Legislature(2021 - 2022)BELTZ 105 (TSBldg)
01/19/2022 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB44 | |
| HB85 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 44 | TELECONFERENCED | |
| *+ | HB 85 | TELECONFERENCED | |
HB 85-FINANCIAL INSTITUTIONS; LIABILITY
2:22:58 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of CS FOR HOUSE BILL NO. 85(L&C) "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."
2:23:16 PM
REPRESENTATIVE BART LEBON, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 85, stated that HB 85 seeks to achieve
parity and level the competitive playing field between state
chartered banks and national chartered banks. Alaska has seven
commercial banks, three of which are nationally chartered and
four that are state chartered. The bill also has language that
levels the playing field between a mutual bank, of which there
is one in Alaska, and state stock-owned banks. He noted that
the sectional analysis references mutual banks.
REPRESENTATIVE LEBON related that he was previously employed at
Mount McKinley Bank in Fairbanks, which is a mutual bank, and at
the National Bank of Alaska that is now Wells Fargo.
He related that he worked with the Alaska Bankers Association
and the state Division of Banking and Securities to update state
banking statutes to ensure that all banks have an equal
opportunity to offer Alaskans and businesses banking services.
HB 85 is the result, and all seven commercial banks and the
Division of Banking and Securities support HB 85.
2:25:45 PM
SENATOR STEVENS asked for the difference between national and
state chartered banks.
REPRESENTATIVE LEBON provided a personal experience to respond
to the question. When he worked on commercial loans at the
National Bank of Alaska, national banking law allowed him to
loan at 80 percent of the value of the asset, whereas state law
allowed state chartered banks to loan at just 75 percent of the
value of the asset. That is a competitive disadvantage to state
chartered banks.
SENATOR STEVENS asked how HB 85 fixes that issue.
REPRESENTATIVE LEBON explained that it would align loans to
value, types and dollar amounts of loans, management of banks'
deposit base, and investment and loan portfolio management.
SENATOR REVAK made a motion to clarify that the committee was
considering CSHB 85(L&C), which was the version that passed the
House.
CHAIR COSTELLO asked Joseph Byrnes to walk through the sectional
analysis for HB 85.
2:27:54 PM
JOSEPH BYRNES, Staff, Representative Bart LeBon, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for HB 85 on behalf of the sponsor, which read as follows:
[Original punctuation provided with some formatting changes.]
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: Adds the option for posting
notices of publication of bank reports on a bank's
internet website vs. physical posting in the bank
lobby.
MR. BYRNES added that the requirement that a copy of the report
of condition be supplied upon request at no cost is unchanged,
but it makes state law more consistent with federal regulations
for nationally chartered banks that do not have the requirement
to post notices of financial reports.
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.
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).
MR. BYRNES explained that this changes aligns with the barring
limit for national banks
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
write-down will be dictated by Generally Accepted
Accounting Principles (GAAP).
MR. BYRNES explained that this is consistent with federal
regulations governing nationally chartered banks.
2:31:43 PM
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.
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.
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.
MR. BYRNES explained that this achieves parity by authorizing
state chartered banks to pledge assets for interest rate swaps
the same as for nationally chartered banks. National banks are
regulated by Section 610 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act.
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.
MR. BYRNES noted that federal regulation requires all nationally
chartered banks to be FDIC insured and all banks in Alaska are
so insured.
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. [This is the same as
Section 19 for state chartered 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.
MR. BYRNES stated that this brings parity with nationally
chartered banks that do not have a required number of board
meetings.
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.
2:35:06 PM
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.
MR. BYRNES explained that this raises the amount that may be
borrowed from a mutual bank from five percent to no more than 15
percent of assets.
Sec. 15. AS 06.15.190
Expands the deposits that mutual banks can accept.
MR. BYRNES noted that Sec. 15 allows state mutual banks to
accept the same deposits as nationally chartered mutual banks,
which received expanded authority to accept deposits under the
federal Depositary Institutions Deregulation and Monetary
Control Act of 1980.
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.
Sec. 18. AS 06.15.250
Providing mutual banks with the same lending
opportunities as state banks.
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.
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.
2:39:05 PM
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.
2:40:38 PM
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 & 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.
? 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".
2:42:36 PM
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
for Sections 1, 10, 12, and 19 to provide the
Department time to promulgate regulations for changes
of bank locations and establishing branch banks.
MR. BYRNES stated that the effective date currently is set to
January 2022 but the sponsor would like the committee to
conceptually amend that date to January 2023.
Sec. 28. Immediate Effective Date
MR. BYRNES explained that the immediate effective date would
apply to all but those sections listed in Section 27.
2:44:34 PM
At ease
2:46:37 PM
CHAIR COSTELLO reconvened the meeting and turned to invited
testimony.
2:46:54 PM
JOE SCHIERHORN, Chair, President, and Chief Executive Officer
(CEO), Northrim Bank, Anchorage, Alaska, stated that he is a
member and past president of the Alaska Bankers Association,
which represents the seven banks that operate in Alaska. These
include: the state chartered Denali State Bank, Mt. McKinley
Bank, 1st Bank of Ketchikan, and Northrim Bank, as well as
KeyBank, Wells Fargo, and First National Bank Alaska, which are
national banks chartered by the Office of the Comptroller of the
Currency. He reported that all seven banks support HB 85, and
the four state chartered banks have submitted letters that are
in the bill packets.
MR. SCHIERHORN stated that the Alaska Bankers Association has
worked in concert with the Division of Banking and Securities on
HB 85, the provision of which will provide meaningful updates to
the banking code. He expressed gratitude to the sponsor for
introducing the bill which is essential to better serve bank
customers in Alaska; create parity between laws and regulations
governing the various types of financial institutions that
operate in Alaska; keep Alaska chartered banks competitive with
other financial institutions; keep pace with the technology
advances in banking; and enable efficient operations.
2:50:39 PM
DAVID DURHAM, Executive Vice President and Chief Credit
Administrator, Mt. McKinley Bank, Fairbanks, Alaska, stated that
he is also the secretary-treasurer for the Alaska Bankers
Association. He related that Mt. McKinley Bank is Alaska's only
mutual bank. It is owned by its depositors and its structure
lies between a commercial bank and credit union. The focus is to
provide customer service to local communities rather than
generating dividends for shareholders. He shared that Mt.
McKinley Bank recently earned another outstanding CRA rating
from the FDIC, demonstrating its commitment to serving the
banking and commercial needs of communities.
MR. DURHAM opined that HB 85 will modernize banking regulations
in Alaska and provide parity for Alaska banks chartered under AS
06.05 with national banks. It also modernizes and gives parity
to the state's home and mutual banks regulated under AS 06.15,
which still contains provisions for mutual banks that became
obsolete when savings and loans were deregulated in 1980. HB 85
seeks to update banking regulations to take advantage of new
technology and accounting standards, and levels the playing
field. He said Alaska's banks have always enjoyed a friendly
competitive environment, but today the competition has grown to
include numerous online financial institutions that have
captured a significant share of the Alaska market. HB 85 also
brings parity between commercial banks and mutual banks for
lending, investing, and borrowing.
MR. DURHAM said HB 85 repeals AS 06.15.180 and allows mutual
banks the same borrowing capacity as commercial banks. It also
removes antiquated provisions of AS 06.15.150 - .170, which
required mutual banks to sequester up to 10 percent of its
annual net earnings into a surplus reserve account that may only
be used to meet losses. Since 1970, all financial institutions
have been required to reserve for losses under the Financial
Accounting Standards Board (FASB) regulation FAS 5 and FAS 114.
AS 06.15.150 - .170 require that mutual banks duplicate the
reserve requirement. HB 85 repeals these sections and brings
parity to both state and national banks.
Finally, he said HB 85 adds provisions to AS 06.03 that mirror
the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA). These regulations protect lenders from
environmental liability when they foreclose on contaminated
properties. CERCLA requires that lenders cannot participate in
the management of the property and must take reasonable steps to
divest the property in the earliest practicable and
environmentally reasonable manner to avoid liability. This
provision gives Alaska lenders the same protections available to
lenders in other states and allows continued lending to local
businesses vital to the health of Alaska communities.
2:54:45 PM
SENATOR STEVENS asked why credit unions are not members of the
Alaska Bankers Association and if they have the parity afforded
to federal, state, and mutual banks.
MR. DURHAM offered that credit unions already enjoy advantages
not available to banks. They are not regulated by the Community
Reinvestment Act and do not pay tax on their income.
SENATOR STEVENS asked the sponsor to supplement the response.
REPRESENTATIVE LEBON explained that federal banking laws require
banks to offer loans to all parts of the community from which
they collect deposits, whereas credit unions are not required to
do so. The bill seeks to level the playing field by extending
banks the advantages credit unions currently enjoy. He added
that he has not heard credit unions in Alaska raise concerns
about the bill.
SENATOR STEVENS asked if he is saying that the bill bring parity
for state, national, and mutual banks to the credit union
position.
REPRESENTATIVE LEBON clarified that HB 85 seeks to address the
major differences between state chartered and federally
chartered banks.
2:59:06 PM
ROBERT SCHMIDT, Director, Division of Banking and Securities,
Department of Commerce, Community and Economic Development
(DCCED), Anchorage, Alaska, stated that the division serves as
the primary regulator of the four state chartered banks in
Alaska, following the Alaska banking statutes. The nationally
chartered banks have had the advantage of broader powers from
updated federal laws, which has created a disparity between the
two banking systems. There has been a collaborative effort
between the Alaska Bankers Association and the division to
bridge the gap between the state and federal law. HB 85
modernizes Alaska's banking law to bring parity between state
and national banks and level the playing field. HB 85 will help
banks to become competitive with modern best practices and the
evolution of the financial services they provide. The Division
of Banking and Securities supports HB 85.
3:00:17 PM
CHAIR COSTELLO opened public testimony for HB 85; finding none,
she closed it.
3:00:38 PM
SENATOR GRAY-JACKSON moved Conceptual Amendment 1 to HB 85.
CONCEPTUAL AMENDMENT 1
Page 12, line 6:
Delete: "2022"
Insert "2023"
3:01:03 PM
CHAIR COSTELLO found no objection and Conceptual Amendment 1 was
adopted.
3:01:09 PM
SENATOR REVAK moved to report the [Senate CS] for CSHB 85, work
order 32-LS0371\G, as amended, from committee with individual
recommendations and attached fiscal note(s).
3:01:31 PM
CHAIR COSTELLO found no objection and SCS CSHB 85(L&C) was
reported from the Senate Labor and Commerce Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CSHB 44 (STA) Sectional Analysis version I - 01.19.21.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| HB 44 Fiscal Note 2360 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| CSHB 44 (HSTA) Conceptual Amendment 1 - 1.19.22.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 44 |
| HB 85 Fiscal Note 2360 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| HB 85 Fiscal Note 2808 - DCCED.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| HB 85 Fiscal Note 3094 - DEC.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |
| CSHB 85 (HL&C) Conceptual Amendment 1 - 1.19.22.pdf |
SL&C 1/19/2022 1:30:00 PM |
HB 85 |