STAND. COM. REP. NO.2353

Honolulu, Hawaii

, 2002

RE: S.B. No. 2735

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 2735 entitled:

"A BILL FOR AN ACT RELATING TO FEES PAID TO THE DIVISION OF FINANCIAL INSTITUTIONS,"

begs leave to report as follows:

The purpose of this measure is to establish a supplementary revenue source to help fund the costs of regulating state-chartered and licensed financial institutions.

The Commissioner of Financial Institutions testified in support of this measure. The Hawaii Bankers Association and Bank of Hawaii opposed the measure.

The Division of Financial Institutions (Division) has oversight of state-chartered and licensed financial institutions. Its operations are supported by application and renewal fees, examination fees, and by a portion of the franchise tax paid by financial institutions. At the start of the current fiscal year, a negative franchise tax balance resulted when refunds were greater than revenues, and required that the Division use general funds to meet its expenses. If franchise tax revenues continue to be at a deficit, the Division's ability to effectively supervise state-chartered and licensed institutions will be at risk.

This measure establishes a source of revenue to supplement the Division's franchise tax allocation by authorizing the assessment of fees against financial institutions regulated by the State. Your Committee finds that an assessment of fees is consistent with the national trend since a majority of state and federal regulators assess financial institutions under their jurisdiction to pay for the costs of regulation and supervision. These regulators include forty-seven state regulators, the Office of Comptroller of the Currency (OCC), the Office of Thrift Supervision, and the National Credit Union Administration (NCUA).

This measure establishes maximum assessment schedules for all state-chartered institutions based on current assessment schedules of the OCC and the NCUA, and a modified version of the West Virginia assessment schedule for consumer lenders. An institution's actual assessment, however, would vary annually dependent upon the amount of the Division's budget shortfall, if any.

Your Committee has amended this measure to reflect language provided by the Commissioner that, among other things, clarifies the assessment process. As amended, this measure:

(1) Clarifies what constitutes a shortfall in the Division's share of the compliance resolution fund that triggers an assessment, and provides that the Division is limited to collecting assessments necessary to make up the shortfall;

(2) Clarifies the ratio utilized to determine an institution's actual annual assessment, when this amount is less than its maximum annual assessment;

(3) Conforms the assessment schedules so that all assessments are made on an annual basis; and

(4) Specifies that the Division's allocation of the franchise tax is $1,000,000, rather than an amount not to exceed $2,000,000.

Your Committee has also amended this measure by inserting a delayed effective date of July 1, 2050, and by making technical, nonsubstantive changes to reflect preferred drafting style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2735, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2735, S.D. 1, and be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection and Housing,

____________________________

RON MENOR, Chair