Legislature(2021 - 2022)SENATE FINANCE 532
01/31/2022 01:00 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB41 | |
| HB85 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 41 | TELECONFERENCED | |
| + | HB 85 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 85(LandC)
"An Act relating to the Alaska Banking Code; relating
to mutual savings banks; relating to interstate state
banks and international banks; relating to the
pledging of bank assets as collateral security to
tribal organizations; relating to the pledging of bank
assets for interest swap agreements; relating to state
business licenses; relating to persons who make loans
secured by interests in vessels or facilities;
relating to liability for the release or threatened
release of hazardous substances; relating to the Model
Foreign Bank Loan Act; and providing for an effective
date."
1:39:25 PM
REPRESENTATIVE BART LEBON, SPONSOR, introduced the bill.
changes and to bring regulatory parity between state-
chartered and national banks. He stated that HB 85 provides
Alaska's state banking regulator tools to level the playing
field and promote healthy competition among state and
national banks. Over the course of the pandemic, the Alaska
economy has been tested like never before and has more than
proven its resilience. That is thanks in no small part to
our diverse financial system: a network of financial
institutions of all sizes, charters and business models
that are dedicated to providing the products and services
that consumers and businesses need to thrive. The diversity
of our financial system is something that is uniquely
American. It is important that we preserve that diversity
but we must do so in a manner that ensures a level playing
field between providers of financial services. Banks play a
critical role in the Alaska and United States economies,
channeling funds from savers to borrowers and thereby
facilitating economic activity. The U.S. has what is
referred to as a "dual banking system," in which banks can
choose to apply for a charter from a state banking
authority or a federal charter from the Office of the
Comptroller of the Currency (OCC), a bureau within the
Department of the Treasury. A bank's choice of chartering
authority is also a choice of primary regulator; state
regulatory agencies serve as the primary regulators of
state-chartered banks, and the OCC serves as the primary
regulator of national banks. Over time, due to increasingly
broad powers granted to national banks by the OCC, state
banks have experienced difficulty in remaining competitive
with national banks.
1:42:23 PM
JOSEPH BYRNES, STAFF, REPRESENTATIVE BART LEBON, discussed
the Sectional Analysis:
Sec. 1. AS 06.05.005(a)
Conforming language to changes made under Section 10
to provide Alaska chartered banks parity with credit
unions when establishing a bank branch.
Sec. 2. AS 06.05.005
Prohibits the Department from placing a regulatory
limitation on a credit card that a state bank issues
to an officer of a state bank, the statutory authority
for which is amended in Section 5 and the regulation
(3 AAC 02.121) annulled in Section 24.
Prohibits the Department from adopting regulations
relating to the setting of time limits on the disposal
of real and personal property, the statutory authority
for which is amended in Section 6 and the regulation
(3 AAC 02.135) annulled in Section 24.
Sec. 3. AS 06.05.050
Publication of reports: Directs a bank to post
statutorily required reports on the bank's website and
makes it optional to post those reports in the bank's
physical lobby.
This change recognizes that information is more
commonly available on the Internet and provides the
option for publication of reports online to better
meet customer expectations. National banks do not have
a similar requirement to post notices of publication
of financial and other information that state banks
are required to report. In 2019, the FDIC repealed the
"lobby notice" rule, which had required posting
notices in bank lobbies. 84 Fed. Reg. 9698 (Mar. 18,
2019) (repealing 12 C.F.R. Part 350). In the final
rule, the FDIC noted that reports are widely available
through bank websites.
Sec. 4. AS 06.05.166(c)
Defines the timeframe not later than 15 days for
which a bank must notify the Department after an
emergency non-opening or closing of the bank. This
change provides additional clarity for reporting
requirements.
Sec. 5. AS 06.05.210(a)
Increases the amount a director or executive officer
of a state bank may borrow to $500,000 (from $100K or
$250K for a primary residence). This change aligns
with the regulatory limit established for national
banks, which is $500,000. 12 C.F.R. ? 215.4(b)(2)
("Regulation O").
Sec. 6. AS 06.05.245
Disposition of property not needed in the conduct of a
banking business: Removes the Department's authority
to set a time limit on the disposal of real and
personal property. Instead, the carrying value and
right-down will be dictated by Generally Accepted
Accounting Principles (GAAP). Federal regulations
allow national banks to dispose of other real estate
owned according to GAAP. 12 C.F.R. ? 34.83(a).
Sec. 7. AS 06.05.260
Allows a state bank to pledge bank assets as
collateral security to secure funds deposited by
consortiums of federally recognized tribes in the same
way as national banks, which are authorized to pledge
bank assets as collateral security to secure funds
deposited by federally recognized Indian tribes. 12
U.S.C. ? 90.
Sec. 8. AS 06.05.260
Adds a new subsection to replace the Division of
Banking's Parity Orders 12-B (3-6) regarding the
pledging of assets for interest rate swaps. National
banks are regulated by Section 610 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, and
implementing regulations at 12 C.F.R. Part 32. This
change achieves parity by authorizing state banks to
pledge assets for interest rate swaps according to the
same regulations as national banks.
Adds a new subsection to define:
? "federally recognized tribe" as an Indian tribe
under the Federally Recognized Indian Tribe List
Act of 1994; and
? "interest rate swap agreement" as a stream of
future interest payments that are exchanged for
another stream of future interest payments.
Sec. 9. AS 06.05.355(a)
Requires all banks to become a member of the FDIC as a
condition for receiving a Certificate of Authority;
Intended to maintain trust and level the playing field
for the banking industry. All national banks must be
members of the FDIC. 12 C.F.R. ? 5.20.
Sec. 10. AS 06.05.399
Changes of location; branch banks. Provides Alaska
chartered banks parity with credit unions when
establishing a bank branch. Banks are currently
subject to stricter bank branch application
requirements under 3 AAC 02.215. The Division would
establish in regulations similar requirements of
credit unions as in 3 AAC 03.260. [Same as section 19
for Mutual Banks]
Sec. 11. AS 06.05.438(a)
Reduces the number of required meetings of a bank's
board from 10 to 4 per calendar year. There is no
required number of board meetings for national banks.
12 C.F.R. ? 5.20. Sec. 12. AS 06.05.555(a)
Conforming language to changes made under Section 10
to provide Alaska chartered banks parity with credit
unions when establishing a bank branch.
1:48:33 PM
Mr. Burns continued with the Sectional Analysis:
Sec. 13. AS 06.05.990(4)
Removes "remote service unit" (ATM, etc.) from the
definition of "branch bank" and defines "remote
service unit" directly under this section.
Sec. 14. AS 06.15.180
Allowing mutual banks to have similar borrowing
options as state banks. AS 06.05.205 establishes a 15-
percent limit on state banks.
Sec. 15. AS 06.15.190
Expands the deposits that mutual banks can accept. The
federal Depository Institutions Deregulation and
Monetary Control Act of 1980 expanded the authority
for national mutual banks to accept deposits. This
change authorizes state mutual banks to accept the
same deposits as national mutual banks.
Sec. 16. AS 06.15.220
Allows trustees to delegate their authority to approve
interest on deposits.
Sec. 17. AS 06.15.240
Provides mutual banks with the same investment
opportunities as state banks under AS 06.05.270. This
change adopts nearly identical language: "In addition
to loans and acquisitions expressly authorized by this
chapter, a state bank may deal in, underwrite, and
invest in for its own account the obligations that the
department by regulation authorizes the bank to deal
in, underwrite, or invest in for its own account." AS
06.05.270(a).
Sec. 18. AS 06.15.250
Provides mutual banks with the same lending
opportunities as state banks. This change removes the
mortgage lending limit that applies to mutual banks
and authorizes mutual banks to invest in first
mortgages subject to the same lending limits as state
banks in AS 06.05.205-.206.
Sec. 19. AS 06.15.290
Changes of location; branch banks. Provides mutual
banks parity with state banks and credit unions when
establishing a bank branch. Alaska chartered banks are
currently subject to stricter bank branch application
requirements under 3 AAC 02.215. The Division would
establish in regulations similar requirements of
credit unions as in 3 AAC 03.260. [Same as section 10
for state banks]
Sec. 20. AS 43.70.105(a)
Exempts depository institutions (banks and credit
unions) from the requirement to obtain business
licenses for all headquarter and branch locations.
Currently, state-chartered institutions receive a
Certificate of Authority through the Division of
Banking and Securities. Until each institution
receives this certificate, they may not transact
business. This change would eliminate duplicate
licensing, thus reducing regulatory burden.
Sec. 21. AS 46.03.822(a)
Adds reference to the new language in section 22.
Sec. 22. AS 46.03.822
Conforms state law to the Comprehensive, Environmental
Response, Compensation, and Liability Act (CERCLA)
standard for lender liability. CERCLA Section 101(20)
contains a secured creditor exemption that eliminates
owner or operator liability for lenders who hold
ownership in a CERCLA facility primarily to protect
their security interest in that facility, provided
they do not "participate in the management of the
facility." Generally, participation in the management
applies if a bank exercises decision-making control
over a property's environmental compliance, or
exercises control at a level similar to a manager of
the facility or property. Participation in management
does not include actions such as conducting property
inspections, requiring a response action to address
contamination, providing financial advice, or
renegotiating or restructuring the terms of the
security interest. The secured creditor exemption also
provides that foreclosure on a property does not
result in liability for a bank, provided the bank
takes "reasonable steps" to divest itself of the
property "at the earliest practicable, commercially
reasonable time, on commercially reasonable terms."
Generally, a bank can maintain business activities and
close down operations at a property as long as the
property is listed for sale shortly after the
foreclosure date or at the earliest practicable,
commercially reasonable time.
Sec. 23. Repealed Sections
? Repeals AS 06.05.265 Liability of directors for
certain loans. Overbroad and unnecessary.
? Repeals AS 06.10.010-050 Model Foreign Bank
Loan Act. The Act exempts out-of-state banks from
Alaska taxation for certain business types and
became obsolete in 1984 due to other tax
measures. The Act is an unnecessary
administrative burden.
? Repeals AS 06.15.150, 160 and 170 Surplus
requirements, additions, and limitations.
Repealing these statutes would provide parity and
allow a mutual savings bank to follow AS
06.05.305 for capital requirements. AS 06.05.305
establishes surplus requirements, additions, and
limitations for state banks.
? Repeals AS 06.15.230 Withdrawal of Deposits:
Language no longer relevant after deregulation of
Thrifts and Savings and Loans.
Sec. 24. Annulled Regulations
? Annuls 3 AAC 02.121 Credit cards for officers:
Removes the regulation limiting uncollateralized
credit card balances up to $10,000 for an officer
of a state bank. See Sections 2 and 5.
? Annuls 3 AAC 02.135 Disposition of property not
needed for banking business. The carrying value
and write-down of property will instead be
dictated by Generally Accepted Accounting
Principles (GAAP). See Sections 2 and 6.
Sec. 25. Applicability
Uncodified law for sections 3, 4, 6, 9, 10, 12, 16,
18, and 19.
Cites definition locations for "branch bank",
"department", "international bank", "interstate state
bank", "mutual bank" and "state bank".
Sec. 26. Transition
Provides a transition period relating to sections 1,
10, 12, and 19; provides the Department time to
promulgate regulations for changes of bank locations
and establishing branch banks.
Sec. 27. Delayed Effective Date
Sets a delayed effective date of January 1, 2023 for
sections 1, 10, 12, and 19 to provide the Department
time to promulgate regulations for changes of bank
locations and establishing branch banks.
Sec. 28. Immediate Effective Date
Sets an immediate effective date for all sections
except for sections 1, 10, 12, and 19, relating to
changes of bank locations and establishing branch
banks.
1:55:30 PM
Senator Wilson asked for more information about Section 7
and Section 8. He surmised that Section 7 allowed for an
exemption for federal recognized tribes, and queried the
current process.
Representative LeBon stated that Northrim Bank was
available for explanation. He shared that banks were
required by certain depositors to secure their deposits
with assets of the bank.
Senator Wilson asked for an example of an occurrence
related to Section o8 of the bill.
Representative LeBon shared that the state banks were
looking for equality and parody with the federal banks.
1:59:51 PM
ROBERT SCHMIDT, DIRECTOR, DIVISION OF BANKING AND
SECURITIES, ANCHORAGE (via teleconference), announced that
interest rate swaps would allow for state chartered
depository financial institutions to do the same as
federally chartered financial institutions.
Senator Wielechowski wondered whether state-chartered banks
would treat the interest rate swaps differently than the
national banks.
Representative LeBon replied that national banking laws
changed over time, while the state banking laws remained
the same without proposed legislation.
Senator Olson wondered whether the federal recognized
tribes had offered an opinion on the legislation.
Representative LeBon had not heard of any opposition.
Senator Wielechowski looked at Section 14, and understood
that the current aggregate amount of outstanding
liabilities may not exceed 5 percent, but there was an
increase to 15 percent. He queried the rationale behind the
change.
Mr. Schmidt replied that Section 14 was merely matching the
state banks with the federal banks.
Senator Wielechowski looked at Section 4, and queried the
concerns on the provision.
Mr. Schmidt stated that the provision made a more concrete
line, and stated that 15 days was easier to understand than
as soon as possible. He stated that there were no
concerns with the change.
Senator Wielechowski looked at page 10, and noticed the
phrase, a person who holds or held interest in a vessel
facility to secure a loan. He surmised that there was an
exemption for a person, and queried the definition of a
person. He thought the bill was limited to banks, but
wondered if there was a broader inclusion.
Mr. Schmidt replied that it could include corporate
entities and any person, bank, or credit union that help
property as collateral for a loan.
Senator Wielechowski asked for Department of Environmental
Conservation (DEC) to be available for comment.
2:07:19 PM
TIFFANY LARSON, DIRECTOR FOR DIVISION OF SPILL PREVENTION
AND RESPONSE, DEPARTMENT OF ENVIRONMENTAL CONSERVATION,
FAIRBANKS (via teleconference), stated that the inclusion
of language matched the federal level language for broader
inclusivity.
2:08:01 PM
Senator Wielechowski was concerned about "laundering of
liability." He wondered whether DEC had concerns about
liability.
Ms. Larson replied section 22(o) act as a lender, foreclose
on the property and then act fast to avoid liability.
Liability remains on the property whether or not the
property was foreclosed on. The language allows a contender
to find help addressing the contamination.
Senator Wielechowski offered a hypothetical and asked where
the legal obligation lay.
Ms. Larson said that the liability extended to owner,
operator, or contaminator. She believed that the lender was
exempt up until the point of contamination.
Senator Wilson asked about PFAS contamination and
regulations.
Co-Chair Bishop reframed the question. He queried whether
if the bank load money on a property whether PFAS
contamination would stay with the originator of the
contamination and the bank would be held harmless on the
loan.
Representative LeBon replied that the responsible party
could be any number of people. He offered a personal story
of contamination liability.
2:14:51 PM
Senator Wilson understood there was no requirement for
disclosure of PFAS to a new owner.
Ms. Larson said that the new owner would be responsible.
Senator Wilson expressed concern with the absence of the
requirement to disclose contamination information.
Senator Wielechowski felt that shell companies could be an
issue. He thought that once a property was contaminated by
a shell corporation the corporation could escape liability.
Representative LeBon said that language could be expanded
to include protection for individuals.
Senator Wielechowski asked about Section 23 - liability for
certain loans.
Representative LeBon shared that directors had
responsibility for operation of their banks.
2:19:41 PM
Senator Wilson spoke to Section 20 and wondered about the
number of locations and reduction in state revenue.
SARA CHAMBERS, DIRECTOR, DIVISION OF CORPORATIONS, BUSINESS
AND PROFESSIONAL LICENSING, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference),
estimated that approximately 50 business licenses would be
foregone with the legislation. She stated that there were
approximately five primary corporations with many branches.
She stated that the cost of the business license was so
minimal that the annual loss of revenue to the state would
be less than $1500.
Co-Chair Bishop opened invited testimony.
2:21:34 PM
JOE SCHIERHORN, PRESIDENT AND CEO, NORTHRIM BANK, JUNEAU
(via teleconference), stated that there were three state
chartered banks and all three banks supported the
legislation. He noted that the association had worked on
the development of the legislation. He felt that the bill
would help banks to better serve Alaskans. He offered
posthumous thanks to a fellow colleague. He also spoke to
pledging assets. He said that the reason for the provision
was to give institutions the ability to pledge assets for
federally recognized tribes.
2:27:14 PM
Mr. Schierhorn spoke to Senator Wielechowski's question
about Section 23 and the repealing liability was covered in
other areas.
Senator Wielechowski was curious about the loans under the
statute and what the nature of the violation would be.
Mr. Schierhorn said he could get the information to the
committee.
2:29:54 PM
DAVID DURHAM, MT. MCKINLEY BANK, ALASKA BANKERS
ASSOCIATION, FAIRBANKS (via teleconference), testified in
support of the bill. He detailed the specifics of how the
bill would benefit the
Mr. Schmidt testified in support of the bill.
Co-Chair Bishop OPENED and CLOSED public testimony.
CSHB 85(FIN) was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 41 Public Testimony Hillstrand OPPOSE .pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 41 |
| HB 41 Work Draft ver. G 5.13.2021.pdf |
SFIN 5/17/2021 9:00:00 AM SFIN 1/31/2022 1:00:00 PM |
HB 41 |
| HB 41 Explanation of Changes ver I to G 5.13.2021.pdf |
SFIN 5/17/2021 9:00:00 AM SFIN 1/31/2022 1:00:00 PM |
HB 41 |
| HB 41 Letters of Support as of 04.26.2021.pdf |
SFIN 5/14/2021 1:00:00 PM SFIN 1/31/2022 1:00:00 PM SRES 5/12/2021 3:30:00 PM |
HB 41 |
| HB 41 Legal Memo Thompson 042221.pdf |
HFIN 4/26/2021 1:30:00 PM SFIN 1/31/2022 1:00:00 PM |
HB 41 |
| HB 85 Letters of Support 04.21.2021.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 85 |
| HB 85 Sectional Analysis ver. W 01.21.2022.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 85 |
| HB 85 Summary of Changes version B to version W 01.21.2022.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 85 |
| HB 85 Sponsor Statement 03.16.2021.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 85 |
| HB 41 Public Testimony Koeneman.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 41 |
| HB 85 Response to Questions in Senate Finance 02.16.2022_.pdf |
SFIN 1/31/2022 1:00:00 PM |
HB 85 |