Legislature(1995 - 1996)
02/21/1996 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 168
An Act relating to financial institutions.
Co-chairman Halford directed that SB 168 be brought on for
discussion. SHERMAN ERNOUF, aide to Senator Kelly, came
before committee. He advised that the legislation was
introduced at the request of the Division of Banking,
Securities, and Corporations. As background information,
Mr. Ernouf explained that congressional passage of the
Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 overrides state law in a number of areas. It also
allows states to address provisions in the Act and effect
remedies before the 1996 deadline. Alaska anticipated most
of the federal changes in recent recodification of Alaska
banking law. SB 168 contains provisions needed to correct
state law before the congressional act goes into effect.
Changes relate to:
1. Agency activities between Alaska banks and banks
in other states.
2. Examination sharing agreements between state bank
regulators.
3. Deposit concentration limits on mergers and
purchases of Alaska banks by outside banks.
The Alaska Bankers' Association endorses the legislation.
All banks within the state have "passed" on the language and
the intent of the bill.
WILLIS KIRKPATRICK, Director, Division of Banking,
Securities, and Corporations, Dept. of Commerce and Economic
Development, came before committee. He explained that 1994
recodification of state banking law showed that "state
barriers/boundaries were falling down." There was a massive
push by large national and international banks for
congressional action on interstate branching. The large
banks wanted branches across state lines. The congressional
act allows states until 1997 to decide whether or not they
wish to opt in or out of interstate branching. Alaska's
recodification provides for that type of branching. A bank
from another state could buy an existing bank or existing
branch. Alaska opted in before Congress made specific
determinations. However, federal law contains other
optional provisions upon which the state must act by 1997.
One of those provisions relates to agency powers. The
Division of Banking, Securities, and Corporations has
determined that full agency powers would be appropriate in
Alaska. That means that if a large international or
interstate bank locates in Alaska and imports many of its
services and becomes aggressive in the marketplace, the
local community bank may enter an agreement with a bank
outside the state to serve as an agent for the outside bank
and thus compete with the large national or international
bank.
Federal law also allows states to address the question of
concentration (the outside purchase of deposits in Alaska).
A limit of 50% is proposed. Mr. Kirkpatrick cited, as an
example, the fact that National Bank of Alaska has insured
deposits of 24 to 30%.
Federal law also allows states to share agreements and
examinations across state lines. Under that provision, the
Division of Banking, Securities, and Corporations would
cooperate with other states and jurisdictions in sharing
bank examination information.
Senator Randy Phillips asked if consumers would experience
any side effects as a result of proposed law. Mr.
Kirkpatrick responded, "Not that I know of."
Senator Rieger directed attention to page 3, line 7, and
inquired regarding a definition for "financial institution."
Mr. Kirkpatrick explained that "depository institution" is
defined in Title 6, Chapter 1. Financial institutions are
included within that definition. It refers to financial
institutions whose deposits are insured by an agency of the
federal government.
Senator Rieger next referenced page 1, Section 1, and noted
that subsections (a) through (f) speak to state banks acting
as agents for other entities. Subsection (g) appears to
reverse the process and allow state banks to contract with
other entities to render services. The Senator pointed
specifically to language at page 2, line 19, and asked for
an explanation of "by itself through an agent." Mr.
Kirkpatrick said that wording prevents a state bank, acting
as an agent for an outside bank, from conducting activities
prohibited by applicable state or federal laws. Senator
Rieger expressed continuing concern that language might
impact situations where a state bank might be using an agent
rather than serving as an agent.
Co-chairman Halford acknowledged a teleconference connection
to Anchorage and asked if individuals wished to testify.
RON KUKIS, First Interstate Bank of Alaska, advised that he
and Jerry Weaver, National Bank of Alaska, were available to
answer questions.
Co-chairman Frank asked if federal law establishes a limit
on concentration. Willis Kirkpatrick said that under the
Riegle-Neal Act, Congress would set the limit at 37% if the
state does not take alternative action. Most states
presently rely on antitrust provisions. Co-chairman Frank
voiced his understanding that the state would preempt
imposition of 37% by enacting 50%. Mr. Kirkpatrick
concurred.
Senator Rieger MOVED that SB 168 pass from committee with
individual recommendations. No objection having been
raised, SB 168 was REPORTED OUT of committee with a zero
fiscal note from the Dept. of Commerce and Economic
Development. Co-chairmen Halford and Frank and Senators
Rieger and Phillips signed the committee report with a "do
pass" recommendation. Senators Donley and Zharoff signed
"no recommendation."
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