REPORT TITLE:
Code of Financial Institutions


DESCRIPTION:
Amends Code of Financial Institutions consistent with prior
amendments to the Code.  (HB1063 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1063
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                
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."
 

 
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 1      SECTION 2.  Section 412:2-503, Hawaii Revised Statutes, is
 
 2 amended by amending subsections (a) and (b) to read as follows:
 
 3      "(a)  If the failing financial institution is a bank,
 
 4 savings bank, or depository financial services loan company that
 
 5 is a Hawaii financial institution, or if the institution to
 
 6 result from the acquisition proposed in the application is to be
 
 7 any of the foregoing, the commissioner may accept an application
 
 8 under this part only from:
 
 9      (1)  A Hawaii financial institution;
 
10      (2)  A federal financial institution whose operations are
 
11           principally conducted in this State (unless the
 
12           operations of any holding company of such an applicant
 
13           are principally conducted elsewhere than in Hawaii or a
 
14           qualifying state);
 
15     [(3)  A financial institution whose operations are
 
16           principally conducted in a qualifying state (unless the
 
17           operations of any holding company of such an applicant
 
18           are principally conducted elsewhere than in Hawaii or a
 
19           qualifying state);]
 
20      (3)  A resulting bank as defined in article 12;
 
21      (4)  An out-of-state bank as defined in article 12;
 
22     [(4)] (5)  The holding company of any of the foregoing, if
 
23           any [(unless the operations of such holding company or
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

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

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 power to issue an expedited approval authorizing the following:
 
 2      (1)  In the case of a Hawaii financial institution seeking
 
 3           to acquire the failing financial institution, expedited
 
 4           approval for the establishment of a branch;
 
 5      (2)  In the case of a new corporation[,] or for a qualified
 
 6           bidder [from a qualifying state], a charter for a bank
 
 7           or savings bank or a license to engage in the business
 
 8           of a depository financial services loan company;
 
 9           provided that the applicant has secured provisional
 
10           approval to organize as required in section 412:2-508."
 
11      SECTION 4.  Section 412:3-617, Hawaii Revised Statutes, is
 
12 amended by amending subsection (b) to read as follows:
 
13      "(b)  Subject to the approval of the commissioner, a solvent
 
14 credit union whose capital is not impaired and which has not
 
15 received a notice of charges and proposed order of suspension or
 
16 revocation pursuant to section 412:2-312 may elect to dissolve
 
17 voluntarily and liquidate its affairs in the manner prescribed in
 
18 this section[.]:
 
19      (1)  The board of directors shall adopt a resolution
 
20           adopting a plan of liquidation and dissolution,
 
21           recommending the voluntary dissolution of the credit
 
22           union, and directing that the question of the
 
23           dissolution be submitted to the commissioner for
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           approval and, if approved, requesting that the
 
 2           liquidation question be submitted to the members[;].
 
 3           The plan of liquidation and dissolution shall include
 
 4           but not be limited to provisions for the orderly
 
 5           payment or assumption of the credit union's deposits,
 
 6           shares, and other liabilities;
 
 7      (2)  Not later than ten days after [the board of directors
 
 8           decides to submit the liquidation question to the
 
 9           members, the chairperson shall notify the commissioner
 
10           and] the meeting of the board of directors described in
 
11           paragraph (1), the credit union shall file an
 
12           application with the commissioner pursuant to section
 
13           412:3-603, for approval to cease business and dissolve.
 
14           The application shall be accompanied by a copy of the
 
15           plan of liquidation and dissolution, certified by two
 
16           executive officers of the credit union, and duly
 
17           adopted by the board, and shall include any other
 
18           information that the commissioner may require.  A copy
 
19           of the notice shall be delivered contemporaneously to
 
20           any government agency or other organization insuring
 
21           member accounts thereof, in writing, setting forth the
 
22           reasons for the proposed liquidation[.  Not later than
 
23           ten days after the members act on the liquidation
 

 
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 1           question, the chairperson of the board of directors
 
 2           shall notify the commissioner and any government agency
 
 3           or other organization insuring member accounts, in
 
 4           writing, of the action of the members on the
 
 5           liquidation question];
 
 6      (3)  [As] The commissioner shall approve the application to
 
 7           cease business and dissolve if the commissioner is
 
 8           satisfied that the depositors, beneficiaries, and
 
 9           creditors will be adequately protected under the plan,
 
10           the credit union is not insolvent or in danger of
 
11           becoming insolvent, its capital is not impaired and is
 
12           not in danger of becoming impaired, and no other reason
 
13           exists to deny the application.  The commissioner may
 
14           impose any restrictions and conditions as the
 
15           commissioner deems appropriate;
 
16      (4)  Upon receipt of the commissioner's approval to cease
 
17           business and dissolve and as soon as the board of
 
18           directors decides to submit the liquidation question to
 
19           the members, all business affairs of the credit union,
 
20           including[,] but not limited to[,] payments on and
 
21           [withdrawal] withdrawals of shares, share certificates,
 
22           share drafts, deposits, and deposit certificates,
 
23           (except for the transfer of shares or deposits to loans
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           and interest), [making] investments of any kind, (other
 
 2           than short-term investments), and the issuing of loans,
 
 3           shall be suspended until the members act on the
 
 4           liquidation question.  Upon approval by the members,
 
 5           all business transactions of the credit union shall be
 
 6           permanently discontinued.  [Necessary] Transfer of
 
 7           deposits or shares to loans and interest, collection of
 
 8           loans and interest, and the payment of necessary
 
 9           expenses of operation[, however,] shall continue [to be
 
10           paid] upon authorization by the board of directors or
 
11           the liquidating agent during liquidation;
 
12     [(4)] (5)  An affirmative majority vote by the members by
 
13           ballot, in person, by letter, or other written
 
14           communication, is necessary for a credit union to enter
 
15           into voluntary liquidation.  Whenever authorization for
 
16           liquidation is to be obtained at a meeting of the
 
17           members, notice in writing shall be given to each
 
18           member, by first-class mail, at least ten days prior to
 
19           such meeting;
 
20     (6)   Not later than ten days after the members act on the
 
21           liquidation question, the chairperson of the board of
 
22           directors shall notify the commissioner and any
 
23           government agency or other organization insuring member
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           accounts, in writing, of the action of the members on
 
 2           the liquidation question;
 
 3     [(5)] (7)  A liquidating credit union shall remain in
 
 4           existence for the purpose of discharging its debts,
 
 5           collecting its loans, distributing its assets, and any
 
 6           other necessary functions in order to conclude its
 
 7           business.  A liquidating credit union may sue or be
 
 8           sued for the purpose of enforcing its debts and
 
 9           obligations until its affairs are complete;
 
10     [(6)] (8)  The board of directors or the liquidating agent
 
11           who may be the insurer shall use the assets of the
 
12           credit union to pay:
 
13           (A)  First, the expenses incidental to liquidation
 
14                including any surety bonds required during
 
15                liquidation;
 
16           (B)  Second, any liability due to nonmembers;
 
17           (C)  Third, the deposits and deposit certificates of
 
18                the members of the credit union; and
 
19           (D)  Fourth, the remaining assets shall be distributed
 
20                to the members in proportion to the number of
 
21                shares held by each member on the date dissolution
 
22                was approved by the members; [and]
 

 
 
 
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 1     [(7)] (9)  When the board of directors or the liquidating
 
 2           agent determines that all assets of the credit union
 
 3           having a reasonable expectancy of realization have been
 
 4           liquidated and distributed as provided in this section,
 
 5           the board or the liquidating agent, whichever is
 
 6           applicable, shall complete a certificate of dissolution
 
 7           on a form prescribed by the commissioner.  Upon the
 
 8           completion of such certificate, the board or the
 
 9           liquidating agent, whichever is applicable, shall file
 
10           such certificate with the commissioner for the complete
 
11           dissolution and liquidation of the credit union[.]; and
 
12     (10)  Any credit union whose capital is impaired or in danger
 
13           of becoming impaired, and any credit union that is
 
14           insolvent or in danger of becoming insolvent, may not
 
15           undergo a voluntary dissolution."
 
16     SECTION 5.  Section 412:13-222, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18     "[[]412:13-222[]]  Relocation of office; written [notice]
 
19 application necessary.(a)  No foreign bank that is licensed to
 
20 establish and maintain a Hawaii state branch, Hawaii state
 
21 agency, or Hawaii representative office shall relocate any Hawaii
 
22 office unless the foreign bank [provides prior] files a written
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 [notice to] application with [[]the[]] commissioner and the
 
 2 commissioner [has approved] approves the relocation.
 
 3     (b)  [Written notice provided] The written application filed
 
 4 by a foreign bank under this section shall be in a form and
 
 5 contain any information as the commissioner shall require and
 
 6 shall be accompanied by a fee, the amount of which shall be
 
 7 established by rule."
 
 8     SECTION 6.  Section 412:2-500, Hawaii Revised Statutes, is
 
 9 amended by repealing the definition of "qualifying state".
 
10     [""Qualifying state" means a state, other than Hawaii, in the
 
11 Twelfth Federal Reserve District as designated in 12 United
 
12 States Code section 222."]
 
13     SECTION 7.  Section 412:2-512, Hawaii Revised Statutes, is
 
14 repealed.
 
15     ["412:2-512  Nonseverability.  It is the express intent of
 
16 the legislature to specifically authorize the acquisition of a
 
17 failing financial institution by an out-of-state institution only
 
18 as provided in this part, and notwithstanding the restrictions
 
19 set forth in the Bank Holding Company Act of 1956, as amended (12
 
20 U.S.C. 1841 et seq.), and, accordingly, the provisions of this
 
21 part are not severable.  If any provision of this part is
 
22 determined to be invalid, then this entire part shall be of no
 
23 force and effect, except that transactions already conducted
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 under the authority of this part prior to such determination of
 
 2 invalidity shall not be thereby affected."]
 
 3     SECTION 8.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5     SECTION 9.  This Act shall take effect upon its approval.