                               
examinations with  the FDIC".   There is  no reason  the National                                                               
Credit Union Administration (NCUA) shouldn't also be included.                                                                  
                                                                                                                                
MR.  LUTZ, responding  to  a question  about  [the frequency]  of                                                               
examination, explained  that [these institutions]  are [examined]                                                               
annually.                                                                                                                       
                                                                                                                                
MR. ELDER  pointed out that  [these institutions]  are [examined]                                                               
more often  than banks.   It is  [common] practice  to coordinate                                                               
examinations with both the FDIC and the NCUA, he remarked.                                                                      
                                                                                                                                
Number 1112                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if this  is done annually now or if                                                               
a fiscal note is needed [to pay for this].                                                                                      
                                                                                                                                
MR. ELDER replied that this is done anyway.                                                                                     
                                                                                                                                
MR. ELDER went on to the seventh proposed amendment, which read:                                                                
                                                                                                                                
     7.   (Section  5, page  3, lines  25-27) Amend  the new                                                                  
     paragraph to read:                                                                                                       
                                                                                                                                
     (4)  "state financial  institution"  means a  financial                                                                    
     institution  that is  organized  under  this title,  or                                                                    
     that is subject to  examination by the department under                                                                    
     this title.                                                                                                                
                                                                                                                                
     This amendment removes  reference to entities organized                                                                    
     under AS 10.13 (Alaska BIDCO  Act) and AS 44.81 (CFAB).                                                                    
     The  privacy  provision   was  discussed  above,  other                                                                    
     provisions of  Title 6 are  not relevant to a  BIDCO or                                                                    
     CFAB, and so  it is appropriate to  delete reference to                                                                    
     AS  10.13  and  44.81  from the  definition  of  "state                                                                    
     financial institution."                                                                                                    
                                                                                                                                
MR.  ELDER  added that  it  changes  the  definition of  a  state                                                               
financial institution by removing BIDCO and CFAB.                                                                               
                                                                                                                                
MR. ELDER referred to the eighth proposed amendment, which read:                                                                
                                                                                                                                
     8.   (Section  20, page  11, lines  16-20) Replace  the                                                                  
     sentence  starting  on  line   16  with  the  following                                                                  
     sentence:                                                                                                                
                                                                                                                                
     An automated teller machine  operated off bank premises                                                                    
     shall be  made available  on a  nondiscriminatory basis                                                                    
     for use by depositors  of other depository institutions                                                                
     [BANKS]  authorized to  do business  in the  state [AND                                                                    
     THEIR  CUSTOMERS],  upon  the agreement  of  the  other                                                                    
     depository  institutions  [BANKS]  to pay  a  fair  and                                                                  
     equitable amount for the use of the machine.                                                                               
                                                                                                                                
MR.  ELDER  explained that  the  sentence  that starts  with  "An                                                               
automated teller  machine" is being  replaced by adding  "for use                                                               
by  depositors of".   The  current  language in  statute says  an                                                               
automated teller machine  operating from a premise  shall be made                                                               
available on  a nondiscriminatory basis  for use by  other banks.                                                               
Therefore,   ["banks"]   is    being   changed   to   "depository                                                               
institutions".   He  answered affirmatively  when  asked if  this                                                               
would be [changed] for credit unions as well.                                                                                   
                                                                                                                                
Number 1011                                                                                                                     
                                                                                                                                
MR.  ELDER  drew  attention  to  the  ninth  and  tenth  proposed                                                               
amendments, which read:                                                                                                         
                                                                                                                                
     9.    (Section  44,   page  18,  lines  29-31)  Replace                                                                  
     language with the following:                                                                                             
                                                                                                                                
     (24)  "state financial  institution" means  a financial                                                                    
     institution  that is  organized  under  this title,  or                                                                
     that is subject to  examination by the department under                                                                  
     this title.                                                                                                              
                                                                                                                                
     This   amendment  keeps   the   definition  of   "state                                                                    
     financial institution" in AS  06.05 consistent with the                                                                    
     definition  in   AS  06.01.    For   the  same  reasons                                                                    
     described earlier, this  amendment removes reference to                                                                    
     AS 10.13 and 44.81.                                                                                                        
                                                                                                                                
     In  addition to  the above  requested amendments  to HB                                                                    
     106,  we  have  reviewed  the  request  for  amendments                                                                    
     outlined in  a letter from Ms.  Leslie Ellis, President                                                                    
     of Credit  Union 1, dated February  16, 2001, addressed                                                                    
     to Senator Randy Phillips, (copy  attached) and have no                                                                    
     problem    with     her    request     concerning    AS                                                                    
     06.45.060(5)(A)(iv)  to achieve  parity with  federally                                                                    
     chartered  credit unions.   In  addition, although  her                                                                    
     letter does  not mention  the following  paragraph, it,                                                                    
     too,  should  be  amended to  be  consistent  with  the                                                                    
     change in (iv).                                                                                                            
                                                                                                                                
     These could  be accomplished by amending  Section 50 to                                                                    
     include  the following  changes  in  addition to  those                                                                    
     indicated in the bill:                                                                                                     
                                                                                                                                
     10.  (Section  50, pages 21-22, lines  31-8) Amend (iv)                                                                  
     and (v) as follows:                                                                                                      
                                                                                                                                
     (iv)   a loan or  aggregate of  loans to a  director or                                                                    
     member of  the supervisory  or credit committee  of the                                                                    
     credit  union making  the loan  which exceeds  [$5,000]                                                                    
     $20,000 plus  pledged shares shall  be approved  by the                                                                  
     board of directors;                                                                                                        
                                                                                                                                
     (v)   loans  to other  members for  which directors  or                                                                    
     members of  the supervisory or credit  committee act as                                                                    
     guarantor or  endorser shall be  approved by  the board                                                                    
     of  directors when  the loans  standing  alone or  when                                                                    
     added to an outstanding loan  or loans of the guarantor                                                                    
     or endorser exceed [$5,000] $20,000;                                                                                     
                                                                                                                                
MR. ELDER  referred to  the ninth  proposed amendment  and stated                                                               
that it  takes the  definition of  a state  financial institution                                                               
from AS  06.05 and  makes it consistent  with the  previous state                                                               
financial institution definition from AS 06.01.                                                                                 
                                                                                                                                
MR.  ELDER  explained that  the  tenth  proposed amendment  is  a                                                               
request from Credit Union One, which  sent in a letter of support                                                               
for the bill with a couple of  requests.  One request was for the                                                               
GLBA's  "opt  out"  approach to  privacy,  which  [the  division]                                                               
didn't agree with; the other  request which [the division] agreed                                                               
with, referred to Section 50,  pages 21-22, starting with line 31                                                               
of  the  bill.   There  are  two  times  when the  number  $5,000                                                               
appears, he said,  and this amendment would change  both of those                                                               
to $20,000.   The  current federal limit  is $20,000,  he pointed                                                               
out, rather than $5,000.                                                                                                        
                                                                                                                                
Number 0890                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAYES  asked why  [Alaska's] privacy  criteria are                                                               
so strict when compared to the Lower 48's.                                                                                      
                                                                                                                                
MR. ELDER clarified  that for the last 30 years  [Alaska] has had                                                               
"opt  in."    It  is  [the  division's]  understanding  from  the                                                               
Association  of   Bank  Regulators,  Conference  of   State  Bank                                                               
Supervisors (CSBS),  that there  are about  six states  that have                                                               
fairly  restrictive  privacy provisions.    He  said "folks"  [in                                                               
Alaska] like  privacy, plus there  is a  constitutional provision                                                               
for privacy probably not present in other states.                                                                               
                                                                                                                                
Number 0723                                                                                                                     
                                                                                                                                
LISA  BELL, Senior  Vice President  and Chief  Executive Officer,                                                               
Alaska Pacific Bank (a small  community bank based in Juneau with                                                               
offices  around  Southeast Alaska)  testified  on  behalf of  the                                                               
Alaska   Bankers   Association,   representing   nine   financial                                                               
institutions   around  the   state,   both  state-chartered   and                                                               
federally  chartered institutions.   She  said this  bill crosses                                                               
the   line  between   state-chartered  and   federally  chartered                                                               
institutions.                                                                                                                   
                                                                                                                                
MS.  BELL   said  the  [Alaska  Bankers   Association]  generally                                                               
supports  this bill,  which has  a lot  of cleanup  language; the                                                               
intent to  bring the old  banking code  into a more  modern light                                                               
and make it more parallel  with the GLBA is "excellent," allowing                                                               
financial institutions  to compete with other  types of financial                                                               
intermediaries  now in  the marketplace.   Brokerages,  insurance                                                               
companies, and so  forth have broader powers than  [banks] and in                                                               
many cases  have been  able to offer  products similar  to "ours"                                                               
while  "we"  haven't  been  able to  offer  products  similar  to                                                               
theirs.   She remarked that it  hasn't felt like a  level playing                                                               
field.                                                                                                                          
                                                                                                                                
MS. BELL  commented that GLBA  breaks down barriers  and provides                                                               
free commerce with better choices for consumers.                                                                                
                                                                                                                                
Number 0606                                                                                                                     
                                                                                                                                
MS.   BELL   explained   that  GLBA   was   "sweeping   financial                                                               
modernization,"  and  Title  5,  the privacy  provision,  is  one                                                               
important  piece that  is supposed  to create  some parity  among                                                               
financial  institutions across  the country,  allowing banks  and                                                               
other  financial   institutions  to  have  the   same  rights  of                                                               
information  sharing,  regardless  of  whether  they  are  state-                                                               
chartered  or federally  chartered.   One important  focus is  on                                                               
allowing more  parity among states  so banking  institutions with                                                               
banks in  more than one state  can apply the same  rules, provide                                                               
customers with the  same disclosures, and have  the same products                                                               
and services without a lot of confusion.                                                                                        
                                                                                                                                
Number 0477                                                                                                                     
                                                                                                                                
MS. BELL noted  that GLBA only governs the  sharing of non-public                                                               
financial information,  information sharing among  third parties,                                                               
non-affiliated   companies   are   what  GLBA   legislates,   she                                                               
explained.     Information  sharing   of  the  same   type  among                                                               
affiliated companies or companies  within the same parent company                                                               
has been governed  by the Fair Credit Reporting  Act (FCRA) since                                                               
the 1970s and is governed under current federal legislation.                                                                    
                                                                                                                                
MS.  BELL explained  that  GLBA sets  affiliates  aside and  just                                                               
talks about  non-affiliated third  parties.   Once on  the topic,                                                               
there  is  a  differential  between  those  non-affiliated  third                                                               
parties necessary  to complete the transaction  for the customer;                                                               
that would  include title and check-printing  companies, and even                                                               
a marketing  company that allows marketing  of financial products                                                               
to customers.  This would fall  within the exceptions to GLBA and                                                               
would  be considered  a normal  part of  the traditional  banking                                                               
services.                                                                                                                       
                                                                                                                                
Number 0352                                                                                                                     
                                                                                                                                
MS.  BELL explained  that GLBA  also addresses  the "not-quite-as                                                               
traditional,  non-affiliated  third  parties"; it  sets  forth  a                                                               
comprehensive  set of  conditions  and  protections for  customer                                                               
privacy dealing with non-affiliated  third parties.  In February,                                                               
the FDIC issued  a handbook to all  state-chartered and federally                                                               
chartered  banks,  which  talks  about GLBA  Title  5  privacy  -                                                               
explaining what  it means  in plain language  and how  to comply.                                                               
She  said  "we"  are  required  to  provide  disclosures  to  all                                                               
customers  beginning July  1.   When a  person walks  through the                                                               
door of a  bank for the first  time as a new customer,  he or she                                                               
will receive  a privacy  disclosure from  that bank  telling what                                                               
its privacy and   information-sharing practices are.   If [banks]                                                               
share  information  beyond  the  exceptions  in  GLBA,  they  are                                                               
required to give customers an  opportunity to "opt out" the first                                                               
time they walk through the door.                                                                                                
                                                                                                                                
Number 0166                                                                                                                     
                                                                                                                                
MS. BELL  said after  that, [the  opportunity would  be provided]                                                               
annually.   And anytime a  bank changes  its practice, it  has to                                                               
send out a  new set of disclosures to customers;  this, she said,                                                               
allows customers to compare policies between banks.                                                                             
                                                                                                                                
Number 0144                                                                                                                     
                                                                                                                                
MS.  BELL  said  a  person  could  tell  how  complex  a  banking                                                               
institution is by  its disclosure [statement], also  known as the                                                               
"opt out" provision.                                                                                                            
                                                                                                                                
MS. BELL stated that the  FCRA governs the sharing of information                                                               
among  affiliates.    She  said  the  FCRA  also  has  "opt  out"                                                               
provisions that were  built in so customers  have the opportunity                                                               
to prevent affiliates from  sharing information among themselves.                                                               
Generally, that  type of information might  be credit information                                                               
shared to cross-market products in  the same family of companies;                                                               
however, a person still has the opportunity to opt out.                                                                         
                                                                                                                                
Number 0078                                                                                                                     
                                                                                                                                
MS.  BELL pointed  out  that  it appears  that  the existing  and                                                               
proposed statutes  may be  in conflict with  the FCRA  if sharing                                                               
information with affiliates  is not allowed under  state law, and                                                               
added  that the  FCRA forbids  state preemption  of that  portion                                                               
until 2004.  She  said it needs to be closely  looked at with the                                                               
Division   of  Banking   to  understand   whether  it   would  be                                                               
meaningful.                                                                                                                     
                                                                                                                                
TAPE 01-36, SIDE A                                                                                                              
Number 0049                                                                                                                     
                                                                                                                                
MS.  BELL said  the Alaska  Bankers Association  and its  various                                                               
members,  along with  Mr. Elder  and Mr.  Lutz, have  an ongoing,                                                               
open  dialog.   She said  "we" also  met with  Jeff Bush,  Deputy                                                               
Commissioner,  Department of  Community and  Economic Development                                                               
(DCED).   She  said  she thought  there was  an  "open door"  for                                                               
working with them.   She expressed the hope of  finding the holes                                                               
where improper information may leak out and plugging them.                                                                      
                                                                                                                                
MS.  BELL referred  to  the amendments  submitted  by the  Alaska                                                               
Bankers Association  that were included in  the committee packet.                                                               
The first  amendment would completely  replace Section  3, rather                                                               
than doing it piece by piece.  It read:                                                                                         
                                                                                                                                
     1.   Delete  p.2, line  10 through  p.3,  line 17,  and                                                                  
     replace that material with                                                                                               
               Sec. 06.01.028. Depositor and customer                                                                         
     records confidential.  (a) The  records of  a financial                                                                    
     institution pertaining to  its depositors and customers                                                                    
     and  the  information  contained in  such  records  are                                                                    
     confidential.  Such records and  information may not be                                                                    
     disclosed  by  the  financial  institution  to  another                                                                    
     person or  a government  except when,  and only  to the                                                                    
     extent that, the disclosure is                                                                                             
                    (1) authorized in writing by the                                                                          
     depositor or customer;                                                                                                     
                    (2) required by federal or state                                                                            
     statute or regulation or by  a subpoena, search warrant                                                                    
     or other  order directed  to the  financial institution                                                                    
     issued  by  a  court or  administrative  agency  having                                                                    
     jurisdiction of the financial institution;                                                                                 
     or                                                                                                                         
                    (3) made in compliance with sections                                                                        
     501-509  of P.L.  106-102 (15  U.S.C. (Sections)  6801-                                                                    
     6809) and regulations promulgated thereunder.                                                                            
          (b) A financial institution is authorized, but is                                                                     
     not  required,  to  comply   with  a  subpoena,  search                                                                    
     warrant   or  other   order  issued   by  a   court  or                                                                    
     administrative  agency  of  this state  that  does  not                                                                    
     provide   for  the   reimbursement  of   the  financial                                                                    
     institution's  reasonable cost  of  complying with  the                                                                    
     order.                                                                                                                     
          (c) When disclosure is required or permitted                                                                          
     under  (a)(2), (a)(3),  or  (b) of  this  section by  a                                                                    
     subpoena, search warrant  or other order of  a court or                                                                    
     administrative agency, the  financial institution shall                                                                    
     mail a copy  of the order to the  depositor or customer                                                                    
     within  three business  days after  its receipt  of the                                                                    
     order  unless the  order is,  or is  accompanied by,  a                                                                    
     court  order  that   expressly  directs  the  financial                                                                    
     institution not  to notify or  inform the  depositor or                                                                    
     customer.                                                                                                                  
          (d) In this section, "government" means the                                                                           
     United  States;  a  state,  commonwealth,  district  or                                                                    
     territory  of  the  United States;  a  municipality  or                                                                    
     other political  subdivision of a  state, commonwealth,                                                                    
     district or  territory of the United  States; a foreign                                                                    
     state;  or   a  department,   agency,  instrumentality,                                                                    
     officer, employee or agent of any of the foregoing.                                                                        
                                                                                                                                
MS. BELL  explained that the real  "meat" of this amendment  is a                                                               
direct  reference  back  to  GLBA for  what  information  can  be                                                               
shared,  and whether  it is  "opt in"  or "opt  out."   There are                                                               
other pieces  in the amendment  that are slightly  different from                                                               
what the  Division of Banking proposed.   She said "we"  can work                                                               
out those differences and come to an agreement on the language.                                                                 
                                                                                                                                
Number 0172                                                                                                                     
                                                                                                                                
MS. BELL  referred to  number 1, subsection  (a).   [See inserted                                                               
Alaska  Bankers  Association  first  proposed  amendment  above].                                                               
"We" wanted to ensure that  the customer records are actually the                                                               
property  of the  financial institution,  she said,  to alleviate                                                               
any  type  of legal  battle  in  the  future if  someone  decides                                                               
otherwise.  She remarked that  "our" language may differ slightly                                                               
but the intent is the same.                                                                                                     
                                                                                                                                
MS. BELL referred  back to the discussion about  when a financial                                                               
institution provides  information under a subpoena,  court order,                                                               
or search warrant.  It doesn't sound  as if it is a big deal, but                                                               
it  can  be,  she  explained, both  the  reimbursement  part  and                                                               
providing clarity about  when the customer needs  to be notified.                                                               
She said  that is why  there is  new language proposed  from both                                                               
the Alaska Bankers Association and the division.                                                                                
                                                                                                                                
Number 0290                                                                                                                     
                                                                                                                                
CHAIR   MURKOWSKI  asked   about  the   reimbursement  component,                                                               
referring to the Alaska  Bankers Association's proposed amendment                                                               
number  1, subsection  (b) [from  above  insert].   She said  she                                                               
would  think  that  not  complying  with  a  subpoena  [would  be                                                               
possible] for other legitimate legal  grounds, but not because of                                                               
a reimbursement issue.                                                                                                          
                                                                                                                                
Number 0399                                                                                                                     
                                                                                                                                
MS.  BELL replied  that her  financial  institution was  recently                                                               
served with  a search warrant,  and a huge volume  of information                                                               
was being requested;  it would cost the  institution over $10,000                                                               
to get  all of  that information.   "We" are  a little  bank, and                                                               
this  is just  one search  warrant.   The  search warrant  itself                                                               
didn't say anything  about reimbursement, nor did  it say whether                                                               
the  customer could  be told,  so it  crossed over  into both  of                                                               
those issues.                                                                                                                   
                                                                                                                                
MS. BELL  stated that "we" think  it is entirely fair  and within                                                               
the  law to  require  reimbursement, and  yet  a law  enforcement                                                               
agency could say, "We are not  required to reimburse you for that                                                               
$10,000."                                                                                                                       
                                                                                                                                
Number 0477                                                                                                                     
                                                                                                                                
MS. BELL,  referring to the customer  disclosure, said [financial                                                               
institutions]  have  an obligation  to  let  customers know  when                                                               
someone is seeking  their private information.  She  said this is                                                               
definitely a privacy  issue.  In the case of  that search warrant                                                               
served,  it didn't  say anything  about disclosure.   So  the law                                                               
enforcement agent was notified that  unless something is provided                                                               
that says that  "we" can't, "we" are going to  tell our customer,                                                               
because that  is our duty  under the law.   She said  "we" forced                                                               
them  to go  back to  the judge  and get  an order  that requires                                                               
silence for  a couple of months.   The position of  the state law                                                               
enforcement  agency, in  looking at  Criminal Rule  37, was  that                                                               
search warrants could be sealed for up to four years.                                                                           
                                                                                                                                
Number 0549                                                                                                                     
                                                                                                                                
MS. BELL  explained that there is  no reference to this  in state                                                               
statute.  So how  would a person know to go  to Criminal Rule 37,                                                               
she asked, when a person is  just trying to comply with a request                                                               
for information?                                                                                                                
                                                                                                                                
MS. BELL, referring to the  Alaska Bankers Association's proposed                                                               
amendment, stated that from number  1, subsection (d) and beyond,                                                               
it provides definitions for terms  used within the statute, which                                                               
are details that can be worked  on with the division.  The second                                                               
and third amendments read:                                                                                                      
                                                                                                                                
     2.   Delete p.3, lines 18-28 and replace that material                                                                   
     with                                                                                                                     
     *Sec. 4. AS 06.01.050 is amended to read:                                                                                  
               Sec. 06.01.050. Definitions. In this title                                                                     
     [CHAPTER], unless the context otherwise requires,                                                                          
          (1) "commissioner" means the commissioner of                                                                          
     community and economic development;                                                                                        
          (2)   "department"   means   the   Department   of                                                                    
     Community and Economic Development;                                                                                        
          (3) "financial institution" means a person [AN                                                                      
     INSTITUTION]   subject  to   the   regulation  of   the                                                                    
     department under this title;                                                                                               
          (4) "person" means an individual, a corporation,                                                                    
     a  general, limited  or limited  liability company,  or                                                                  
     any other  association or organization  accorded status                                                                  
     or capacity by law; and                                                                                                  
          (5) "state financial institution" means a                                                                           
     financial  institution  that  is organized  under  this                                                                  
     title, AS 10.13, or AS 44.81.                                                                                            
3.   At page 25, add a new section to read as follows                                                                         
          *Sec. 59. COURT RULE CHANGES. To the extent that                                                                    
     it  requires  court  orders  compelling  disclosure  to                                                                    
     provide for reimbursement  of a financial institution's                                                                    
     cost of  compliance, AS 06.01.028(b) has  the effect of                                                                    
     amending  Rule[s]45_______________of  the Alaska  Rules                                                                    
     of  Civil  Procedure,  Rule[s]__________of  the  Alaska                                                                    
     Rules of Criminal  Procedure, and Rule[s]_____________,                                                                    
     Alaska Rules of Administrative Procedure.                                                                                  
                                                                                                                                
Number 0641                                                                                                                     
                                                                                                                                
MS. BELL said the current state  law is an "opt in" situation and                                                               
requires  that  before  customer  information  can  be  released,                                                               
unless something has  already been signed by the  customer or the                                                               
institution is compelled  to comply because of a  court order and                                                               
so forth,  one has  to go  out and  seek an  affirmative response                                                               
from  the  customer before  that  can  be shared;  however,  when                                                               
talking on  a larger-scale-type of product  offering or marketing                                                               
opportunity,  it  is  a  much   more  complex  issue.    In  this                                                               
situation,  "opt  in"  becomes  cumbersome,  expensive,  and  not                                                               
necessarily  to the  customer's advantage;  this, she  said, "we"                                                               
consider a big issue.                                                                                                           
                                                                                                                                
MS. BELL  emphasized that  protecting customer  privacy is  a big                                                               
deal  and  that   integrity  and  reputation  are   at  stake  if                                                               
[customer] privacy isn't protected, so  "we" are not at odds with                                                               
the  Division of  Banking or  the  Office of  the Governor  about                                                               
where "we" want to  be.  "We" want to make  sure that everyone is                                                               
educated on the existing privacy  provisions under federal law so                                                               
something isn't created that is already  there, and so we are not                                                               
unduly  restricted   from  participating   in  the  new   era  of                                                               
"enlightenment" in the financial services industry.                                                                             
                                                                                                                                
Number 0741                                                                                                                     
                                                                                                                                
MS. BELL explained  that the best-case scenario would  be to make                                                               
a direct referral  in Section 3 back  to GLBA, so that  if one is                                                               
in compliance  with the GLBA  privacy provisions, then one  is in                                                               
compliance with  state law.   That would be the  easiest cleanest                                                               
way to  do it, she said;  however, "we" are also  willing to work                                                               
with other  parties on trouble  spots, for specific  issues where                                                               
maybe Alaska is  different and "we" want to reserve  the right to                                                               
specifically  restrict something.    We" would  like  to be  like                                                               
every other bank  in the nation and be subject  to GLBA, she told                                                               
members, which is already quite  complicated to comply with.  And                                                               
"we" need to  know what our marching orders are  so we can comply                                                               
with them  by July  1 [2001];  "we" feel  that the  current state                                                               
statute   would   impose   something  contrary   and   far   more                                                               
restrictive.   At this point,  she said, the puzzle  pieces don't                                                               
fit together.                                                                                                                   
                                                                                                                                
Number 0846                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAYES asked what the  downside is to having a more                                                               
restrictive policy than the federal law.                                                                                        
                                                                                                                                
MS. BELL  replied that although  the privacy provisions  may have                                                               
been on the books  for 30 years, not all banks  in the state have                                                               
been  subject to  them.   As a  federally chartered  institution,                                                               
[Alaska Pacific Bank] was never  notified that it was governed by                                                               
Section 6 of the banking code,  and was under the impression that                                                               
only state-chartered,  state-examined banks  were subject  to the                                                               
existing law.   "We" have complied with the intent  of the Alaska                                                               
statute; however,  "we" have never  considered all  banks legally                                                               
subject  to  it.   It  is  old  and  outdated and  doesn't  allow                                                               
affiliates  within   the  same  family  of   companies  to  share                                                               
information.                                                                                                                    
                                                                                                                                
Number 0979                                                                                                                     
                                                                                                                                
MS. BELL  stated that the  hope is that  this doesn't have  to be                                                               
revisited  every  year  to  keep  making  changes  to  it.    She                                                               
explained  that their  vision  is  to offer  a  broader array  of                                                               
financial services, a broader mix of  things that are all part of                                                               
the package that consumers are looking for.                                                                                     
                                                                                                                                
MS. BELL  said the "opt  out" provision provides the  customer an                                                               
opportunity to have  something already in their hands,  such as a                                                               
new  privacy notice  that gives  them a  vehicle "right  then and                                                               
there"  to choose.   It  places the  control for  the release  of                                                               
information in the hands of the customer.                                                                                       
                                                                                                                                
Number 1057                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES  asked  whether [a  financial  institution]                                                               
could give the  policy to the customer when he  or she walks into                                                               
the bank, and the person could make the decision right there.                                                                   
                                                                                                                                
MS. BELL  responded that it  would have to  be studied to  see if                                                               
that  would work,  but she  mentioned  that one  problem is  that                                                               
there  are  actually  "road  maps"   for  these  disclosures  and                                                               
notices.   Depending on how  complex a financial  institution is,                                                               
she said, there  is kind of an A,  B, and C.  The  wording is set                                                               
up to  be "opt  out" and  would take  some reengineering  to turn                                                               
those into "opt  in" instead.  She deferred the  question to some                                                               
of her colleagues.                                                                                                              
                                                                                                                                
REPRESENTATIVE CRAWFORD  asked what type of  information would be                                                               
shared with an affiliate, or non-affiliated entity.                                                                             
                                                                                                                                
MS. BELL explained  that the type of  information normally shared                                                               
with affiliates is  credit experience:  how a person  had paid on                                                               
a  mortgage loan,  and how  that relates  to how  well he  or she                                                               
would make this type of  payment.  Credit application information                                                               
can  be shared  among affiliates  under  the FCRA,  and there  is                                                               
personal information on the  credit application; however, account                                                               
numbers  can't  be  shared.   Demographic  information  might  be                                                               
shared,  allowing an  affiliate  to make  a  determination as  to                                                               
whether a  product or  service would be  something that  a person                                                               
would want to have.                                                                                                             
                                                                                                                                
Number 1206                                                                                                                     
                                                                                                                                
REPRESENTATIVE   CRAWFORD    said   the   customer    makes   the                                                               
determination to "opt out" for the  first time while in the bank,                                                               
and  the next  year receives  this "thing"  in the  mail to  "opt                                                               
out"; he  remarked that [the  financial institution]  is counting                                                               
on a person not sending that in.   He then asked if postage would                                                               
be provided  or if the  individual would have  to pay to  send it                                                               
back in.                                                                                                                        
                                                                                                                                
MS. BELL  said she couldn't  answer that because she  hasn't seen                                                               
it addressed in  law; however, she surmised that  [whether or not                                                               
to provide postage] would be  left to the individual institution.                                                               
She said she  believes there is a 30-day window  after the notice                                                               
has been  provided to a  customer before that information  can be                                                               
shared.   Ms. Bell pointed  out, "The instances within  Alaska of                                                               
sharing information outside of affiliates,  outside of the normal                                                               
third parties,  who are exceptions  under the  law, is not  ... a                                                               
great amount."                                                                                                                  
                                                                                                                                
Number 1350                                                                                                                     
                                                                                                                                
MS.  BELL surmised  that banks  don't want  to be  prevented from                                                               
doing  what other  banks across  the country  can do;  if [banks]                                                               
have an opportunity  to jointly market something or  create a new                                                               
product,  they  want to  make  sure  it  can  be done  without  a                                                               
significant  amount of  red  tape  and expense,  and  be able  to                                                               
present that to the broadest number of people across the state.                                                                 
                                                                                                                                
DAVID  LAWER, Alaska  Bankers Association;  First National  Bank,                                                               
via  teleconference,  said  he   is  familiar  with  the  privacy                                                               
legislation as well as the  current federal legislation still "in                                                               
the making."   He said  the customer  under federal law  is given                                                               
the  opportunity  to "opt  out"  at  the  time a  transaction  is                                                               
initiated, and  also annually.   The bank must give  the customer                                                               
reasonable means  of exercising  that option, which  includes the                                                               
opportunity to make a phone call or [send an] e-mail.                                                                           
                                                                                                                                
Number 1515                                                                                                                     
                                                                                                                                
MR. LAWER, switching gears, explained  that when a court order is                                                               
received  or  a  subpoena  [issued], that  person  is  given  the                                                               
opportunity to  object, and could  object on the grounds  that it                                                               
is "unduly burdensome";  limits can be set on either  the time or                                                               
the  money expended.   He  said  he hasn't  encountered a  lawyer                                                               
issuing  a  subpoena  who  has  litigated  the  issue  in  court;                                                               
however, it would be helpful  to [clarify what] the circumstances                                                               
are [through this legislation].                                                                                                 
                                                                                                                                
MR. LAWER responding  to the question of what the  purpose of the                                                               
legislation is, said  over the last 30 years it  has been used as                                                               
a shield by  banks, and otherwise ignored.  In  its current form,                                                               
it  is  very (indisc.),  not  certain  to  whom it  applies,  and                                                               
doesn't answer many of the  questions posed on a quarterly basis;                                                               
for example, one thing routinely  disclosed from customer records                                                               
is the  customer's identity,  such as when  an account  is opened                                                               
with a  bank and  checks are  issued.   The bank  doesn't prepare                                                               
those  checks;  someone  is  hired  to  print  those  and  put  a                                                               
customer's name on them.   When [financial institutions] disclose                                                               
[a  customer's] name  to  be  printed on  those  checks, that  is                                                               
disclosing a  customer record.   This is contrary to  the statute                                                               
in its  current form, he  stated, and the  same is true  with the                                                               
amount of a  transaction, a loan on the security  of real estate.                                                               
"We" disclose  who the borrow  is and the  amount of the  loan to                                                               
the title  company closing the  transaction, which  under current                                                               
legislation is prohibited, but it is done by all.                                                                               
                                                                                                                                
Number 1688                                                                                                                     
                                                                                                                                
MR. LAWER  said the existing  law is so  poorly drawn that  it is                                                               
used when  it suits  a purpose,  and is  ignore when  it doesn't.                                                               
Simply taking that from one section  of the statute and moving it                                                               
to   another  with   minor   variations   doesn't  improve   that                                                               
circumstance, he said,  and only serves to "muddy  the waters" in                                                               
some areas and provide limited clarification in others.                                                                         
                                                                                                                                
MR. LAWER  explained that the Alaska  Bankers Association offered                                                               
a  substitute  for that  section  that  parallels the  state  and                                                               
federal  laws and  is  advantageous to  the  banks and  customers                                                               
because the federal  law is evolving.   There isn't comprehensive                                                               
regulation of federal law for privacy now, he remarked.                                                                         
                                                                                                                                
Number 1739                                                                                                                     
                                                                                                                                
MR. LAWER referred to an article  that quoted him as saying, "The                                                               
current  law ...  [doesn't have]  any significant  impact on  the                                                               
bank."  He  said it was cited in support  of the proposition that                                                               
the  more restrictive  law is  not harmful  to banks,  insofar as                                                               
costs and  other matters are  concerned.  He said  the statements                                                               
in the  article were accurate  quotations but weren't  taken with                                                               
the rest of  the remarks that he made during  that interview.  He                                                               
said those things were largely in response to the question:                                                                     
                                                                                                                                
     Given the state  law, what impact will  GLB [Act] have?                                                                    
     And the  answer was:   It doesn't impact the  state law                                                                    
     currently.   And when  asked how  we were  living under                                                                    
     the  more restrictive  law, I  gave  the same  response                                                                    
     that I gave  to you today, and that is,  the law is not                                                                    
     more restrictive;  it's poorly drawn, it  doesn't work.                                                                    
     We use  it when  we can,  [and] ...  ignore it  when it                                                                    
     doesn't  serve   our  purposes;   it  hasn't   been  an                                                                    
     impediment.                                                                                                                
                                                                                                                                
MR.  LAWER  commented that  "they"  chose  not to  publish  those                                                               
remarks in the article.                                                                                                         
                                                                                                                                
Number 1861                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked Mr.  Lawer whether  he recommended                                                               
the "opt in"  and "opt out" language  in Section 3 or  that in AS                                                               
06.01.028.                                                                                                                      
                                                                                                                                
MR. LAWER responded that the  Alaska Bankers Association proposed                                                               
AS 06.01.028, an alternative that  directly parallels federal law                                                               
and would  make state and  federal law "opt  out." He went  on to                                                               
explain that  the definitions  were taken  from elsewhere  in the                                                               
statutes because none were provided [in this section].                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he understood that  the Division of                                                               
Banking,   Securities  and   Corporations   in   Alaska  had   no                                                               
jurisdiction  over a  national bank  or one  that the  controller                                                               
currency authorized.   Apparently there  is some change  here, he                                                               
asked, because of the federal law.                                                                                              
                                                                                                                                
Number 1935                                                                                                                     
                                                                                                                                
MR. LAWER replied  that there is no proposed  change.  Responding                                                               
to a question about whether  [the Division of Banking, Securities                                                               
and  Corporations] has  an  impact on  the  institution that  Mr.                                                               
Lawer works for  or other interstate banks, he  replied, "Not the                                                               
institution that I  work for, no"; however,  there are provisions                                                               
concerning  multi-state branching  and  banks  doing business  in                                                               
more than one state that will  bring them within the (indisc.) of                                                               
those who are subject to  regulation by the [commissioner] in the                                                               
state.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if  he was  correct in  surmising                                                               
that the state  authorities have the right under  statute to have                                                               
requirements on branching and  establishing [institutions] in the                                                               
state.                                                                                                                          
                                                                                                                                
MR.  LAWER responded  affirmatively, and  added [in  those states                                                               
that have multiple banks].                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  said 25 years ago  he represented "CIBC"                                                               
when it  endeavored to enter  the Alaskan  market unsuccessfully.                                                               
He asked if that had changed.                                                                                                   
                                                                                                                                
MR. LAWER responded affirmatively.                                                                                              
                                                                                                                                
Number 2017                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he  is not  familiar with  whether                                                               
"opt  in" or  "opt out"  would affect  Mr. Lawer's  operations or                                                               
those of Wells Fargo.                                                                                                           
                                                                                                                                
MR.  LAWER replied  that as  far as  the First  National Bank  of                                                               
Anchorage is  concerned, operations wouldn't be  affected because                                                               
it doesn't  disclose customer information  at all, except  at the                                                               
request of the customer or as required by law.                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  if that  was what  Mr. Elder  was                                                               
referring to as the state's default policy.                                                                                     
                                                                                                                                
MR. LAWER responded in the negative.   He said his point was that                                                               
insofar  as  other  banks   are  concerned,  particularly  larger                                                               
institutions in more  than one state, they  make some disclosures                                                               
among their  affiliates and it  is not necessarily  prohibited by                                                               
federal  law;  under  the  proposed HB  106,  that  isn't  barred                                                               
either, he said, and is not subject  to the "opt in" or "opt out"                                                               
provision  in  either  event.    What  is  being  sought  is  the                                                               
disclosure  of non-public  information  for non-affiliated  third                                                               
parties, largely involving the sale of customer information.                                                                    
                                                                                                                                
MR.  LAWER explained  that "we"  don't engage  in that  practice,                                                               
Wells  Fargo  doesn't,  nor  do  any of  the  other  banks  doing                                                               
business in the state.                                                                                                          
                                                                                                                                
Number 2139                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if this  is for the  large holding                                                               
company with  affiliated organizations that want  to cross-market                                                               
[products and services].                                                                                                        
                                                                                                                                
MR. LAWER answered affirmatively.  He  said the "opt in, opt out"                                                               
[provision]  doesn't pertain  to  that  because those  (indisc.),                                                               
with various  exceptions, are affiliated  institutions.   He said                                                               
the GLBA is  the law that for the first  time sets up definitions                                                               
of affiliated institutions.                                                                                                     
                                                                                                                                
Number 2181                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked for  clarification that  under the                                                               
new  definitions in  the FCRA,  affiliated organizations  under a                                                               
holding company trade could share "that" information.                                                                           
                                                                                                                                
MR. LAWER responded affirmatively.                                                                                              
                                                                                                                                
CHAIR  MURKOWSKI  said  it  would  be helpful  to  have  a  chart                                                               
explaining to whom and how the GLBA  and the FCRA apply.  And she                                                               
said it would be helpful to  see if there were other federal Acts                                                               
relating to privacy that banks have to comply with.                                                                             
                                                                                                                                
Number 2235                                                                                                                     
                                                                                                                                
MR. LAWER said the FCRA  has privacy aspects relating exclusively                                                               
to credit  reports, and imposes  some restriction  on disclosure.                                                               
He said in terms of privacy,  what is being talked about is GLBA.                                                               
One problem in producing that chart,  he said, is that the law is                                                               
evolving,  and  there  are routinely  new  interpretations;  when                                                               
financial  institutions  are trying  to  deal  with that,  adding                                                               
legislation  at the  state level,  with the  consistency unknown,                                                               
may not be something that "we"  necessarily want to do.  "We" are                                                               
talking  about  proposed  legislation   intended  to  make  state                                                               
financial   institutions  competitive   with  federal   financial                                                               
institutions.                                                                                                                   
                                                                                                                                
Number 2302                                                                                                                     
                                                                                                                                
MR. LAWER suggested  that if a state financial  institution has a                                                               
different set  of requirements  than those  that apply  to others                                                               
who  are nonetheless  in a  position to  do business  here, [that                                                               
institution] is being put at a competitive disadvantage.                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG   replied  that  this  is   because  the                                                               
Division  of   Banking,  Securities,  and  Corporations   has  no                                                               
jurisdiction over most controller-currency-type banks.                                                                          
                                                                                                                                
MR.  LAWER  responded,  "State   and  other  types  of  financial                                                               
institutions."   He said  the biggest  competitors for  all banks                                                               
and credit  unions are  security brokers,  which are  governed by                                                               
federal  legislation  but wouldn't  be  governed  by any  of  the                                                               
proposed state legislation that has to do with privacy.                                                                         
                                                                                                                                
MR.  LAWER   explained  that  "financial   institution"  includes                                                               
commercial banks,  savings banks, credit unions,  premium finance                                                               
companies,   small  loan   companies,  bank   holding  companies,                                                               
financial  holding companies,  trust companies,  and savings  and                                                               
loan  institutions.   Security brokers  and  dealers are  omitted                                                               
from that list.                                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG asked about  Mr. Lawer's definition under                                                               
AS 10.13 and AS 44.81.                                                                                                          
                                                                                                                                
MR.  LAWER  stated  that  "they"  would be,  but  not  under  the                                                               
banker's proposal either.   The virtue of  the banker's proposal,                                                               
he  said, is  that  it  requires no  more  or  less of  financial                                                               
institutions than what is required by the federal law.                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked  Mr. Elder  if broker-dealers  are                                                               
regulated by [the division].                                                                                                    
                                                                                                                                
MR. ELDER answered affirmatively.                                                                                               
                                                                                                                                
Number 2434                                                                                                                     
                                                                                                                                
MR.  LAWER  explained  that  the proposal  is  that  a  financial                                                               
institution  under that  title doesn't  include security  brokers                                                               
and dealers.                                                                                                                    
                                                                                                                                
Number 2460                                                                                                                     
                                                                                                                                
JERRY  WEAVER,  Senior  Vice President  and  Manager,  Commercial                                                               
Banking   Group;  National   Bank  of   Alaska;  Alaska   Bankers                                                               
Association, testified via teleconference.                                                                                      
                                                                                                                                
TAPE 01-36, SIDE B                                                                                                              
Number 2459                                                                                                                     
                                                                                                                                
MR. WEAVER mentioned the "opt out"  position under GLBA.  He said                                                               
20  state legislatures  this year  have considered  some sort  of                                                               
"opt in" proposal  or modification to GLBA, and  none have passed                                                               
it.  If Alaska wants to  stick with this restrictive "opt in," it                                                               
would be one of only six  states.  Furthermore, some of those six                                                               
states have  run into severe  problems.  For example,  some years                                                               
back  Vermont adopted  a rigid  "opt in,"  and because  it is  an                                                               
isolated state with  a small population, Vermont  was excluded by                                                               
most of the national marketing programs.   There is a good chance                                                               
that that could  occur in Alaska, too, he said,  if [Alaska] goes                                                               
outside the federal guidelines.                                                                                                 
                                                                                                                                
Number 2421                                                                                                                     
                                                                                                                                
MR. WEAVER said, too, that  those federal guidelines are evolving                                                               
quickly and  will be formulated  under a new regulation  "P" once                                                               
complete.    The  guidelines  put  out  by  the  Federal  Deposit                                                               
Insurance Corporation (FDIC) in its  privacy rule handbook are 12                                                               
pages long.  These are  comprehensive guidelines that will evolve                                                               
more  as time  goes  on; most  states have  decided  to give  the                                                               
federal GLBA  and regulators a  chance to  see how well  it works                                                               
before [moving forward].                                                                                                        
                                                                                                                                
Number 2392                                                                                                                     
                                                                                                                                
MR. WEAVER  pointed out that  Alaska might want to  consider this                                                               
before getting  in there.   Finally, he said, GLBA  concerns more                                                               
than just  the institutions  that have  been discussed;  there is                                                               
another bill that is starting  to move through the legislature on                                                               
the insurance  industry as well.   He said all of  these types of                                                               
institutions do essentially  the same things today:   they handle                                                               
deposits, provide financial services,  and counsel customers, and                                                               
it is  important that a lot  of these are "cross-fed"  to provide                                                               
rapidly  evolving benefits  at a  reasonable  cost to  customers.                                                               
"We" don't  want a restrictive policy,  he said, and it  would be                                                               
good if "we" could get rid of the existing one.                                                                                 
                                                                                                                                
MR. WEAVER remarked that GLBA  provides an opportunity to reach a                                                               
practical compromise.                                                                                                           
                                                                                                                                
CHAIR MURKOWSKI  asked -  recognizing that  the National  Bank of                                                               
Alaska is now  Wells Fargo, and that Wells Fargo  is operating in                                                               
many  different  states  -  if   Alaska  has  a  stricter  policy                                                               
regarding privacy, does a bank  that is in various states handles                                                               
the  "opt   in"  provision,  considering  that   California,  for                                                               
example, may have an "opt out" provision.                                                                                       
                                                                                                                                
MR. WEAVER said  the banks could do  it two or three  ways.  With                                                               
[Alaska] being such a small  market, "they" would have the option                                                               
to just exclude  Alaska, because Wells Fargo happens  to own most                                                               
of its affiliates and is part of  a family of companies.  He said                                                               
that information could probably  be exchanged anyway and probably                                                               
would be in Alaska, and marketing  would just continue.  The ones                                                               
that would  be harmed by the  bill are the very  same state banks                                                               
that [this legislation] is trying to [help].                                                                                    
                                                                                                                                
MR. WEAVER used North Rim [Bank] as  an example and said it has a                                                               
significant  holding  in  a  residential  mortgage  company,  but                                                               
doesn't own  it free and clear.   If it wanted  to make referrals                                                               
similar to  those "we" can  to our "mortgage arm"  on competitive                                                               
customer  offers,  the  "opt  in"  provision  would  be  a  major                                                               
handicap.                                                                                                                       
                                                                                                                                
MR. WEAVER  explained that this is  one of the other  reasons why                                                               
"we" want to keep it  fairly open; however, the legislature would                                                               
want to consider being more  restrictive than the federal laws if                                                               
an abuse were found or if it wasn't working for Alaskans.                                                                       
                                                                                                                                
Number 2256                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked for clarification that  there is a                                                               
deadline to make sure [Alaskan]  state banks are on equal footing                                                               
with national  banks.  From  a competitive standpoint,  he asked,                                                               
is there  an [option] to  do nothing  before the July  1 deadline                                                               
and do it later?                                                                                                                
                                                                                                                                
MR. LAWER  answered affirmatively.   The privacy portion  of this                                                               
could be separated  out, he explained, and the  current law could                                                               
be left as  it is; the rest of the  proposed legislation could be                                                               
enacted to  provide all  of the  competitive advantages  to state                                                               
banks that were intended by the administration.                                                                                 
                                                                                                                                
MR.  LAWER, upon  being  asked if  there is  a  "sunset" for  the                                                               
privacy provisions after a few  years, responded that there is no                                                               
time limit.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG clarified  that  Mr.  Lawer wasn't  sure                                                               
what  those regulation  are going  to be.   [The  legislature] is                                                               
being  asked  to  pass something  that  would  mirror  something,                                                               
although legislators don't know what it is going to be.                                                                         
                                                                                                                                
MR. LAWER  remarked, "Exactly so."   That would be  the proposal;                                                               
it is intended to take into  account all of the exceptions in the                                                               
federal  law  and  bring  them  to bear  in  the  case  of  state                                                               
institutions  so that  competition can  be on  an equal  footing.                                                               
The other alternative  is to leave the privacy  provision that is                                                               
in the state law as it is.                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that  from Mr.  Weaver's testimony,                                                               
it  would have  a  negative effect  on  the economic  competitive                                                               
position of state institutions.                                                                                                 
                                                                                                                                
MR.  WEAVER replied  that  after  working with  it  for about  18                                                               
years, that is his professional opinion.   He pointed out that he                                                               
didn't  say   it  was  the   preferred  alternative,   but  "the"                                                               
alternative.  The state of  Colorado, after considering this very                                                               
carefully, decided  that it would  just stand back, use  the GLBA                                                               
provisions that will become regulation  "P," and monitor it for a                                                               
couple  of  years  to  see   how  it  impacts  the  residents  of                                                               
California  and  the  business  climate.   If  [it  is  favorable                                                               
California] can  let it  go forward  and not  legislate anything,                                                               
and if  not, the legislature can  decided to go back  and correct                                                               
any  errors it  felt existed.   He  pointed out  that the  Alaska                                                               
legislature could do the same thing.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  wondered if [the legislature]  could put                                                               
a sunset on  that provision to review it in  case the legislature                                                               
"bungled" the job.   There is some urgency, he  remarked, for the                                                               
state-chartered institutions.                                                                                                   
                                                                                                                                
MR.  WEAVER  stated that  as  far  as the  rest  of  the bill  is                                                               
concerned,  all the  bankers, regulators,  and  everyone who  has                                                               
looked  at it  [think] it  is quite  good, specifically  with the                                                               
fine technical revisions  proposed today.  Section 3  - privacy -                                                               
he said, seems to be the only  area of major discussion by any of                                                               
the professionals in the financial industry.                                                                                    
                                                                                                                                
Number 2109                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG,  referring   to  the   Alaska  Bankers                                                               
Association's proposed amendments, asked Mr.  Lawer if he was the                                                               
author  of  the  first   amendment  [text  provided  previously],                                                               
subsection (b),  referring to  deleting page  2, line  10 through                                                               
page 3, line 17 of the bill.                                                                                                    
                                                                                                                                
MR. LAWER  replied that  he had  a hand  in it.   He  said "they"                                                               
could propose  an alternative that would  simply [mirror] federal                                                               
law and regulations in [Alaska's] state law.                                                                                    
                                                                                                                                
CHAIR MURKOWSKI announced that HB  106 would be held over because                                                               
work needs to be done on Section 3.                                                                                             
                                                                                                                                
REPRESENTATIVE   ROKEBERG  expressed   concern  that   if  people                                                               
perceive  this  as a  step  backwards  in  terms of  privacy  [in                                                               
Alaska], it would be problematic.                                                                                               
                                                                                                                                
CHAIR  MURKOWSKI noted  her appreciation  of the  [Alaska Bankers                                                               
Association]  and  hoped  it  would continue  to  work  with  the                                                               
[division] director on the remaining issues.                                                                                    
                                                                                                                                
[HB 106 was held over.]                                                                                                         

Document Name Date/Time Subjects