PRIOR PRINTER'S NO. 3091 PRINTER'S NO. 3257
No. 2398 Session of 1978
INTRODUCED BY MESSRS. BENNETT, HALVERSON, RAPPAPORT, FEE,
MILLIRON AND KNEPPER, APRIL 18, 1978
AS REPORTED FROM COMMITTEE ON BUSINESS AND COMMERCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, MAY 31, 1978
AN ACT
1 Amending the act of May 15, 1933 (P.L.565, No.111), entitled "An
2 act relating to the powers and duties of the Department of
3 Banking and the Secretary of Banking in exercising
4 supervision over, and taking possession of and conducting or
5 liquidating the business and property of, corporations,
6 associations, and persons receiving deposits or otherwise
7 transacting a banking business, corporations acting as
8 fiduciaries, and building and loan associations; providing
9 for the payment of the expenses of the Department of Banking
10 by supervised corporations, associations, or persons, and
11 appropriating the Banking Department Fund; authorizing the
12 Department of Banking, under certain circumstances, to
13 examine corporations, associations, or persons affiliated, or
14 having business transactions with supervised corporations,
15 associations or persons; authorizing appeals to the Supreme
16 Court, and prescribing and limiting the powers and duties of
17 certain other courts and their prothonotaries, registers of
18 wills, recorders of deeds, and certain State departments,
19 commissions, and officers; authorizing certain local public
20 officers and State departments to collect fees for services
21 rendered under this act; providing penalties; and repealing
22 certain acts and parts of acts," further providing for the
23 applicability of the act and penalties for conflicts of
24 interest; authorizing appointment as receiver of a closed
25 institution, a public body of the United States; clarifying
26 authority of the secretary to seek bids for the purchase of
27 assets and assumption of liabilities of a closed institution.
28 The General Assembly of the Commonwealth of Pennsylvania
29 hereby enacts as follows:
30 Section 1. Subsection A of section 2, act of May 15, 1933
1 (P.L.565, No.111), known as the "Department of Banking Code," is
2 amended by adding a definition to read:
3 Section 2. Definitions.--A. The following terms shall be
4 construed in this act to have the following meanings, except in
5 those instances where the context clearly indicates otherwise:
6 * * *
7 "Public body of the United States." The Federal Deposit
8 Insurance Corporation or the Federal Savings and Loan Insurance
9 Corporation, or any other agency or instrumentality of the
10 United States which insures deposits of an institution.
11 Section 2. Section 15 of the act, amended April 22, 1937
12 (P.L.337, No.96), is amended to read:
13 Section 15. Act Not Applicable to [Small Loan Companies and]
14 Credit Unions.--[A. This] Except where otherwise expressly
15 provided, this act does not apply to, and does not affect any
16 act relating to, [corporations and persons licensed by the
17 department to make small loans, as provided by the act, approved
18 the seventeenth day of June, one thousand nine hundred fifteen
19 (Pamphlet Laws, one thousand twelve), entitled "An act
20 regulating the business of loaning money in sums of three
21 hundred ($300.00) dollars or less, either with or without
22 security, to individuals pressed by lack of funds to meet
23 immediate necessities; fixing the rates of interest and charges
24 therefor; requiring the licensing of lenders; and prescribing
25 penalties for the violation of this act," its amendments and
26 supplements; nor to credit unions incorporated under the act,
27 approved the twenty-sixth day of May, one thousand nine hundred
28 thirty-three (Pamphlet Laws, one thousand seventy-six), entitled
29 "An act to provide for the organization, incorporation,
30 operation, and supervision of cooperative savings and credit
19780H2398B3257 - 2 -
1 associations, to be termed credit unions; designating such
2 credit unions as corporations, and defining their powers and
3 duties; conferring certain powers and duties on the Department
4 of Banking; and providing penalties," its amendments and
5 supplements.] credit unions as defined in the act of September
6 20, 1961 (P.L.1548, No.658), as amended, known as the "Credit
7 Union Act."
8 Section 3. The act is amended by adding a section to read:
9 Section 16. General Authority.--Whenever, under the
10 provisions of this act, the department takes possession of an
11 institution or the secretary becomes receiver of an institution
12 whose deposits or shares are insured by a public body of the
13 United States, such public body may become receiver either by
14 designation of the secretary or appointment by the court in
15 which the certificate of possession is filed. As receiver, such
16 public body shall have the same rights, powers and duties,
17 either with respect to taking possession or acting as receiver,
18 as are provided to the department or secretary under the
19 provisions of this act.
20 Section 4. Section 301 of the act is repealed.
21 Section 5. The act is amended by adding a section to read:
22 Section 303. Conflicts of Interest; Penalty.--A. For
23 purposes of this section, "institution" shall mean: a
24 Pennsylvania State-chartered or licensed bank, mutual savings
25 bank, bank and trust company, trust company, private bank,
26 savings and loan association, consumer discount company, motor
27 vehicle sales finance company, licensed self-financing
28 installment seller of motor vehicles, licensed collector-
29 repossessor, money transmitter, pawnbroker or credit union.
30 B. Except as provided in subsection E, neither the Secretary
19780H2398B3257 - 3 -
1 of Banking, nor any officer or employe of the department, nor
2 any deputy receiver or employe of the Secretary of Banking, as
3 receiver, shall receive any sum of money or any property as a
4 gift or loan or otherwise, directly or indirectly from any
5 institution or from any officer, director or employe thereof.
6 C. Neither the Secretary of Banking, nor any officer or
7 employe of the department, nor any deputy receiver or employe of
8 the Secretary of Banking as receiver, shall hold any office or
9 position in, have any direct or indirect pecuniary interest in,
10 or direct or indirectly own shares or securities issued by an
11 institution, except that the Secretary of Banking may continue
12 to own shares or securities issued by an institution which are
13 owned by him on the date of his appointment and all shares or
14 securities distributed by the institution and received by him on
15 account of the shares or securities so owned subject to the
16 penalty provisions of this section.
17 D. In the event of such ownership of shares or securities by
18 the Secretary of Banking, he shall disclose the ownership,
19 amount and date of acquisition of such shares or securities in
20 writing to the Secretary of the Commonwealth immediately after
21 his appointment and shall not during his term of office
22 participate in any decision or take any action concerning an
23 institution in which he owns such shares or securities other
24 than actions or decisions generally applicable to institutions
25 or classes of institutions. In the event of disqualification of
26 the Secretary of Banking from participation in any decision or
27 action for such reason, all authority vested in him by law
28 shall, for the purpose of such decision or action, be exercised
29 by the senior deputy Secretary of Banking.
30 E. The prohibitions of subsections B. and C. shall not apply
19780H2398B3257 - 4 -
1 to:
2 (1) A first lien mortgage loan upon the home of the
3 Secretary of Banking, an officer or employe of the department, a
4 deputy receiver or an employe of the Secretary of Banking as
5 receiver, where such loan is granted upon the same terms and in
6 the same manner as provided by law for mortgage loans granted by
7 such institutions.
8 (2) A deposit account with an institution, provided that
9 such account shall not be intentionally overdrawn; except that
10 an examiner assigned to the examination of savings associations
11 shall not have a savings account in any State-chartered savings
12 association.
13 F. A violation of the prohibitions of this section by the
14 Secretary of Banking, an officer or employe of the department, a
15 deputy receiver or an employe of the Secretary of Banking as
16 receiver shall constitute sufficient ground for removal from
17 office. In addition, any such person who willfully or knowingly
18 commits such violation shall be guilty of a misdemeanor and
19 shall, upon conviction thereof, be subject to imprisonment for a
20 period not exceeding one year, or a fine not exceeding one
21 thousand dollars ($1,000.00), or both; and shall be subject to a
22 further fine equal to the amount of money or value of the
23 property which such individual has directly or indirectly
24 received in violation of this section.
25 Section 6. Sections 606, 704 and 714 of the act are amended
26 to read:
27 Section 606. Power of Courts to Appoint Receivers.--[No]
28 Except as hereinafter provided, no court shall appoint anyone
29 but the secretary as receiver of an institution. Whenever any
30 court, at the instance of a depositor, shareholder, or other
19780H2398B3257 - 5 -
1 person entitled by law to institute such proceedings, shall
2 determine that a receiver should be appointed, for any reason
3 whatsoever, it shall appoint the secretary as such receiver.
4 When thus appointed receiver by a court, the secretary shall
5 serve in the same manner and with the same limitations, and he
6 shall have the same rights, powers, and duties, as when he
7 becomes receiver by operation of law and without appointment by
8 any court. No court shall impose upon the secretary as receiver
9 any duties or restrictions which are in conflict with the
10 provisions of this act.
11 In any proceeding for the appointment of a receiver of an
12 institution whose deposits or shares are insured by a public
13 body of the United States, the court shall upon the
14 recommendation of the secretary (whether or not the department
15 is a party) appoint said body or its administrator as receiver.
16 If said public body or its administrator accepts the appointment
17 it or he shall have all the rights, powers and duties of the
18 secretary as receiver, under this act and other applicable law.
19 The public body or its administrator may act as receiver without
20 bond.
21 Section 704. Suspension or Continuation of Business.--The
22 secretary is authorized, upon taking possession of the business
23 and property of an institution as receiver, to continue or to
24 suspend the business for such period as he may deem necessary to
25 enable him to determine whether to surrender such possession to
26 the institution, to authorize a merger or consolidation, to seek
27 bids for the purchase of assets and assumption of liabilities of
28 the institution by any State or Federal institution whose
29 principal place of business is located in Pennsylvania, to
30 liquidate the affairs of such institution, or to take such other
19780H2398B3257 - 6 -
1 action as is authorized by law. During such period, he shall
2 take any action he deems necessary to conserve the assets and
3 business, or to protect the best interests of the estate.
4 Section 714. Power of Secretary to Borrow from or Sell or
5 Pledge to Government Agencies.--A. The secretary may, without
6 leave of court, borrow money from any agency or instrumentality
7 of the United States government, except national banks, or of
8 the Commonwealth of Pennsylvania, and pledge or hypothecate, as
9 security therefor, any real or personal property of the
10 institution, for the purpose of expediting the liquidation of
11 the assets of the institution of which he is receiver, and the
12 distribution of the proceeds thereof to the depositors, the
13 other creditors, or the shareholders thereof.
14 B. The secretary may, without leave of court, sell or pledge
15 assets of a closed institution to any public body of the United
16 States, or agency or instrumentality of the United States
17 government, except national banks, or of the Commonwealth of
18 Pennsylvania.
19 Section 7. The act is amended by adding a section to read:
20 Section 725. Rights of Subrogation.--When a public body of
21 the United States has made payment to any depositor, it shall
22 become subrogated to all rights of the depositor against the
23 institution in possession to the extent of such payment.
24 Section 8. This act shall take effect in 60 days <--
25 IMMEDIATELY. <--
C30L7HVY/19780H2398B3257 - 7 -