S.B. 100

1

FINANCIAL INSTITUTION AMENDMENTS
2 1997 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: L. Alma Mansell
5 AN ACT RELATING TO FINANCIAL INSTITUTIONS; AMENDING POWERS AND
6 DUTIES OF COMMISSIONER OF FINANCIAL INSTITUTIONS; REVISING FEES;
7 AMENDING APPLICATION PROCEDURE; AMENDING POWERS, RIGHTS, AND
8 PRIVILEGES OF BANKS; AMENDING BANK PROHIBITED INVESTMENTS AND
9 LOANS; AMENDING COMMISSIONER'S AUTHORITY TO AUTHORIZE INDUSTRIAL
10 LOAN CORPORATIONS TO CONDUCT BUSINESSES; MAKING TECHNICAL
11 CORRECTIONS; AND PROVIDING AN EFFECTIVE DATE.
12 This act affects sections of Utah Code Annotated 1953 as follows:
13 AMENDS:
14 7-1-301, as last amended by Chapter 49, Laws of Utah 1995
15 7-1-401, as last amended by Chapters 63 and 182, Laws of Utah 1996
16 7-1-706, as last amended by Chapter 161, Laws of Utah 1987
17 7-3-10, as last amended by Chapter 49, Laws of Utah 1995
18 7-3-12, as last amended by Chapter 30, Laws of Utah 1992
19 7-8-3, as last amended by Chapter 200, Laws of Utah 1994
20 Be it enacted by the Legislature of the state of Utah:
21 Section 1. Section 7-1-301 is amended to read:
22 7-1-301. Powers and duties of commissioner -- Rulemaking.
23 Without limiting the other powers, duties, and responsibilities specified in this title, the
24 commissioner has all the functions, powers, duties, and responsibilities with respect to institutions,
25 persons, or businesses subject to the jurisdiction of the department contained in this [article] title,
26 including all of the following:
27 (1) The commissioner [has power to] may govern the administration and operation of the

1 department.
2 (2) The commissioner [has power to] may supervise the conduct, operation, management,
3 examination, and statements and reports of examinations of financial institutions and other persons
4 subject to the jurisdiction of the department.
5 (3) (a) The commissioner [has power to] may authorize a state chartered depository
6 institution to engage in any activity it could engage in, and to grant to that institution all additional
7 rights, powers, privileges, benefits, or immunities it would possess, if it were chartered under the
8 laws of the United States.
9 (b) The commissioner [has power to] may authorize a depository institution chartered by
10 this state to engage in any activity that a Utah branch of an out-of-state depository institution of
11 the same class can engage in, and to grant to the Utah institution all additional rights, powers,
12 privileges, benefits, or immunities it needs to engage in the activity.
13 (c) In granting authority under this Subsection (3), the commissioner shall consider:
14 (i) the need for competitive equality between institutions chartered by this state and
15 institutions operating in this state that are chartered by another state or by the federal government;
16 and
17 (ii) the adverse effect on shareholders, members, depositors, and other customers of
18 financial institutions chartered by this state if equal power and protection of those institutions,
19 compared with federally chartered or out-of-state institutions of the same class, are not promptly
20 available[; and].
21 [(iii) whether circumstances are such that awaiting action by the Legislature would unduly
22 prejudice institutions chartered by this state, their shareholders, members, depositors, or other
23 customers, or adversely affect the public interest.]
24 (4) The commissioner [has power to] may safeguard the interest of shareholders, members,
25 depositors, and other customers of institutions and other persons subject to the jurisdiction of the
26 department.
27 (5) (a) The commissioner [has power to] may establish criteria consistent with this title
28 to be applied in granting applications for approval of:
29 (i) a new institution[,];
30 (ii) a new branch[,];
31 (iii) the relocation of an office or branch[,];

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1 (iv) a merger[,];
2 (v) a consolidation[,];
3 (vi) a change in control of an institution or other person subject to the jurisdiction of the
4 department[,]; and
5 (vii) other applications specified in this title.
6 (b) The criteria established under Subsection (5)(a) may not be applied to make it more
7 difficult for a state chartered institution to obtain approval of an application than for a federally
8 chartered institution in the same class to obtain approval from the appropriate federal regulatory
9 agency or administrator.
10 (6) (a) The commissioner [has power to] may protect the privacy of the records of any
11 institution subject to the jurisdiction of the department pertaining to a particular depositor or other
12 customer of the institution. Rules adopted under this Subsection (6) shall be consistent with
13 federal laws and regulations applicable to the institution.
14 (b) Any institution that consents to produce records or that is required to produce records
15 in compliance with a subpoena or other order of a court of competent jurisdiction or in compliance
16 with an order obtained pursuant to Sections 78-27-45 through 78-27-50 shall be reimbursed for
17 the cost of retrieval and reproduction of the records by the party seeking the information. The
18 commissioner may by rule establish the rates and conditions under which reimbursement is made.
19 (7) (a) The commissioner [has power to] may classify all records kept by institutions
20 subject to the jurisdiction of the department and to prescribe the period for which each class of
21 records is retained. Rules adopted under this Subsection (7) for any class of financial institution
22 shall be consistent with federal laws and regulations applicable to the class. [These rules]
23 (b) Rules made under Subsection (7)(a) shall provide that [an]:
24 (i) An institution may dispose of any record after retaining it for the period prescribed by
25 the commissioner for retention of records of its class. If an institution disposes of a record after
26 the prescribed period, the institution has no duty to produce it in any action or proceeding and is
27 not liable to any person by reason of that disposition. [The rules shall also provide that any]
28 (ii) Any institution may keep records in its custody in the form of microfilm or equivalent
29 reproduction. Any such reproduction shall have the same force and effect as the original and shall
30 be admissible into evidence as if it were the original.
31 (c) In adopting rules under this Subsection (7), the commissioner shall take into

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1 consideration:
2 [(a)] (i) actions at law and administrative proceedings in which the production of the
3 records might be necessary or desirable;
4 [(b)] (ii) state and federal statutes of limitation applicable to the actions or proceedings;
5 [(c)] (iii) the availability from other sources of information contained in these records; and
6 [(d)] (iv) other matters the commissioner considers pertinent in formulating rules that
7 require institutions to retain their records for as short a period as commensurate with the interest
8 in having the records available of:
9 (A) customers, members, depositors, and shareholders of the institutions; and [of]
10 (B) the people of this state [in having the records available].
11 (8) (a) The commissioner [has power to] may establish reasonable classes of depository
12 and other financial institutions including separate classes for savings and loan associations and
13 related institutions, banks and related institutions, credit unions, and industrial loan corporations.
14 [So long as]
15 (b) If the restrictions or requirements the commissioner imposes are not more stringent
16 than those applicable under federal law or regulation to federally chartered institutions of the same
17 class, the commissioner [has power to] may establish the following for each class in a manner
18 consistent with this title:
19 [(a)] (i) eligible classes and types of investments for the deposits and other funds of those
20 financial institutions;
21 [(b)] (ii) minimum standards, in amounts sufficient to protect depositors and other
22 creditors, for the amount and types of capital required to engage in the business conducted by each
23 class or to obtain a license or to establish a branch or additional office of an institution of each
24 class;
25 [(c)] (iii) eligible obligations, reserves, and other accounts to be included in the
26 computation of capital;
27 [(d)] (iv) minimum liquidity requirements for financial institutions within each class in
28 amounts sufficient to meet the demands of depositors and other creditors for liquid funds;
29 [(e)] (v) limitations on the amount and type of borrowings by each class of financial
30 institution in relation to the amount of its capital and the character and condition of its assets and
31 its deposits and other liabilities;

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1 [(f)] (vi) limitations on the amount and nature of loans and extensions of credit to any
2 person or related persons by each class of financial institution in relation to the amount of its
3 capital; and
4 [(g)] (vii) limitations on the amount and nature of loans and extensions of credit by a
5 financial institution or other person within each class to an executive officer, director, or principal
6 shareholder of:
7 [(i)] (A) the institution or other person;
8 [(ii)] (B) any company of which the institution or other person is a subsidiary;
9 [(iii)] (C) any subsidiary of the institution or other person;
10 [(iv)] (D) any affiliate of the institution; and
11 [(v)] (E) a company controlled by an executive officer, director, or principal shareholder
12 of the institution.
13 (9) The commissioner [has power to] may define unfair trade practices of financial
14 institutions and other persons subject to the jurisdiction of the department and to prohibit or restrict
15 these practices.
16 (10) The commissioner [has power to] may establish reasonable standards to promote the
17 fair and truthful advertising of:
18 (a) services offered by a financial institution;
19 (b) the charges for [these] the services advertised under Subsection (10)(a);
20 (c) the interest or other compensation to be paid on deposits or any debt instrument offered
21 for sale by the institution;
22 (d) the nature and extent of any insurance on deposits, savings accounts, share accounts,
23 certificates of deposit, time deposit accounts, NOW accounts, share draft accounts, transaction
24 accounts, or any evidence of indebtedness issued, offered for sale, offered to sell or sold by any
25 financial institution or other person subject to the jurisdiction of the department; and
26 (e) the safety or financial soundness of any financial institution or other person subject to
27 the jurisdiction of the department.
28 (11) The commissioner [has power to] may define what constitutes an impairment of
29 capital for each class of financial institution or other person subject to the jurisdiction of the
30 department.
31 (12) The commissioner [has power to] may designate days on which depository

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1 institutions are closed in accordance with Section 7-1-808.
2 (13) The commissioner [has power to] may regulate the issuance, advertising, offer for
3 sale, and sale of a security to the extent authorized by Section 7-1-503.
4 (14) The commissioner [has power to] may require the officers of any institution or other
5 person subject to the commissioner's jurisdiction to open and keep a standard set of books,
6 computer records, or both for the purpose of keeping accurate and convenient records of the
7 transactions and accounts of the institution in a manner to enable the commissioner, supervisors,
8 and department examiners to readily ascertain the institution's true condition. These requirements
9 shall be consistent with generally accepted accounting principles for financial institutions.
10 (15) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
11 commissioner may adopt and issue rules consistent with the purposes and provisions of this title,
12 and may revise, amend, or repeal [them] the rules adopted.
13 Section 2. Section 7-1-401 is amended to read:
14 7-1-401. Fees payable to commissioner.
15 (1) Each depository institution under the jurisdiction of the department, except an
16 out-of-state depository institution with a branch in Utah, shall pay an annual fee computed upon
17 the basis of aggregate assets [in Utah], as shown upon the year-end report of condition at the
18 following rates:
19 (a) on the first $5,000,000 of these assets, [77] 65 cents per $1,000 or $500, whichever is
20 greater;
21 (b) on the next $10,000,000 of these assets, [41] 35 cents per $1,000;
22 (c) on the next $35,000,000 of these assets, [23] 15 cents per $1,000;
23 (d) on the next $50,000,000 of these assets, [15] 12 cents per $1,000;
24 (e) on the next $200,000,000 of these assets, [13] 10 cents per $1,000; [and]
25 (f) on [all amounts over] the next $300,000,000 of these assets, [9] 6 cents per $1,000[.];
26 and
27 (g) on all amounts over $600,000,000 of these assets, 4 cents per $1,000.
28 (2) A financial institution with a trust department shall pay a fee for each examination of
29 the trust department by state examiners.
30 (3) A credit union in its first year of operation shall pay a basic fee of $25 instead of the
31 fee required under Subsection (1).

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1 (4) A trust company that is not a depository institution or a subsidiary of a depository
2 institution holding company shall pay an annual fee of $500 and an additional fee for each
3 examination by state examiners.
4 (5) All other persons and institutions under the jurisdiction of the department that do not
5 pay a fee under Subsections (1) through (4) shall pay an annual fee of $100 and an additional fee
6 for each examination by state examiners.
7 (6) An applicant under Section 7-1-503, 7-1-702, 7-1-703, 7-1-704, 7-1-713, 7-5-3, or
8 7-18a-202 shall pay:
9 (a) a filing fee of $500; and
10 (b) all reasonable expenses incurred in processing the application.
11 (7) Per diem assessments for examinations shall be calculated at the rate of $40 per hour
12 for each examiner up to a maximum of $320 per examiner per day. For examination of branches
13 or offices of financial institutions located outside of this state, the institution shall also pay all
14 reasonable travel, lodging, and other expenses incurred by each examiner while conducting the
15 examination.
16 [(8) Each out-of-state depository institution with a branch in Utah shall pay a basic fee
17 of the greater of $500 or .0001 of all deposits held in Utah branches on December 31 of the
18 preceding year. The institution shall also pay an additional per diem fee for each examiner as set
19 forth in Subsection (7).]
20 Section 3. Section 7-1-706 is amended to read:
21 7-1-706. Application to commissioner to exercise power -- Procedure.
22 (1) Except as provided in Sections 7-1-704 and 7-1-705, by filing a request for agency
23 action with the commissioner, any person may request the commissioner to:
24 (a) issue any rule or order[, to];
25 (b) exercise any powers granted to the commissioner under this title[,]; or [to]
26 (c) act on any matter that is subject to the approval of the commissioner [by filing a
27 request for agency action with the commissioner].
28 (2) Within ten days of receipt of the request, the commissioner shall, at the applicant's
29 expense, cause a supervisor to make a careful investigation of the facts relevant or material to
30 [such application] the request.
31 (3) (a) The supervisor shall submit [his] written findings and recommendations [in writing]

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1 to the commissioner [as required by the department's rules].
2 (b) The application, any additional information furnished by the applicant, and the findings
3 and recommendations of the supervisor may be inspected by any person at the office of the
4 commissioner, except those portions of the application or report that the [rules of the department
5 designate] commissioner designates as confidential [in order] to prevent a clearly unwarranted
6 invasion of privacy.
7 (4) (a) [Before the] If a hearing is held concerning the request, the commissioner shall
8 publish notice of the hearing at the applicant's expense in a newspaper of general circulation within
9 the county where the applicant is located at least once a week for three successive weeks before
10 the date of the hearing.
11 (b) The notice required by Subsection (4)(a) shall include the information required by the
12 department's rules.
13 (c) The commissioner shall [take action] act upon the request within 30 days after the close
14 of the hearing, based on the record before [him] the commissioner.
15 (5) (a) If no hearing is held, the commissioner shall approve or disapprove the
16 [application] request within 90 days of receipt of the request based on:
17 (i) the [papers filed with him, together with] application;
18 (ii) additional information filed with the commissioner; and
19 (iii) the findings and recommendations of the supervisor[, within 90 days of receipt of the
20 application].
21 (b) The commissioner shall [take action] act on the [application] request by issuing [his]
22 findings of fact, conclusions, and an order, and shall mail a copy of each to:
23 (i) the applicant;
24 (ii) all persons who have filed protests to the granting of the application; and
25 (iii) [whatever] other persons that [he] the commissioner considers should receive copies
26 [under the circumstances].
27 (6) The commissioner may impose any conditions or limitations on [his] the approval or
28 disapproval of [an application] a request that [he] the commissioner considers proper to:
29 (a) protect the interest of creditors, depositors, and other customers of an institution;
30 (b) protect its shareholders or members; and
31 (c) carry out the purposes of this title.

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1 Section 4. Section 7-3-10 is amended to read:
2 7-3-10. Powers, rights, and privileges of banking corporation -- Other business
3 activities.
4 (1) In addition to the powers granted under Title 16, Chapter 10a, Utah Revised Business
5 Corporation Act, a [banking corporation] bank has all the rights, privileges, and powers necessary
6 or incidental to carrying on the business of banking. [Necessary or incidental powers include all
7 rights, privileges, and powers held by national banks.]
8 [(2) Subject to the approval of the commissioner, after notice and opportunity for hearing,
9 any bank operating a main office or branch in this state may, either directly or indirectly through
10 a subsidiary or affiliate, engage in other business activities determined by the commissioner by
11 rule or order to be closely related to banking. This determination may not be inconsistent with
12 rules, regulations, or other actions of the board of governors of the Federal Reserve System under
13 Section 4(c)(8) of the Bank Holding Company Act of 1956.]
14 (2) The commissioner may, by rule or order, determine that necessary or incidental rights,
15 privileges, and powers include:
16 (a) the rights, privileges, and powers held by national banks; S OR s
17 (b) other business activities so long as the commissioner's determination is not inconsistent
18 with the rules, regulations, or other actions of the board of governors of the Federal Reserve
19 System under Section 4(c)(8) of the Bank Holding Company Act of 1956, 12 U.S.C. Sec.
20 1843(c)(8).
21 (3) The commissioner shall implement this section in a manner consistent with the
22 purposes set forth in Section 7-1-102.
23 Section 5. Section 7-3-12 is amended to read:
24 7-3-12. Prohibited investments and loans.
25 [Unless the prior written approval of the commissioner is obtained and a reasonable need
26 for such investment can be shown, no bank may:]
27 (1) (a) Except as provided in Subsection (2), a bank may not make an investment or loan
28 described in Subsection (1)(b) if the aggregate of the investments and loans described in
29 Subsections (1)(b)(i) and (ii) plus any indebtedness incurred by any corporation holding the
30 premises of the bank which is an affiliate of the bank, exceeds the greater of:
Text Box

Amend on 2_goldenrod January 28, 1997 31 (i) the amount of the capital stock and surplus of the bank; or

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1 (ii) 50% of the total capital accounts of the bank.
2 (b) If an investment or loan will violate Subsection (1)(a), a bank may not:
3 [(1)] (i) invest in its own premises including furniture, fixtures and equipment, or in the
4 stock, bonds, debentures, or other obligations of any corporation holding the premises of the bank;
5 or
6 [(2)] (ii) make loans to or upon the security of the stock of any corporation holding the
7 bank's premises[, if the aggregate of these investments and loans, plus any indebtedness incurred
8 by any such corporation which is an affiliate of the bank, exceeds the amount of the capital stock
9 and surplus or 50% of the total capital accounts of the bank, whichever is greater. Upon
10 application to and approval by the commissioner, a bank may exceed this limitation].
11 (2) A bank may make an investment or loan prohibited under Subsection (1) with the prior
12 written approval of the commissioner if the bank can demonstrate reasonable need for the
13 investment or loan to the commissioner.
14 Section 6. Section 7-8-3 is amended to read:
15 7-8-3. Organization under Business Corporation Act -- Authorization to conduct
16 business.
17 (1) Each domestic corporation organized to conduct the business of an industrial loan
18 corporation in this state shall be organized under Title 16, Chapter 10a, Utah Revised Business
19 Corporation Act. All rights, privileges, powers, duties, and obligations of the corporation and its
20 officers, directors, and stockholders shall be governed by [that chapter] Title 16, Chapter 10a,
21 except as otherwise provided in this title.
22 (2) The commissioner may authorize [an industrial loan corporation] a domestic
23 corporation to conduct business [or receive deposits from the public only if its corporate purposes
24 are limited in its articles of incorporation to the acquisition of, the merger with, the assumption of
25 all or a portion of the liabilities of, or the acquisition of all or a portion of the assets of a failing or
26 failed] as an industrial loan corporation.
27 Section 7. Effective date.
28 This act takes effect on July 1, 1997, except Section 7-8-3 takes effect if approved by
29 two-thirds of all the members elected to each house, upon approval by the governor, or the day
30 following the constitutional time limit of Utah Constitution, Article VII, Section 8, without the
31 governor's signature, or in the case of a veto, the date of the veto override.

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Legislative Review Note
as of 11-21-96 1:12 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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