PRIOR PRINTER'S NOS. 3518, 3627 PRINTER'S NO. 3706
No. 2533 Session of 2000
INTRODUCED BY ALLEN, HASAY, CALTAGIRONE, GORDNER, PERZEL,
BARLEY, COY, ARGALL, BAKER, BOYES, L. I. COHEN, M. COHEN,
DEMPSEY, DERMODY, FAIRCHILD, FLICK, FRANKEL, GEIST, GODSHALL,
HARHAI, HENNESSEY, HERMAN, HORSEY, LaGROTTA, LESCOVITZ,
LUCYK, MARKOSEK, MASLAND, MAYERNIK, McCALL, S. MILLER,
NAILOR, NICKOL, PETRARCA, PHILLIPS, RAYMOND, SAINATO, SEMMEL,
SHANER, TULLI, WILT, ZUG, STEVENSON, METCALFE, CLARK, VANCE,
HESS, McILHATTAN, FARGO, ADOLPH, CORNELL, TRUE, SCRIMENTI,
SCHULER, VAN HORNE, MAHER, ROSS, STERN, STABACK, SAYLOR,
BASTIAN, KENNEY, MUNDY, PRESTON, WOJNAROSKI, THOMAS, STETLER,
GANNON, MICOZZIE AND TRICH, MAY 9, 2000
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 12, 2000
AN ACT
1 Amending the act of November 30, 1965 (P.L.847, No.356),
2 entitled "An act relating to and regulating the business of
3 banking and the exercise by corporations of fiduciary powers;
4 affecting persons engaged in the business of banking and
5 corporations exercising fiduciary powers and affiliates of
6 such persons; affecting the shareholders of such persons and
7 the directors, trustees, officers, attorneys and employes of
8 such persons and of the affiliates of such persons; affecting
9 national banks located in the Commonwealth; affecting persons
10 dealing with persons engaged in the business of banking,
11 corporations exercising fiduciary powers and national banks;
12 conferring powers and imposing duties on the Banking Board,
13 on certain departments and officers of the Commonwealth and
14 on courts, prothonotaries, clerks and recorders of deeds;
15 providing penalties; and repealing certain acts and parts of
16 acts," further providing for corporations authorized to act
17 as fiduciary, for general corporate powers and duties of
18 incorporated institutions, for additional powers of
19 incorporated institutions related to conduct of business, for
20 additional powers related to conduct of business of
21 incorporated institutions other than trust companies, for
22 real estate loans by banks and bank and trust companies, for
23 transactions with respect to shares of corporate stock and
24 capital securities and for real estate loans by savings
1 banks; further prohibiting promoters' fees; and further <--
2 providing for audits and reports and for preferential rates
3 of interest; AND REQUIRING A REPORT FROM THE LEGISLATIVE <--
4 BUDGET AND FINANCE COMMITTEE.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Section 102 of the act of November 30, 1965
8 (P.L.847, No.356), known as the Banking Code of 1965, is amended
9 by adding a subsection to read:
10 Section 102. Definitions
11 Subject to additional definitions contained in subsequent
12 chapters of this act which are applicable to specific chapters
13 or sections thereof, the following words and phrases when used
14 in this act shall have, unless the context clearly indicates
15 otherwise, the meanings given to them in this section:
16 * * *
17 (ii) "Subsidiary"--a corporation or other entity defined as
18 a subsidiary by section 2 of the Bank Holding Company Act of
19 1956 (70 Stat. 133, 12 U.S.C. § 1841 et seq.), regardless of
20 whether the corporation or other entity is a subsidiary of a
21 bank holding company.
22 Section 2. Section 106(b) of the act, amended July 6, 1995
23 (P.L.271, No.39), is amended to read:
24 Section 106. Corporations Authorized to Act as Fiduciary
25 * * *
26 (b) Foreign fiduciaries--No corporation existing under the
27 laws of a state other than this Commonwealth [or national bank
28 located in another state, except an interstate bank, may act in
29 this Commonwealth as fiduciary unless:
30 (i) it shall be appointed fiduciary by will or other
31 testamentary writing, by a deed of trust or by a court or
20000H2533B3706 - 2 -
1 register of wills of this Commonwealth or it shall be
2 designated as fiduciary by the beneficiaries or by one or
3 more other fiduciaries of the estate or trust pursuant to the
4 terms of the instrument, or
5 (ii) it shall be the successor by merger or
6 consolidation to a corporation lawfully acting as fiduciary
7 in this Commonwealth at the time of such merger or
8 consolidation
9 and unless the laws of such other state confer like powers on
10 corporations existing under the laws of this Commonwealth. No
11 corporation of another state or national bank located in another
12 state authorized to act as fiduciary pursuant to this subsection
13 (b) shall be authorized to establish a place of business in this
14 Commonwealth.] may act in this Commonwealth as fiduciary, except
15 that an incorporated institution possessing fiduciary powers
16 pursuant to the laws of another state shall have the same power
17 to engage in fiduciary activities within this Commonwealth as a
18 national banking association acting pursuant to 12 U.S.C. § 92a
19 or a Federal savings association 12 U.S.C. § 1464(n), provided
20 that:
21 (i) the state laws pursuant to which the incorporated
22 institution is operating provide equivalent privileges to an
23 incorporated institution chartered by the Commonwealth;
24 (ii) the incorporated institution complies with the
25 minimum capital requirements of section 1102; and
26 (iii) the incorporated institution provides written
27 notice to the department at least thirty days prior to the
28 commencement of fiduciary activities, which notice shall be
29 accompanied by documentation of its authorization to conduct
30 fiduciary activities issued by the appropriate regulatory
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1 authority of the jurisdiction in which the institution is
2 chartered or organized, acknowledgment by the appropriate
3 regulatory authority of the jurisdiction in which the
4 institution is chartered or organized that equivalent
5 privileges are provided to incorporated institutions
6 chartered within this Commonwealth, proof the institution
7 complies with the minimum capital requirements of section
8 1102 and a certificate of authority to do business in this
9 Commonwealth issued by the Department of State pursuant to 15
10 Pa.C.S. Ch. 41 (relating to foreign business corporations).
11 * * *
12 Section 3. Sections 201 and 202 of the act are amended by
13 adding subsections to read:
14 Section 201. General Corporate Powers of Incorporated
15 Institutions
16 * * *
17 (c) Notwithstanding any other provisions of this act or any
18 other law, in addition to any other power as authorized by this
19 act or other law, an incorporated institution shall have the
20 power:
21 (i) To engage in any activity permissible for a national
22 banking association, including those activities as authorized
23 by 12 U.S.C. § 24, subject to conditions, limitations and
24 restrictions as may be imposed by the department which shall
25 not be more restrictive than conditions, limitations and
26 restrictions otherwise imposed upon a national banking
27 association;
28 (ii) To engage in any activity permissible for a Federal
29 savings association, including those activities as authorized
30 by 12 U.S.C. § 1464, subject to conditions, limitations and
20000H2533B3706 - 4 -
1 restrictions as may be imposed by the department which shall
2 not be more restrictive than conditions, limitations and
3 restrictions otherwise imposed upon a Federal savings
4 association;
5 (iii) To control or hold an interest in a subsidiary
6 that engages in any activity permissible for a national bank
7 to conduct through an operating or financial subsidiary,
8 provided that:
9 (A) any activity permissible for an operating
10 subsidiary shall be subject to conditions, limitations
11 and restrictions as may be imposed by the department
12 which shall not be more restrictive than conditions,
13 limitations and restrictions otherwise imposed upon an
14 operating subsidiary of a national banking association;
15 and
16 (B) any activity only permissible for a financial
17 subsidiary, and not permissible for an operating
18 subsidiary, shall comply with the requirements of section
19 121(d) of the Gramm-Leach-Bliley Act (Public Law 106-102,
20 113 Stat. 1380 et seq);
21 (iv) To control or hold an interest in a subsidiary that
22 engages in any activity permissible for a subsidiary of a
23 Federal savings association pursuant to 12 U.S.C. § 1464
24 subject to conditions, limitations and restrictions as may be
25 imposed by the department which shall not be more restrictive
26 than conditions, limitations and restrictions otherwise
27 imposed upon a subsidiary of a Federal savings association;
28 or
29 (v) To engage in any activity or to control or hold an
30 interest in a subsidiary that engages in any activity
20000H2533B3706 - 5 -
1 determined to be permissible for an insured state bank or the
2 subsidiary of an insured state bank by the Federal Deposit
3 Insurance Corporation pursuant to 12 U.S.C. § 1831a subject
4 to conditions, limitations and restrictions as may be imposed
5 by the department with respect to the safety and soundness of
6 the incorporated institution.
7 (d) If an incorporated institution engages in an activity or
8 holds an interest permissible under more than one clause of
9 subsection (c), the incorporated institution may elect under
10 which clause such notice is given and the activity is conducted
11 or the interest is held.
12 (e) Unless earlier approval is granted by the department, an
13 incorporated institution shall provide at least thirty days
14 prior written notice to the department before it engages in an
15 activity or acquires an interest permissible under subsection
16 (c). During the review period provided by this subsection, the
17 department may:
18 (i) Request further information concerning any proposed
19 activity or interest;
20 (ii) Impose any conditions, limitations or restrictions
21 upon such interests or activities to the extent authorized by
22 subsection (c); or
23 (iii) Prohibit an incorporated institution from engaging
24 in an activity or acquiring an interest if to do so would
25 have a significant adverse impact upon the safety and
26 soundness of the incorporated institution.
27 Except as otherwise agreed to by an incorporated institution,
28 the department shall be deemed to have granted approval for an
29 incorporated institution to engage in an activity or acquire an
30 interest if within thirty days of receipt of written notice from
20000H2533B3706 - 6 -
1 an incorporated institution the department does not impose
2 conditions, limitations or restrictions upon interests or
3 activities as authorized by subsection (c) or prohibit the
4 incorporated institution from engaging in an activity or
5 acquiring an interest authorized by subsection (c).
6 (f) Notwithstanding any other provisions of this act or any
7 other law, an incorporated institution shall have the same power
8 to engage in fiduciary activities, both within and outside of
9 this Commonwealth, as a national banking association pursuant to
10 12 U.S.C. § 92a. The department shall interpret the provisions
11 of 12 U.S.C. § 92a in a manner consistent with regulations and
12 interpretations as provided by the Comptroller of the Currency.
13 Section 202. Additional Powers of Incorporated Institutions
14 Related to Conduct of Business
15 An incorporated institution shall have in addition to other
16 powers granted by this act or its articles and subject to the
17 limitations and restrictions contained in this act or in its
18 articles:
19 * * *
20 (k) Delivery service--the power to pick up from and deliver
21 to customers cash or other valuables relating to financial
22 services provided by the incorporated institution using a
23 contract carrier or employes or affiliates of the incorporated
24 institution. No separate authorization or approval by the
25 department shall be required for an incorporated institution to
26 provide delivery service, provided that the incorporated
27 institution complies with other laws and regulations applicable
28 to the provision of delivery service.
29 Section 4. Sections 203(d) and 306(d) of the act, amended
30 July 6, 1984 (P.L.621, No.128), are amended to read:
20000H2533B3706 - 7 -
1 Section 203. Additional Powers Related to Conduct of Business
2 of Incorporated Institutions Other Than Trust
3 Companies
4 A bank, a bank and trust company and a savings bank shall
5 have in addition to other powers granted by this act or its
6 articles and subject to the limitations and restrictions
7 contained in this act or in its articles:
8 * * *
9 (d) Subsidiaries--in addition to the power to acquire and
10 hold interests in a subsidiary permissible under section
11 201(c)(3), (4) and (5), the power to acquire and hold, without
12 limitation of amount, the stock of subsidiary corporations
13 engaged in activities permissible for such institution and
14 activities permissible under the Bank Service Corporation Act
15 (Public Law 87-856, 12 U.S.C. § 1861 et seq.), [if the shares
16 are acquired with the prior written approval of the department
17 and in accordance with the terms and conditions of transfer
18 prescribed by the department.] subject to any conditions,
19 limitations and restrictions comparable to those which may be
20 imposed pursuant to section 201(c)(3), (4) and (5) and to notice
21 and review as provided by section 201(e).
22 * * *
23 Section 306. Limits on Indebtedness of One Customer (Including
24 Purchased Paper)
25 * * *
26 (d) Regulation--The department may by regulation not
27 inconsistent with the provisions of this section and section
28 1414(b) prescribe definitions of and requirements for
29 transactions included in or excluded from the indebtedness to
30 which the fifteen percent limitation of this section applies.
20000H2533B3706 - 8 -
1 * * *
2 Section 5. Section 310(a) of the act, amended December 21,
3 1988 (P.L.1416, No.173), is amended to read:
4 Section 310. Real Estate Loans
5 (a) Permissible loans; [maximum amount and] term and maximum
6 amount--An institution may, subject to the requirements of this
7 section, make or acquire a loan secured by a lien on real estate
8 (including a lease-hold) located in any state or the District of
9 Columbia, in a dependency or insular possession of the United
10 States or in the Commonwealth of Puerto Rico[, in an amount and
11 for a term not to exceed]:
12 (i) in the case of improved real estate, including farm
13 land for a term not to exceed:
14 (A) [two-thirds of the value for] ten years, if
15 unamortized, or
16 (B) [four-fifths of the value for thirty] forty
17 years, if the terms of the loan require substantially
18 equal payments at successive intervals of not more than
19 one year each and in an amount sufficient to pay all
20 principal of and interest on the loan within the term of
21 the loan, except that a loan to a commercial or
22 industrial borrower is exempted from the requirement of
23 substantially equal payments and the date of the initial
24 payment on a loan to such borrower may be deferred for a
25 period not in excess of [three] five years from the date
26 of the loan; or
27 [(C) ninety percent of the value of a one family
28 residential property for thirty years, in an amount not
29 to exceed forty thousand dollars ($40,000), or such
30 larger amount as the department may permit by regulation,
20000H2533B3706 - 9 -
1 subject to the same requirements set forth in clause (B);
2 or
3 (D) ninety-five percent of the value for thirty
4 years, if that principal portion of the loan in excess of
5 seventy-five percent of the value is made in reliance
6 upon a private company mortgage insurance or guarantee
7 acceptable to the Department of Banking, subject to the
8 same requirements set forth in clause (B); or]
9 (ii) in the case of unimproved real estate to be
10 acquired or developed with the proceeds of the loan, [three-
11 fourths of the value for five years.] for a term not to
12 exceed five years; and
13 (iii) in an amount not to exceed ninety percent of the
14 value of the loan, except that if the amount of the loan does
15 not exceed one hundred thousand dollars ($100,000) or is made
16 in reliance upon a private mortgage insurance or guarantee
17 acceptable to the department regardless of the amount of the
18 loan, then one-hundred percent of the value of the loan.
19 * * *
20 Section 6. Section 311 of the act is amended by adding
21 subsections to read:
22 Section 311. Transactions With Respect to Shares of Corporate
23 Stock and Capital Securities
24 * * *
25 (c.1) Collateral loans with affiliates--An institution may
26 engage in a covered transaction with an affiliate, including the
27 acceptance of securities issued by an affiliate as collateral
28 security for a loan or extension of credit, if the institution
29 complies with the requirements of 12 U.S.C. § 371c. The
30 department shall interpret the requirements of 12 U.S.C. § 371c
20000H2533B3706 - 10 -
1 in a manner consistent with regulations, orders and
2 interpretations as issued by the Board of Governors of the
3 Federal Reserve System.
4 * * *
5 (e.1) Transactions with Affiliates--An institution may
6 engage in a transaction with an affiliate, including the
7 extension of credit to acquire or hold shares of capital
8 securities of an affiliate, if the institution complies with the
9 requirements of 12 U.S.C. § 371c-1. The department shall
10 interpret the requirements of 12 U.S.C. § 371c-1 in a manner
11 consistent with regulations, orders and interpretations as
12 issued by the Board of Governors of the Federal Reserve System.
13 (f) Determination of surplus--For the purposes of this
14 section, an institution may determine its surplus in the same
15 manner as calculated for purposes of satisfying limitations upon
16 the ownership of shares of banks and holding companies as
17 provided by 12 U.S.C. § 24.
18 Section 7. Section 403(g) of the act is repealed.
19 Section 8. Section 505(a) of the act, amended December 21,
20 1988 (P.L.146, No.173), is amended to read:
21 Section 505. Real Estate Loans
22 (a) Permissible loans; [maximum amount and] term and maximum
23 amount--A savings bank may, subject to the requirements of this
24 section, make or acquire a loan secured by a lien on real estate
25 (including a leasehold) located in any state or the District of
26 Columbia, in a dependency or insular possession of the United
27 States or in the Commonwealth of Puerto Rico[, in an amount and
28 for a term not to exceed]:
29 (i) in the case of improved real estate, including farm
30 land, for a term not to exceed:
20000H2533B3706 - 11 -
1 (A) [two-thirds of the value for] ten years, if
2 unamortized[, or three-fourths of the value for five
3 years, if unamortized]; or
4 (B) [four-fifths of the value for thirty] forty
5 years, if the terms of the loan require payments which
6 are substantially equal except for the last payment at
7 successive intervals of not more than one year each and
8 in an amount sufficient to pay all principal of and
9 interest on the loan within [thirty years] the term of
10 the loan, except that a loan to a commercial or
11 industrial borrower is exempted from the requirement of
12 substantially equal payments and the date of the initial
13 payment on a loan to such borrower may be deferred for a
14 period not in excess of five years from the date of the
15 loan; or
16 [(C) ninety percent of the value of a one family
17 residential property for thirty years, in an amount not
18 to exceed forty thousand dollars ($40,000), unless the
19 department by regulation approves the granting of loans
20 under this subsection in greater amounts, subject to the
21 same requirements set forth in clause (B); or
22 (D) ninety-five percent of the value for thirty
23 years, if that portion of the loan in excess of seventy-
24 five percent of the value is made in reliance upon a
25 private company mortgage insurance or guarantee
26 acceptable to the Department of Banking, subject to the
27 same requirements set forth in clause (B); or]
28 (ii) in the case of unimproved real estate to be
29 acquired or developed with the proceeds of the loan[, three-
30 fourths of the value for five years.] for a term not to
20000H2533B3706 - 12 -
1 exceed five years; and
2 (iii) in an amount not to exceed ninety percent of the
3 value of the loan, except that if the amount of the loan does
4 not exceed one hundred thousand dollars ($100,000) or is made
5 in reliance upon a private mortgage insurance or guarantee
6 acceptable to the department regardless of the amount of the
7 loan, then one hundred percent of the value of the loan.
8 * * *
9 Section 9. Section 1003(a) of the act is amended to read:
10 Section 1003. Prohibition of Promoters' Fees
11 (a) Prohibited fees--An institution shall not pay any fee,
12 compensation or commission for promotion in connection with its
13 organization or apply any money received on account of shares or
14 subscriptions for shares to promoters' fees for obtaining
15 subscriptions, selling shares or other services in connection
16 with its organization, except legal fees and other usual and
17 ordinary expenses, including reasonable broker's fees,
18 commissions and underwriting costs, necessary for its
19 organization.
20 * * *
21 Section 10. Section 1407 of the act is amended by adding a
22 subsection to read:
23 Section 1407. Audits and Reports by Directors or Trustees;
24 Accountants; Internal Auditors
25 * * *
26 (d) Accounting standards--Audits and reports shall be deemed
27 to satisfy the requirements of the section to the extent the
28 audits and reports conform to accounting standards and
29 principles applicable pursuant to 12 U.S.C. § 1831n to reports
30 or statements required to be filed with Federal banking
20000H2533B3706 - 13 -
1 agencies.
2 Section 11. Section 1414 of the act, amended April 8, 1982
3 (P.L.262, No.79), is amended to read:
4 Section 1414. Preferential Rates of Interest
5 (a) Preferences prohibited--[An] Notwithstanding the
6 provisions of section 306 and except as provided by subsection
7 (c), an institution shall not pay to any director, trustee,
8 executive officer or attorney a higher rate of interest on
9 deposits than the rate paid to any other depositor on similar
10 deposits and shall not grant to any such individual a lower rate
11 of interest on a loan, or a lower rate of charge on an agreement
12 for the payment of money, than the rate granted to other
13 customers under similar circumstances.
14 [(b) Limited definition--The term "executive officer" for
15 the purposes of this section shall be defined by regulation of
16 the Department of Banking.]
17 (c) Authorized activities--Notwithstanding any other
18 provision of this act, an institution may extend credit to any
19 director, trustee, executive officer, attorney or principal
20 shareholder, or to any related interest of such a person, to the
21 extent permissible pursuant to 12 U.S.C. §§ 375a and 375b. The
22 department shall interpret the provisions of 12 U.S.C. §§ 375a
23 and 375b in a manner consistent with regulations, orders and
24 interpretations as issued by the Board of Governors of the
25 Federal Reserve System. A regulation, order or interpretation of
26 the provisions of 12 U.S.C. §§ 375a and 375b by the Board of
27 Governors of the Federal Reserve System shall take effect for
28 the purposes of this subsection within thirty days of
29 promulgation by the Board of Governors, except that the
30 department may for good cause suspend the application of such
20000H2533B3706 - 14 -
1 regulation, order or interpretation for up to a one-year period.
2 Notice of such suspension shall be published by the department
3 in the Pennsylvania Bulletin. Thereafter the regulation, order
4 or interpretation shall take effect for the purposes of this
5 subsection unless the department adopts administrative
6 regulations setting forth a contrary interpretation of the
7 provisions of 12 U.S.C. §§ 375a and 375b. A regulation, order or
8 interpretation of the provisions of 12 U.S.C. §§ 375a and 375b
9 by the Board of Governors of the Federal Reserve System may take
10 effect for the purposes of this subsection within less than
11 thirty days of promulgation by the Board of Governors if
12 approved by the department.
13 SECTION 12. WITHIN ONE YEAR OF THE EFFECTIVE DATE OF THIS <--
14 ACT, THE LEGISLATIVE BUDGET AND FINANCE COMMITTEE SHALL REPORT
15 TO THE GENERAL ASSEMBLY ON THE AMOUNT OF TIME THAT ELAPSES FROM
16 THE POINT THAT BANKS OR FINANCIAL INSTITUTIONS IN THIS
17 COMMONWEALTH RECEIVE MONEY IN THE FORM OF CASH OR CHECKS THAT
18 ARE PAYABLE TO THE COMMONWEALTH AND THE TIME THAT IT TAKES FOR
19 SUCH CASH AND CHECKS TO BE CREDITED TO THE COMMONWEALTH. THIS
20 REPORT SHALL ALSO INCLUDE THE AMOUNT OF POSSIBLE INTEREST THAT
21 BANKS OR FINANCIAL INSTITUTIONS ARE GAINING FROM SUCH CASH AND
22 CHECKS.
23 Section 12 13. Sections 1415 and 2102(c) of the act are <--
24 repealed.
25 Section 13 14. All acts and parts of acts are repealed <--
26 insofar as they are inconsistent with this act.
27 Section 14 15. This act shall take effect immediately. <--
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