Legislature(1993 - 1994)
03/23/1993 09:33 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE BILL NO. 149: An Act revising the laws governing financial institutions and relating to trust companies, the Alaska Small Loans Act, and the Premium Financing Act; amending Alaska Rule of Criminal Procedure 17 and Alaska Rule of Civil Procedure 45(b); and providing for an effective date. Co-chair Pearce announced that SB 149 was before the committee. SENATOR TIM KELLY spoke in support of SB 149. He said that he knew of no opposition to the proposed legislation by the banking industry in Alaska. He stated that he would offer an amendment suggested by the Credit Union League. WILLIS KIRKPATRICK, Director, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, asked Jeff Bush, Attorney at Law, on contract with the Department of Commerce and Economic Development, to join him in testifying in support of SB 149. Senator Kelly stated that these new statutes apply only to the five state-chartered banks in Alaska, one section effects pawn shops, and a few provisions apply to state- chartered credit unions. It does not concern the national chartered banks. Mr. Kirkpatrick said that Key Bank, North Rim, Denali State Bank in Fairbanks, First Bank in Ketchikan, and Mt. McKinley Mutual in Fairbanks, are the five banks that apply. Mr. Kirkpatrick said that the marketplace changes and the advent of the banking problems of the mid-80's pointed out some incompatibilities and obsolete laws that are in Alaska's statutes created in the 1930s. The state of Oregon has recodified its laws at least twice since then, and its revised regulations were used as a model for this bill. He said this bill would correct the obsolescence in the marketplace and regulatory enforcement action, and allow banks to be more attune to the community needs of Alaska. End SFC-93 #42, Side 1 Begin SFC-93 #42, Side 2 Co-chair Pearce asked if Mr. Kirkpatrick had spoken to Mr. Walsh regarding future international insurance issues that were tied to the banking community, that SB 149 would coincide with international market opportunities as set forth by Mr. Walsh in a bill passed last session. Mr. Kirkpatrick answered that he had worked closely with Mr. Walsh through the staff of the Commissioner's office in the Department of Commerce & Economic Development. In answer to Senator Jacko, Mr. Kirkpatrick said that a state-chartered financial institution is one that applies to the state and agrees to conform to state laws through its corporation and licensing and to the laws of the state of Alaska. A charter through the federal government is also available through the Department of the Treasury. There are more state chartered banks than national chartered banks in Alaska, but more assets are held by national banks than by state banks. Discussion was had by Senator Sharp and Mr. Kirkpatrick regarding federal reserve requirements for banks and the banks need for liquidity. Mr. Kirkpatrick agreed that this bill would allow the state division of banking to make different liquidity rules than the national chartered bank, and give the state banks an advantage. JEFF BUSH, Attorney at Law, on contract with the Department of Commerce and Economic Development, said that the proposed regulations set a figure of 15 percent of total deposits as a required reserve. The current statute is 20 percent of demand deposits and 8 percent of timed savings deposits, which is no longer enforced. The current statute is no longer in force. Also, current regulations require vault cash for reserve and do not recognize current needs in the marketplace. The proposed regulation expands what can be used for calculating reserves to include liquid assets such as government bonds and deposits on deposit with federal reserve in other banks. He said that the proposed regulations will not negatively impact or increase reserve requirements for in state banks. In answer to Senator Kerttula's comments regarding real estate, Mr. Bush said that the proposed legislation would liberalize lending and remove specific statutory restrictions that exist on real estate lending and would allow bank management more freedom in the decision making process. In answer to Senator Rieger question about the reserve requirement for national chartered banks, Mr. Bush said the requirement was calculated based on a list of different types of deposits and those numbers would shift as a method to control the money supply. Mr. Kirkpatrick said at one time a bank did not have to be a member of the federal reserve, and now, whether you are a member or not, a bank is required to follow federal reserve requirements. Mr. Bush said that this bill is designed to be independent of the federal requirements, because the numbers change so rapidly. He explained that if requirements are inconsistent, the bank would have to meet both. For example, if the federal reserve requirement is higher than the state's, the bank would have to meet the higher federal requirement. In answer to Co-chair Pearce, Mr. Kirkpatrick answered that CSSB 149(FIN) would not change audit functions in any way. Co-chair Pearce voiced her frustrations in the 1980s when some banks closed, some merged, and some sold their real estate packages to institutions outside Alaska. In answer to Co-chair Pearce, Mr. Kirkpatrick said there was no provision in the bill that would provide for a local agent in case a real estate loan package was sold out of state. Mr. Bush explained that this was a consumer issue and addressing it in this bill would have been difficult. CO-CHAIR STEVE FRANK asked if HFC had a regulation that required an in-state service office. Mr. Kirkpatrick said that type of regulation had been considered but did not know if it was in effect. Senator Kerttula voiced his support for this type of legislation. Co-chair Pearce invited Clark Gruening, Attorney at Law, Alaska Credit Union League, to join the committee at the table and speak to the amendments regarding credit unions. CLARK GRUENING stated that the Credit Union League was an association of all eighteen credit unions in Alaska (sixteen federal and two state charters). The amendments would bring the state credit union act on par with the federal credit union act. Most are small technical changes but one significant change allows the board of directors of the state chartered credit unions to appoint a credit committee. In practice, the loan committee is already chosen by the board but the statutory requirements maintain another credit committee. He said there was no opposition to these amendments by the department or the credit unions. Mr. Kirkpatrick said he also supported the amendments. Senator Kelly MOVED for adoption of amendment 1. No objections being raised, amendment 1 was ADOPTED. Senator Kelly MOVED for passage of CSSB 149(FIN) as amended from committee with individual recommendations. No objections being raised, it was REPORTED OUT of committee with a "do pass" and with a zero fiscal note for the Department of Commerce & Economic Development. Co-chairs Frank and Pearce, Senators Jacko, Kerttula and Kelly signed "do pass." Senators Rieger and Sharp signed "no recommendation." ADJOURNMENT The meeting was adjourned at approximately 10:45 a.m.