Print Friendly HOUSE BILL NO. 136 – Banking laws, misc amens
HOUSE BILL NO. 136
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BANKING - Amends and repeals existing law relating to banking to remove
language referencing personal financial statements submitted by certain
officers and directors; to remove language referencing first liens; to
require certain executive officers and directors receiving extensions of
credit to submit financial statements to be made available to regulatory
agencies; to provide that borrowings from federal home loan banks shall not
be included for purposes of computing total borrowings; to allow for
extensions of examination periods under certain conditions; to revise
definitions; to prohibit specific conduct relating to use of the name,
trademark, service mark or logo of a financial institution; to provide for
certain actions by financial institutions to enjoin prohibited conduct; and
to recover damages.
02/08 House intro - 1st rdg - to printing
02/09 Rpt prt - to Bus
02/14 Rpt out - rec d/p - to 2nd rdg
02/15 2nd rdg - to 3rd rdg
02/19 3rd rdg - PASSED - 46-23-1
AYES -- Anderson, Bayer, Bell, Bilbao, Black, Block, Bock, Boe, Bolz,
Brackett, Bradford, Chadderdon, Chavez, Chew, Collins, Crane, Durst,
Edmunson, Eskridge, Hagedorn, Henbest, Henderson, Jaquet, Killen,
King, Mathews, Nonini, Pasley-Stuart, Patrick, Pence, Raybould, Ring,
Ringo, Ruchti, Rusche, Sayler, Schaefer, Shepherd(2), Shirley,
Shively, Smith(30), Snodgrass, Stevenson, Trail, Wills, Mr. Speaker
NAYS -- Andrus, Barrett, Bedke, Clark, Hart, Harwood, Kren, Labrador,
Lake, LeFavour, Loertscher, Luker, Marriott, McGeachin, Mortimer,
Moyle, Nielsen, Shepherd(8), Smith(24), Thayn, Vander Woude,
Absent and excused -- Roberts
Floor Sponsor - Black
Title apvd - to Senate
02/20 Senate intro - 1st rdg - to Com/HuRes
03/07 Rpt out - rec d/p - to 2nd rdg
03/08 2nd rdg - to 3rd rdg
03/13 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Gannon, Geddes,
Goedde, Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst,
Little, Lodge, Malepeai, McGee, McKague, McKenzie, Pearce,
Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
NAYS -- None
Absent and excused -- None
Floor Sponsor - Andreason
Title apvd - to House
03/14 To enrol
03/15 Rpt enrol - Sp signed - Pres signed
03/16 To Governor
03/21 Governor signed
Session Law Chapter 126
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 136
BY BUSINESS COMMITTEE
1 AN ACT
2 RELATING TO BANKING; AMENDING SECTION 26-213, IDAHO CODE, TO REMOVE LANGUAGE
3 REFERENCING PERSONAL FINANCIAL STATEMENTS SUBMITTED BY CERTAIN OFFICERS
4 AND DIRECTORS; REPEALING SECTION 26-504, IDAHO CODE, RELATING TO BANK
5 HOLDING COMPANIES EXISTING IN 1979; AMENDING SECTION 26-703, IDAHO CODE,
6 TO REMOVE LANGUAGE REFERENCING FIRST LIENS; AMENDING SECTION 26-706, IDAHO
7 CODE, TO REVISE DESCRIPTIVE LANGUAGE, TO REQUIRE CERTAIN EXECUTIVE OFFI-
8 CERS AND DIRECTORS RECEIVING EXTENSIONS OF CREDIT TO SUBMIT FINANCIAL
9 STATEMENTS TO BE MADE AVAILABLE TO REGULATORY AGENCIES AND TO MAKE A TECH-
10 NICAL CORRECTION; AMENDING SECTION 26-801, IDAHO CODE, TO PROVIDE THAT
11 BORROWINGS FROM FEDERAL HOME LOAN BANKS SHALL NOT BE INCLUDED FOR PURPOSES
12 OF COMPUTING TOTAL BORROWINGS AND TO MAKE A TECHNICAL CORRECTION; AMENDING
13 SECTION 26-1102, IDAHO CODE, TO ALLOW FOR EXTENSIONS OF EXAMINATION
14 PERIODS UNDER CERTAIN CONDITIONS; AMENDING SECTION 26-2802, IDAHO CODE, TO
15 REVISE DEFINITIONS; AMENDING SECTION 67-2752, IDAHO CODE, TO PROHIBIT SPE-
16 CIFIC CONDUCT RELATING TO THE USE OF THE NAME, TRADEMARK, SERVICE MARK OR
17 LOGO OF A FINANCIAL INSTITUTION; AND AMENDING SECTION 67-2756, IDAHO CODE,
18 TO REVISE DESCRIPTIVE LANGUAGE AND TO PROVIDE FOR CERTAIN ACTIONS BY
19 FINANCIAL INSTITUTIONS TO ENJOIN PROHIBITED CONDUCT AND TO RECOVER DAM-
21 Be It Enacted by the Legislature of the State of Idaho:
22 SECTION 1. That Section 26-213, Idaho Code, be, and the same is hereby
23 amended to read as follows:
24 26-213. BOARD OF DIRECTORS -- ELECTION, MEETINGS, DUTIES, LIABILITIES,
25 OATH, REMOVAL -- OFFICERS -- ELECTION AND BOND. (1) The affairs, business and
26 property of a bank shall be managed and controlled by a board of not less than
27 five (5) directors, who shall be elected by the stockholders at their regular
28 stated annual meetings. A majority of said directors shall be residents of the
29 state of Idaho.
30 (2) No person shall be eligible to serve as a director of any bank orga-
31 nized or existing under the laws of this state, unless he shall be the owner
32 in his own right of unhypothecated common stock of the bank in the amount of
33 at least five hundred dollars ($500) par value. One (1) or more of the direc-
34 tors of a bank, the majority of the common stock of which is owned by a bank
35 holding company, may satisfy the requirement of this subsection by owning in
36 his own right at least five hundred dollars ($500) of the unhypothecated com-
37 mon stock of the bank holding company, either the par value or the book value.
38 (3) Any vacancy in the board of directors shall be filled by the board,
39 and any directors so appointed shall hold office until the next annual meeting
40 of stockholders. The board of directors shall immediately following each
41 annual meeting of stockholders organize and elect a president, vice-president
42 and cashier, who may also be the secretary and treasurer of the bank, and such
43 other officers as shall be provided for in the bylaws, and shall fix the sal-
1 ary of all officers and employees or delegate such authority to its managing
2 officer or officers. Directors of every bank shall hold at least ten (10)
3 meetings per year; provided, no more than sixty-five (65) days may elapse
4 between board of directors meetings, and complete records of such meetings
5 shall be entered in the minute book and signed by both the chairman and the
6 secretary. The director may approve, upon written application, a reduction in
7 the number and frequency of directors' meetings.
8 (4) Whenever a vote is taken upon any matter, a record shall be kept and
9 entered in the minutes of those voting in the affirmative and those voting in
10 the negative. At every meeting it shall be the duty of the directors to famil-
11 iarize themselves with loans and investments made since the previous regular
12 meeting and any director may request a listing of all loans made since the
13 previous regular meeting. It shall be the duty of the president and cashier to
14 furnish such information to the directors. The directors shall familiarize
15 themselves with the existing liabilities to the bank of every officer and
16 director of their bank at least once during each calendar year. The minutes of
17 the meeting shall record the approval or disapproval of loans, investments and
18 liabilities of officers. Each officer and director who borrows money from the
19 bank shall submit his personal financial statement to the chief executive
20 officer of the bank at least once during each calendar year and such financial
21 statements shall be made available to federal or state regulatory agencies
22 upon request by the agency.
23 (5) Any director, officer or person who shall participate in any viola-
24 tion of the laws of this state relative to banks or banking, shall be liable
25 for all damages which said bank, its stockholders, depositors, or creditors
26 shall sustain in consequence of such violation. It shall be the duty of every
27 director of a bank personally to attend all meetings of the board of directors
28 unless unavoidably detained therefrom. Any director who shall habitually
29 absent himself from such meeting shall be deemed to have participated in any
30 violation of law that may have occurred in his absence, and he shall not be
31 permitted to set up such absence as a defense thereto.
32 (6) Every director shall take and subscribe an oath that he will dili-
33 gently and honestly perform his duty in such office and will not knowingly
34 violate or permit a violation of any provisions of the bank act, and such oath
35 of office shall be transmitted to and filed with the department of finance. A
36 director may be removed from office at any time for violation of his oath of
37 office by the affirmative vote of two-thirds (2/3) of the entire board, exclu-
38 sive of the director to be removed.
39 (7) Every active officer and employee of any bank in this state shall
40 furnish a surety bond in the penal sum of fifty thousand dollars ($50,000) to
41 the bank by which he is employed for the faithful performance of his duties,
42 executed by a surety company authorized to do business in the state of Idaho
43 as a surety. In lieu of the individual surety bonds required by this section,
44 a bank may provide a bankers blanket or financial institution bond in a mini-
45 mum amount of two hundred fifty thousand dollars ($250,000). The conditions of
46 such bond, whether the instrument so describes the conditions or not, shall be
47 that the principal shall protect the obligee against any loss or liability
48 that the obligee may suffer or incur by reason of the acts of dishonesty of
49 the principal.
50 (8) In lieu of the bonds required in subsection (7) of this section, a
51 bank may, with the approval of the director of the department of finance, pro-
52 vide to the director a certificate of deposit issued by any other bank in the
53 state of Idaho. The principal amount of the certificate of deposit shall be
54 payable to the director and shall be in an amount to be determined by the
55 director, but not less than two hundred fifty thousand dollars ($250,000). The
1 interest on the certificate of deposit shall be payable to the bank providing
2 the certificate of deposit to the director. The certificate of deposit shall
3 be maintained at all times the bank is authorized to do business under this
4 chapter, and for a period of time thereafter to be determined by the director,
5 but not to exceed three (3) years.
6 (9) Every bank shall provide adequate insurance protection or indemnity
7 against robbery and burglary and other similar insurable losses.
8 (10) All surety bonds shall be approved by and filed with the directors.
9 The directors or the director may require an increase of the amount of any
10 such bond whenever either the directors or the director deem necessary for the
11 better protection of the bank.
12 SECTION 2. That Section 26-504, Idaho Code, be, and the same is hereby
14 SECTION 3. That Section 26-703, Idaho Code, be, and the same is hereby
15 amended to read as follows:
16 26-703. REAL ESTATE LOANS. Any bank may make real estate loans secured by
17 first liens upon improved real estate, including improved farm land and
18 improved business and residential properties, as are consistent with safe and
19 sound banking practices. A loan secured by real estate within the meaning of
20 this section shall be in the form of an obligation or obligations secured by
21 mortgage, trust deed, or other such instrument which shall constitute a lien
22 upon real estate.
23 SECTION 4. That Section 26-706, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 26-706. LOANS TO OFFICERS AND DIRECTORS. Except as authorized under this
26 section, no bank may extend credit in any manner to any of its own executive
27 officers. Any extension of credit under this section must be approved by the
28 board of directors of the bank, and may be made only if such credit extension
29 comports with the principles of safety and soundness and is in compliance with
30 regulation O of the board of governors of the federal reserve system, 12
31 C.F.R. CFR 215. Each executive officer and director who receives an extension
32 of credit from the bank shall submit a personal financial statement to the
33 chief executive officer of the bank at least once during each calendar year
34 and such financial statement shall be made available to federal or state regu-
35 latory agencies upon request by the agency.
36 SECTION 5. That Section 26-801, Idaho Code, be, and the same is hereby
37 amended to read as follows:
38 26-801. BORROWING MONEY -- LIMITATIONS. At no time shall the total bor-
39 rowings of any bank exceed in the aggregate an amount equal to the capital
40 structure of the bank, except with the consent of the director.
41 For the purpose of computing total borrowings the following items shall
42 not be included:
43 (1) Federal funds purchased.
44 (2) The sale of securities by a bank, under an agreement to repurchase at
45 the end of a stated period.
46 (3) Borrowings from the Ffederal Rreserve Ssystem.
47 (4) The sale of mortgage loans by a bank, under agreement to repurchase
48 at the end of a stated period.
1 (5) Money borrowed to meet seasonal requirements.
2 (6) Money borrowed to meet unexpected withdrawals.
3 (7) Capital notes issued in accordance with section 26-802, Idaho Code.
4 (8) Borrowing from federal home loan banks.
5 The total of all borrowings by a bank including those items excluded from
6 the computation of total borrowings may not exceed in the aggregate an amount
7 equal to two and one-half (2 1/2) times the capital structure of the bank,
8 except with the consent of the director.
9 Whenever it shall appear to the director that a bank is borrowing money in
10 excess of the above limitation, or for purposes other than as specified above,
11 he may require it to reduce such borrowings within a time to be fixed by him.
12 SECTION 6. That Section 26-1102, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 26-1102. EXAMINATION BY DEPARTMENT. (1) The director may examine no less
15 often than once in eighteen (18) months, and more frequently whenever he shall
16 deem it necessary, all records and other documents in the possession of or
17 relating to the bank, bank trust department including records in the custody
18 of a data processor or other person or company. For this purpose, the director
19 shall have authority to demand and inspect all books, papers, moneys, notes,
20 bonds, or evidences of debt of such bank and may examine on oath any of the
21 directors, officers, agents, employees, customers, or depositors of such bank.
22 Any willful false swearing in any examination shall be deemed perjury. During
23 examinations, the directors, officers and employees shall give any assistance
24 required by the director, but no examiner shall interfere with the routine
25 duty of such directors, officers and employees.
26 (2) Whenever it shall come to the notice of the director that any bank
27 has failed or refused to comply with any of the provisions of this act, the
28 director is authorized to make a special examination of said bank and to
29 charge and collect for such special examination; and to continue such examina-
30 tions and charges at intervals of not less than thirty (30) days until such
31 provisions are complied with.
32 (3) The director may in his discretion at any time omit his examination
33 of any bank as above required and accept in lieu thereof the findings or
34 result of an examination of such bank made by any bank regulatory or insuring
35 agency of the United States authorized to make such examination.
36 (4) The director may in his discretion extend the examination period to
37 no less often than once in twenty-four (24) months if:
38 (a) The bank has total assets of less than one billion dollars
40 (b) The bank is well capitalized, as defined in 12 U.S.C. section 1831o,
41 the federal deposit insurance act;
42 (c) When the bank was most recently examined, it was found to be well-
43 managed and its composite condition was found to be outstanding or good;
45 (d) The bank is not currently subject to a formal enforcement proceeding
46 or order by the department or the appropriate federal banking agency.
47 SECTION 7. That Section 26-2802, Idaho Code, be, and the same is hereby
48 amended to read as follows:
49 26-2802. DEFINITIONS. As used in this chapter:
50 (1) "Department" means the department of finance of the state of Idaho.
51 (2) "Director" means the director of the department of finance.
1 (3) "Mortgage company" means any person who, directly or indirectly is
2 engaged in one (1) of the following: with respect to real property located in
3 this state:
4 (a) Makes or offers to make residential mortgage loans. secured by liens
5 on real property.
6 (b) Services or offers to service residential mortgage loans. secured by
7 liens on real property.
8 (c) Buys or sells, promissory notes secured by liens on real property or
9 offers to buy or sell promissory notes secured by liens on real property
10 or offers to buy or sell, residential mortgage loans.
11 (4) "Person" means an individual, sole proprietorship, partnership, cor-
12 poration or other association of individuals, however organized.
13 (5) "Residential mortgage loan" means a loan made primarily for personal,
14 family or household use and is primarily secured by a security interest on
15 residential real property located in this state.
16 SECTION 8. That Section 67-2752, Idaho Code, be, and the same is hereby
17 amended to read as follows:
18 67-2752. FINANCIAL FRAUD ILLEGAL. It is unlawful for any person, directly
19 or indirectly:
20 (1) To employ any device, scheme or artifice to defraud a financial
22 (2) To obtain or attempt to obtain money, funds, credits, assets, securi-
23 ties, or other property owned by, or under the custody or control of a finan-
24 cial institution by means of false or fraudulent pretenses, representations,
25 or promises or through the use of any fraudulent device, scheme, artifice, or
26 fraudulent monetary instrument;
27 (3) To falsely represent that a person is a financial institution or a
28 representative of a financial institution, for the purpose of obtaining money,
29 goods, or services from any person;
30 (4) To obtain or record or attempt to obtain or record, personal identi-
31 fying information of another person without the authorization of that person,
32 for the purpose of obtaining money, goods, or services from any person,
33 through a false or fraudulent representation that the person doing so is a
34 financial institution. "Personal identifying information" has the same meaning
35 as set forth in section 18-3122(10), Idaho Code, or any successor to that sec-
37 (5) To fraudulently make, emboss, encode, or use a financial transaction
38 card, financial transaction card account number, personal identification code
39 or credit card sales draft, as defined in sections 18-3122, 18-3123, 18-3124
40 and 18-3125A, Idaho Code, or any successors to those sections, for the purpose
41 of obtaining money, goods, or services from any person; or
42 (6) While serving as an employee, agent or representative of a financial
43 institution, to obtain or attempt to obtain the money, funds, credits, assets,
44 securities, or other property owned by, held by, or under the custody or con-
45 trol of, the financial institution by means of false or fraudulent pretenses,
46 representations, or promises or by means of any fraudulent device, scheme or
47 artifice, or through the use of a fraudulent monetary instrument.
48 (7) To use in a manner likely to cause confusion or mistake or to
49 deceive, the name, trademark, service mark, or logo of a financial institution
50 in connection with the sale, offering for sale, distribution or advertising of
51 any product or service without the consent of the financial institution.
52 SECTION 9. That Section 67-2756, Idaho Code, be, and the same is hereby
1 amended to read as follows:
2 67-2756. CUSTOMER INDEMNIFICATION PRIVATE REMEDIES. (1) In the event a
3 financial institution indemnifies its customer for damages caused by a viola-
4 tion of this act, or assumes the loss caused its customer by a violation of
5 this act, the financial institution shall be entitled to sue the violator, at
6 law or in equity, to recover any actual damages suffered by its customer, plus
7 costs and attorney's fees incurred in the bringing of the action.
8 (2) A financial institution may bring an action to enjoin the use prohib-
9 ited in section 67-2752(7), Idaho Code, and recover all damages suffered by
10 reason of the prohibited use, including reasonable attorney's fees. The finan-
11 cial institution may recover any profits derived from the prohibited use.
STATEMENT OF PURPOSE
The purpose of this bill is to amend the Idaho Bank Act to address
several items best described as "housekeeping" as well as to add
new provisions. Changes include: Moving some provisions of code to
a more appropriate section; repealing a section which by its own
terms no longer has any application; removing an obsolete
limitation on real estate loans made by banks; adding language to
allow for borrowings from federal home loan banks on the same
footing as borrowings from federal reserve banks; bringing state
law into conformity with federal law in connection with the
documentation required in connection with loans to bank officers
and directors; allowing the Director of the Department of Finance
to extend the examination period for banks defined as well-
capitalized and well-managed; clarifying themortgage company
chapter of the Bank Act to confirm that it covers residential, not
commercial, mortgage loans; expanding the definition of financial
fraud to prohibit using the trademark, service mark or logo of a
financial institution in a manner intended to cause confusion or
mistake or to deceive consumers; and allowing banks to bring legal
action against those who commit that financial fraud.
This bill will have no impact on the general fund.
Name: Rep. Max Black 332-1139
Sen. John Andreason 332-1333
Patrick V. Collins 388-4828
Counsel for Idaho Bankers Assn.
STATEMENT OF PURPOSE/FISCAL NOTE H 136