REPORT TITLE:
Code of Financial Institutions


DESCRIPTION:
Makes conforming amendments to the Code of Financial
Institutions.  Establishes separate filing deadlines for a
nondepository financial services loan company's unaudited
statements. (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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SENATE                                  S.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                C.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
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                   A  BILL  FOR  AN  ACT

RELATING TO THE CODE OF FINANCIAL INSTITUTIONS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 412:1-109, Hawaii Revised Statutes, is
 
 2 amended by amending the definition of "Hawaii financial
 
 3 institution" to read as follows:
 
 4      ""Hawaii financial institution" means [a]:
 
 5      (1)  A corporation or credit union which holds a charter or
 
 6           license under this chapter or under prior Hawaii law,
 
 7           authorizing it to accept deposits, to make loans in
 
 8           excess of the rates permitted in chapter 478, or to
 
 9           engage in the business of a trust company[,]; or
 
10      (2)  A resulting bank as defined in article 12,
 
11 and includes a corporation, mutual savings and loan association,
 
12 or credit union existing and chartered as a Hawaii financial
 
13 institution or licensed to transact business in this State on
 
14 July 1, 1993.  A Hawaii financial institution may be a bank,
 
15 resulting bank as defined in article 12, savings bank, savings
 
16 and loan association, depository financial services loan company,
 
17 nondepository financial services loan company, trust company,
 
18 credit union, or intra-Pacific bank."
 
19      SECTION 2.  Section 412:2-503, Hawaii Revised Statutes, is
 

 
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 1 amended by amending subsections (a) and (b) to read as follows:
 
 2      "(a)  If the failing financial institution is a bank,
 
 3 savings bank, or depository financial services loan company that
 
 4 is a Hawaii financial institution, or if the institution to
 
 5 result from the acquisition proposed in the application is to be
 
 6 any of the foregoing, the commissioner may accept an application
 
 7 under this part only from:
 
 8      (1)  A Hawaii financial institution;
 
 9      (2)  A federal financial institution whose operations are
 
10           principally conducted in this State (unless the
 
11           operations of any holding company of such an applicant
 
12           are principally conducted elsewhere than in Hawaii [or
 
13           a qualifying state]);
 
14     [(3)  A financial institution whose operations are
 
15           principally conducted in a qualifying state (unless the
 
16           operations of any holding company of such an applicant
 
17           are principally conducted elsewhere than in Hawaii or a
 
18           qualifying state);]
 
19      (3)  A resulting bank as defined in article 12;
 
20      (4)  An out-of-state bank as defined in article 12;
 
21     [(4)] (5)  The holding company of any of the foregoing, if
 
22           any [(unless the operations of such holding company or
 
23           any holding company of such holding company are
 

 
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 1           principally conducted elsewhere than in Hawaii or a
 
 2           qualifying state)]; and
 
 3     [(5)] (6)  A person that is not a company[; and
 
 4      (6)  Notwithstanding any other limitations in this section,
 
 5           a bank holding company as defined under the Bank
 
 6           Holding Company Act of 1956, as amended, that is
 
 7           adequately capitalized and adequately managed].
 
 8      (b)  No application shall be accepted which provides for a
 
 9 merger or consolidation of a failing financial institution or a
 
10 purchase of its assets or assumption of its liabilities, or a
 
11 purchase of its capital stock if, as a result of such merger,
 
12 consolidation, purchase or assumption, any person would be
 
13 eligible to receive deposits in this State other than through a
 
14 Hawaii financial institution [or], a federal financial
 
15 institution whose operations are principally conducted in this
 
16 State[.], or a resulting bank as defined in article 12."
 
17      SECTION 3.  Section 412:2-507, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "412:2-507  Expedited approvals.  If the commissioner finds
 
20 that immediate action is necessary in order to prevent the
 
21 probable failure of the Hawaii financial institution, as
 
22 determined by section 412:2-501, the commissioner shall have the
 
23 power to issue an expedited approval authorizing the following:
 

 
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 1      (1)  In the case of a Hawaii financial institution seeking
 
 2           to acquire the failing financial institution, expedited
 
 3           approval for the establishment of a branch;
 
 4      (2)  In the case of a new corporation[,] or for a qualified
 
 5           bidder [from a qualifying state], a charter for a bank
 
 6           or savings bank or a license to engage in the business
 
 7           of a depository financial services loan company;
 
 8           provided that the applicant has secured provisional
 
 9           approval to organize as required in section 412:2-508."
 
10      SECTION 4.  Section 412:3-112, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "412:3-112  Submissions to commissioner.  (a) Every Hawaii
 
13 financial institution, at its own expense, shall file the
 
14 following written reports with the commissioner:
 
15      (1)  An independent audit report of its financial statements
 
16           as of the close of its fiscal year shall be filed by a
 
17           Hawaii financial institution, other than a
 
18           nondepository financial services loan company or credit
 
19           union, within one hundred twenty days of the close of
 
20           its fiscal year; provided that the commissioner for
 
21           good cause shown may grant a reasonable extension of
 
22           not more than forty-five days.  For depository
 
23           institutions, the independent audit report specified in
 

 
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 1           this paragraph shall comply with the requirements for
 
 2           annual reports under section 36 of the Federal Deposit
 
 3           Insurance Act (12 U.S.C. 1831m), as amended; provided
 
 4           that for a depository institution which, in any fiscal
 
 5           year, is a small depository institution within the
 
 6           meaning of section 36(j) of the Federal Deposit
 
 7           Insurance Act, or any implementing regulations
 
 8           thereunder, the independent audit report specified in
 
 9           this paragraph shall comply with the requirements for
 
10           annual independent audits of financial statements under
 
11           section 36(d).  For trust companies, the independent
 
12           audit report shall contain audited financial statements
 
13           prepared in accordance with generally accepted
 
14           accounting principles and shall be based on an audit
 
15           performed in accordance with generally accepted
 
16           auditing standards, the independent auditor's report on
 
17           the fair presentation of the financial statements and
 
18           any qualification to the report, any management letter,
 
19           and any other report.  Hawaii financial institutions
 
20           that are subsidiaries of a financial institution
 
21           holding company may satisfy the requirements of this
 
22           paragraph by filing an independent audit report of the
 
23           financial institution holding company;
 

 
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 1      (2)  Unaudited financial statements as of the following
 
 2           dates shall be filed by a Hawaii financial institution
 
 3           within thirty days of the date of the financial
 
 4           statement as follows:
 
 5           (A)  For a [nondepository financial services loan
 
 6                company,] trust company[,] or credit union, the
 
 7                statements shall be filed as of June 30 and
 
 8                December 31 of each year; [and]
 
 9           (B)  For a Hawaii financial institution, other than a
 
10                nondepository financial services loan company,
 
11                trust company, or credit union, the statements
 
12                shall be filed as of March 31, June 30,
 
13                September 30, and December 31 of each year; and
 
14           (C)  For a nondepository financial services loan
 
15                company, the statement shall be filed as of the
 
16                last day of the sixth month and the last day of
 
17                the twelfth month of each fiscal or calendar year;
 
18           provided that the commissioner for good cause shown may
 
19           grant a reasonable extension of not more than forty-
 
20           five days.
 
21                The reports shall be in a form prescribed by the
 
22           commissioner and prepared in accordance with section
 
23           412:3-108.  In the alternative, the institution may
 

 
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 1           file the Call Reports, Consolidated Reports of
 
 2           Condition and Reports of Income, or Thrift Financial
 
 3           Reports as of those dates which are submitted to the
 
 4           appropriate federal regulatory agency of the
 
 5           institution;
 
 6      (3)  A notice of any change in the office of the person who
 
 7           has primary responsibility for the operation and
 
 8           management of the financial institution shall be filed
 
 9           by a Hawaii financial institution within ten days of
 
10           the change.  The notice shall specify the name and
 
11           address of the person, who shall be designated that
 
12           institution's "chief executive officer"; and
 
13      (4)  Any other reports and other information that the
 
14           commissioner may require with respect to any financial
 
15           institution at the times and in the form as the
 
16           commissioner deems appropriate for the proper
 
17           supervision and regulation of the institution.
 
18      Each report shall be signed by an officer authorized by the
 
19 institution's board of directors to sign the report, and shall
 
20 contain a declaration of the officer's authority and a statement
 
21 that the report is true and correct."
 
22      SECTION 5.  Section 412:3-617, Hawaii Revised Statutes, is
 
23 amended by amending subsection (b) to read as follows:
 

 
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 1      "(b)  Subject to the approval of the commissioner, a solvent
 
 2 credit union whose capital is not impaired and which has not
 
 3 received a notice of charges and proposed order of suspension or
 
 4 revocation pursuant to section 412:2-312 may elect to dissolve
 
 5 voluntarily and liquidate its affairs in the manner prescribed in
 
 6 this section[.]:
 
 7      (1)  The board of directors shall adopt a resolution
 
 8           adopting a plan of liquidation and dissolution,
 
 9           recommending the voluntary dissolution of the credit
 
10           union, and directing that the question of the
 
11           dissolution be submitted to the commissioner for
 
12           approval and, if approved, requesting that the
 
13           liquidation question be submitted to the members[;].
 
14           The plan of liquidation and dissolution shall include
 
15           but not be limited to provisions for the orderly
 
16           payment or assumption of the credit union's deposits,
 
17           shares, and other liabilities;
 
18      (2)  Not later than ten days after [the board of directors
 
19           decides to submit the liquidation question to the
 
20           members, the chairperson shall notify the commissioner
 
21           and] the meeting of the board of directors described in
 
22           paragraph (1), the credit union shall file an
 
23           application with the commissioner pursuant to section
 

 
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 1           412:3-603, for approval to cease business and dissolve.
 
 2           The application shall be accompanied by a copy of the
 
 3           plan of liquidation and dissolution, certified by two
 
 4           executive officers of the credit union, and duly
 
 5           adopted by the board, and shall include any other
 
 6           information that the commissioner may require.  A copy
 
 7           of the notice shall be delivered contemporaneously to
 
 8           any government agency or other organization insuring
 
 9           member accounts thereof, in writing, setting forth the
 
10           reasons for the proposed liquidation[.  Not later than
 
11           ten days after the members act on the liquidation
 
12           question, the chairperson of the board of directors
 
13           shall notify the commissioner and any government agency
 
14           or other organization insuring member accounts, in
 
15           writing, of the action of the members on the
 
16           liquidation question];
 
17      (3)  [As] The commissioner shall approve the application to
 
18           cease business and dissolve if the commissioner is
 
19           satisfied that the depositors, beneficiaries, and
 
20           creditors will be adequately protected under the plan,
 
21           the credit union is not insolvent or in danger of
 
22           becoming insolvent, its capital is not impaired and is
 
23           not in danger of becoming impaired, and no other reason
 

 
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 1           exists to deny the application.  The commissioner may
 
 2           impose any restrictions and conditions as the
 
 3           commissioner deems appropriate;
 
 4      (4)  Upon receipt of the commissioner's approval to cease
 
 5           business and dissolve and as soon as the board of
 
 6           directors decides to submit the liquidation question to
 
 7           the members, all business affairs of the credit union,
 
 8           including[,] but not limited to[,] payments on and
 
 9           [withdrawal] withdrawals of shares, share certificates,
 
10           share drafts, deposits, and deposit certificates,
 
11           (except for the transfer of shares or deposits to loans
 
12           and interest), [making] investments of any kind, (other
 
13           than short-term investments), and the issuing of loans,
 
14           shall be suspended until the members act on the
 
15           liquidation question.  Upon approval by the members,
 
16           all business transactions of the credit union shall be
 
17           permanently discontinued.  [Necessary] Transfer of
 
18           deposits or shares to loans and interest, collection of
 
19           loans and interest, and the payment of necessary
 
20           expenses of operation[, however,] shall continue [to be
 
21           paid] upon authorization by the board of directors or
 
22           the liquidating agent during liquidation;
 
23     [(4)] (5)  An affirmative majority vote by the members by
 

 
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 1           ballot, in person, by letter, or other written
 
 2           communication, is necessary for a credit union to enter
 
 3           into voluntary liquidation.  Whenever authorization for
 
 4           liquidation is to be obtained at a meeting of the
 
 5           members, notice in writing shall be given to each
 
 6           member, by first-class mail, at least ten days prior to
 
 7           such meeting;
 
 8     (6)   Not later than ten days after the members act on the
 
 9           liquidation question, the chairperson of the board of
 
10           directors shall notify the commissioner and any
 
11           government agency or other organization insuring member
 
12           accounts, in writing, of the action of the members on
 
13           the liquidation question;
 
14     [(5)] (7)  A liquidating credit union shall remain in
 
15           existence for the purpose of discharging its debts,
 
16           collecting its loans, distributing its assets, and any
 
17           other necessary functions in order to conclude its
 
18           business.  A liquidating credit union may sue or be
 
19           sued for the purpose of enforcing its debts and
 
20           obligations until its affairs are complete;
 
21     [(6)] (8)  The board of directors or the liquidating agent
 
22           who may be the insurer shall use the assets of the
 
23           credit union to pay:
 

 
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 1           (A)  First, the expenses incidental to liquidation
 
 2                including any surety bonds required during
 
 3                liquidation;
 
 4           (B)  Second, any liability due to nonmembers;
 
 5           (C)  Third, the deposits and deposit certificates of
 
 6                the members of the credit union; and
 
 7           (D)  Fourth, the remaining assets shall be distributed
 
 8                to the members in proportion to the number of
 
 9                shares held by each member on the date dissolution
 
10                was approved by the members; [and]
 
11     [(7)] (9)  When the board of directors or the liquidating
 
12           agent determines that all assets of the credit union
 
13           having a reasonable expectancy of realization have been
 
14           liquidated and distributed as provided in this section,
 
15           the board or the liquidating agent, whichever is
 
16           applicable, shall complete a certificate of dissolution
 
17           on a form prescribed by the commissioner.  Upon the
 
18           completion of such certificate, the board or the
 
19           liquidating agent, whichever is applicable, shall file
 
20           such certificate with the commissioner for the complete
 
21           dissolution and liquidation of the credit union[.]; and
 
22     (10)  Any credit union whose capital is impaired or in danger
 
23           of becoming impaired, and any credit union that is
 

 
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 1           insolvent or in danger of becoming insolvent, may not
 
 2           undergo a voluntary dissolution."
 
 3     SECTION 6.  Section 412:13-222, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5     "[[]412:13-222[]]  Relocation of office; written [notice]
 
 6 application necessary.(a)  No foreign bank that is licensed to
 
 7 establish and maintain a Hawaii state branch, Hawaii state
 
 8 agency, or Hawaii representative office shall relocate any Hawaii
 
 9 office unless the foreign bank [provides prior] files a written
 
10 [notice to] application with [[]the[]] commissioner and the
 
11 commissioner [has approved] approves the relocation.
 
12     (b)  [Written notice provided] The written application filed
 
13 by a foreign bank under this section shall be in a form and
 
14 contain any information as the commissioner shall require and
 
15 shall be accompanied by a fee, the amount of which shall be
 
16 established by rule."
 
17     SECTION 7.  Section 412:2-500, Hawaii Revised Statutes, is
 
18 amended by repealing the definition of "qualifying state".
 
19     [""Qualifying state" means a state, other than Hawaii, in the
 
20 Twelfth Federal Reserve District as designated in 12 United
 
21 States Code section 222."]
 
22     SECTION 8.  Section 412:2-512, Hawaii Revised Statutes, is
 
23 repealed.
 

 
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 1     ["412:2-512  Nonseverability.  It is the express intent of
 
 2 the legislature to specifically authorize the acquisition of a
 
 3 failing financial institution by an out-of-state institution only
 
 4 as provided in this part, and notwithstanding the restrictions
 
 5 set forth in the Bank Holding Company Act of 1956, as amended (12
 
 6 U.S.C. 1841 et seq.), and, accordingly, the provisions of this
 
 7 part are not severable.  If any provision of this part is
 
 8 determined to be invalid, then this entire part shall be of no
 
 9 force and effect, except that transactions already conducted
 
10 under the authority of this part prior to such determination of
 
11 invalidity shall not be thereby affected."]
 
12     SECTION 9.  Statutory material to be repealed is bracketed.
 
13 New statutory material is underscored.
 
14     SECTION 10.  This Act shall take effect upon its approval.