2007 Legislation
Print Friendly

HOUSE BILL NO. 136 – Banking laws, misc amens

HOUSE BILL NO. 136

View Bill Status

View Bill Text

View Statement of Purpose / Fiscal Impact



Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Bill Status



H0136...........................................................by BUSINESS
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,
      Wood(27), Wood(35)
      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
         Effective: 07/01/07

Bill Text


                                                                        
                                                                        
  ]]]]              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-
 20        AGES.
                                                                        
 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-
                                                                        
                                       2
                                                                        
  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
                                                                        
                                       3
                                                                        
  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
 13    repealed.
                                                                        
 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.
                                                                        
                                       4
                                                                        
  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
 39        ($1,000,000,000);
 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;
 44        and
 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.
                                                                        
                                       5
                                                                        
  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
 21    institution;
 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-
 36    tion;
 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
                                                                        
                                       6
                                                                        
  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 / Fiscal Impact



                       STATEMENT OF PURPOSE

                             RS 16866

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.


                           FISCAL NOTE

This bill will have no impact on the general fund.




Contact
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