Legislature(1995 - 1996)
03/27/1996 03:11 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 168 - FINANCIAL INSTITUTIONS
CHAIRMAN KOTT brought SB 168 before the committee and noted it was
a banking issue resulting from the Riegle-Neal Interstate Banking
and Branching Efficiency Act passed by the federal government.
Number 0847
WILLIS F. KIRKPATRICK, Director, Division of Banking, Securities
and Corporations, Department of Commerce and Economic Development
(DCED), provided a brief history. Some major national and
international banks had, for the past ten years, pushed for
breaking down the barrier of state boundaries. In 1994, they were
successful in getting the U.S. Congress to pass the Riegle-Neal
Act, which gave states until 1997 to opt into or out of interstate
branching.
MR. KIRKPATRICK explained SB 168 had nothing to do with whether or
not there would be interstate banking or branching in Alaska.
"That was taken care of when we recodified the banking code," he
said. "But we were advised that the Riegle-Neal had some other
aspects about it that Alaska should address. And that is what is
before us now. They're part of the Riegle-Neal bill that will
become effective January of 1997, unless the state of Alaska does
something about it."
Number 0955
MR. KIRKPATRICK referred to the first of three sections, which
addressed agency powers. He explained, "And what this means is
that ... if a national bank put a branch across the street from a
state-chartered bank and offered all the powers that that national
bank had through its national organization across the continental
United States, the state-chartered bank, the small independent bank
across the street, could become an agent for another bank someplace
in the continental United States to provide the same services as
that particular branch of the national in-state branch coming into
the state of Alaska. So, ... it provides for the ability of the
state-chartered banks existing in the state of Alaska to be
competitive with any out-of-state branch bank coming in the state."
Number 1011
MR. KIRKPATRICK referred to Section 1(g) and said although a bank
could ask and get permission to perform agency powers, it could not
do anything illegal under state or national law. "If the bank is
a part of a bank holding company system, you would have the Federal
Reserve limitations, you would have FDIC limitations and state
limitations, but at least the competitor across the street would
have the same limitations," Mr. Kirkpatrick explained. "So, it
provides for an even playing field as far as the state-chartered
banks being competitive with the interstate branches in their
business community."
Number 1068
MR. KIRKPATRICK referred to the limitation on concentration found
in Section 2. "To give you an example, Wells Fargo is in the
process of purchasing First Interstate Bank of Alaska," he said.
"If Wells Fargo purchased Interstate Bank of Alaska and NBA and
First Bank of Anchorage, there would be a high concentration of
insured deposits under the control of one financial institution."
MR. KIRKPATRICK cited an example from Washington state where Bank
of America, Seafirst and Rainier had 73 percent of the state's
deposits under one controller. The Washington attorney general's
office introduced an anti-trust bill as a result. "So, what
Riegle-Neal did was said that the states have until January of 1997
to make a determination as to what that level would be," Mr.
Kirkpatrick said. "If the states did not make a decision, that
level would be set by, and preempted by, Congress at 37 percent."
MR. KIRKPATRICK recounted that he asked the Alaska Bankers
Association whether it should be left at 37 percent. "It was the
bankers that came up and said that 50 percent would be a good
figure," he said, indicating anything that would result in an
acquisition of over 50 percent of insured deposits by an outside
entity would be prohibited. "To give you an example of where we
are now, I think NBA itself has probably between 25 and 30 percent
of insured deposits in the state of Alaska," he said. "So, it was
decided that we would put a level of concentration at 50 percent.
Everybody seems to agree. I have no problem with that. We find
that other states would generally not have problems with that."
Number 1245
MR. KIRKPATRICK referred to Section 3 and said a "depository
institution" in the Alaska Banking Code or Title 6 was generally
defined as an institution whose deposits are insured by an agency
of the federal government.
MR. KIRKPATRICK referred to Section 4 and said it was needed by the
state to communicate with other states on confidential information
concerning banks and branches across state lines. "This is not
foreign to the state of Alaska because Key Bank has several banks
throughout the continental United States, and we have a
responsibility to try to make a determination as to what the
condition of the holding company is that owns and controls its
subsidiary banks," he said. "This section of law allows us to ...
exchange information to other jurisdictions where we have an
interest in the safety and soundness of our institution and they
have an interest in the safety and soundness of their institution
in another jurisdiction who has branches in our state."
Number 1331
CHAIRMAN KOTT referred to Section 1, in which a number of time
lines were established, whereby if DCED did not act, a request
would be considered approved. He asked Mr. Kirkpatrick to comment
on whether 60 days was sufficient time.
MR. KIRKPATRICK replied, "On the general banking business and
banking services that are within the laws of the state and the
federal government, we generally know about those. Now, we would
be able to respond very quickly. If somebody wanted to set up a
service that would be real estate owning and managing, we would be
able to say immediately that we would probably want to have more
information on that, what is your expertise, what is your risk.
So, we generally know what the service field is. So, when somebody
makes an application for us, with the institutions that we know, we
think that 60 days is ample time to respond."
Number 1415
CHAIRMAN KOTT referred again to Section 1, which said the
department shall give appropriate notice to the public. He asked
what that notice contained and what parameters DCED operated under
relating to public notice.
MR. KIRKPATRICK responded, "Every time we do something ... under
Title 6, especially the banking code and the administrative chapter
of Title 6, ... we try to inform the public. To give you an
example we're processing right now, a trust company is coming into
the Anchorage area. Now, we're not required by statute to give
public notice, but we are going to put in the Anchorage paper, and
probably the Fairbanks paper - and I don't know about Southeast -
but we are going to say what's going in, who they are, and where
they're going to be, and where to respond if you have any comments
or questions. So, we try to do that, just administratively. And
we will do the same with this. As a marketing tool, the financial
institution is going to do it way before us, probably. But as the
process, we will place a public notice advertisement saying this is
the action that we're considering."
CHAIRMAN KOTT asked if it was done on a regional basis or
statewide.
Number 1506
MR. KIRKPATRICK replied it depended on the application. "If, for
example, the bank is saying that they were going to offer these
services in Fairbanks, the Anchorage [area], part of the Interior
and Southeast, we would do the publications on a statewide basis,"
he said.
CHAIRMAN KOTT asked how long the public comment period was open.
MR. KIRKPATRICK replied, "We would hold it open for 30 days. We
would always extend the 60 days if there was any question. In
other words, if we ... felt that the public needed to comment, we
would extend the 60-day period for that period of comment."
CHAIRMAN KOTT asked if that was for written comments or whether
there was a public hearing.
MR. KIRKPATRICK stated, "On any protest or concern, we will offer
a public hearing."
CHAIRMAN KOTT asked if it was a fair assessment that Section 1
offered Alaska's banks a more competitive arena for operating.
MR. KIRKPATRICK replied, "That's the sole purpose of this section."
Number 1583
REPRESENTATIVE ROKEBERG asked about the effect of the preemption.
He noted it was a federal preemption and asked if there was a
specific, codified dictate in the federal statute that would have
to be adopted if Alaska did not preempt it.
MR. KIRKPATRICK replied, "The Riegle-Neal bill sets out what there
will be. And so, if we don't take action on this preemption, there
will be -- not be agency powers for the ... state banks. There
will be agency powers for the national banks. There will be
interstate branching for national banks and there will not be
interstate branching for state banks, as far as the services are
concerned." Mr. Kirkpatrick then said he had misspoke and that
Alaska statute provides for interstate branching now. "If we don't
pass this, I'm restricted as ... to what information I can give to
other jurisdictions," he said. "I can share information with the
FDIC and the Federal Reserve but I can't share information with
other state jurisdictions."
Number 1656
REPRESENTATIVE PORTER referred to Section 1(g), which said a state
bank may not, under an agency agreement, provide by itself through
an agent an activity that the state bank may not conduct under
applicable state and federal law. Representative Porter asked:
"Well, if it can't, what is it having the agreement to do?"
MR. KIRKPATRICK offered an example. Alaska Bank of Commerce had
decided to provide services for which is did not have expertise.
They cut a deal with someone from First Interstate that resulted in
Alaska Bank of Commerce becoming a franchise of First Interstate
Corporation of California. The sole purpose was to offer services
in Anchorage under the name Interstate Bank of Alaska. Mr.
Kirkpatrick concluded, "And so, what this will do is give the small
community bank an opportunity to be an agent for expertise outside
the state of Alaska."
Number 1768
CHAIRMAN KOTT referred to Mr. Kirkpatrick's comment regarding the
50-percent-or-more concentration of deposits. He asked what other
states were doing and whether their limits were higher, lower, or
flexible.
MR. KIRKPATRICK replied, "Other states have not found any
particular problem with the 50 percent. As you're a larger state,
and with a larger number of financial institutions, you find
actually that the percentages go down. So, it would be closer to
the 37 percent. In the smaller states, it doesn't take too much to
build up that concentration very quickly. We felt that 50 percent
would be appropriate for the state of Alaska. We've had a great
deal of concentration in the last 20 years."
Number 1849
CHAIRMAN KOTT referred to the sectional comments, the last sentence
of which read, "Without action by the end of this session, the
preemptive provision of the Riegle-Neal Act become effective." He
asked if that was accurate.
MR. KIRKPATRICK replied he believed it was January 1, 1997.
CHAIRMAN KOTT indicated that was something to think about for
prioritizing.
Number 1919
REPRESENTATIVE ELTON moved that SB 168 move from committee with the
attached zero fiscal note and individual recommendations. There
being no objection, it was so ordered.
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