PRINTER'S NO. 3518
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 AND ZUG, MAY 9, 2000
REFERRED TO COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT,
MAY 9, 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
25 banks; further prohibiting promoters' fees; and further
26 providing for audits and reports and for preferential rates
27 of interest.
28 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows:
2 Section 1. Section 106(b) of the act of November 30, 1965
3 (P.L.847, No.356), known as the Banking Code of 1965, amended
4 July 6, 1995 (P.L.271, No.39), is amended to read:
5 Section 106. Corporations Authorized to Act as Fiduciary
6 * * *
7 (b) Foreign fiduciaries--No corporation existing under the
8 laws of a state other than this Commonwealth [or national bank
9 located in another state, except an interstate bank, may act in
10 this Commonwealth as fiduciary unless:
11 (i) it shall be appointed fiduciary by will or other
12 testamentary writing, by a deed of trust or by a court or
13 register of wills of this Commonwealth or it shall be
14 designated as fiduciary by the beneficiaries or by one or
15 more other fiduciaries of the estate or trust pursuant to the
16 terms of the instrument, or
17 (ii) it shall be the successor by merger or
18 consolidation to a corporation lawfully acting as fiduciary
19 in this Commonwealth at the time of such merger or
20 consolidation
21 and unless the laws of such other state confer like powers on
22 corporations existing under the laws of this Commonwealth. No
23 corporation of another state or national bank located in another
24 state authorized to act as fiduciary pursuant to this subsection
25 (b) shall be authorized to establish a place of business in this
26 Commonwealth.] may act in this Commonwealth as fiduciary, except
27 that an incorporated institution possessing fiduciary powers
28 pursuant to the laws of another state shall have the same power
29 to engage in fiduciary activities within this Commonwealth as a
30 national banking association acting pursuant to 12 U.S.C. § 92a
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1 or a Federal savings association 12 U.S.C. § 1464(n), provided
2 that:
3 (i) the state laws pursuant to which the incorporated
4 institution is operating provide equivalent privileges to an
5 incorporated institution chartered by the Commonwealth;
6 (ii) the incorporated institution complies with the
7 minimum capital requirements of section 1102; and
8 (iii) the incorporated institution provides written
9 notice to the department at least thirty days prior to the
10 commencement of fiduciary activities, which notice shall be
11 accompanied by documentation of its authorization to conduct
12 fiduciary activities issued by the appropriate regulatory
13 authority of the jurisdiction in which the institution is
14 chartered or organized, acknowledgment by the appropriate
15 regulatory authority of the jurisdiction in which the
16 institution is chartered or organized that equivalent
17 privileges are provided to incorporated institutions
18 chartered within this Commonwealth, proof the institution
19 complies with the minimum capital requirements of section
20 1102 and a certificate of authority to do business in this
21 Commonwealth issued by the Department of State pursuant to 15
22 Pa.C.S. Ch. 41 (relating to foreign business corporations).
23 * * *
24 Section 2. Sections 201 and 202 of the act are amended by
25 adding subsections to read:
26 Section 201. General Corporate Powers of Incorporated
27 Institutions
28 * * *
29 (c) Notwithstanding any other provisions of this act or any
30 other law, in addition to any other power as authorized by this
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1 act or other law, an incorporated institution shall have the
2 power:
3 (i) To engage in any activity permissible for a national
4 banking association, including those activities as authorized
5 by 12 U.S.C. § 24, subject to conditions, limitations and
6 restrictions as may be imposed by the department which shall
7 not be more restrictive than conditions, limitations and
8 restrictions otherwise imposed upon a national banking
9 association;
10 (ii) To engage in any activity permissible for a Federal
11 savings association, including those activities as authorized
12 by 12 U.S.C. § 1464, subject to conditions, limitations and
13 restrictions as may be imposed by the department which shall
14 not be more restrictive than conditions, limitations and
15 restrictions otherwise imposed upon a Federal savings
16 association;
17 (iii) To control or hold an interest in a subsidiary
18 that engages in any activity permissible for a national bank
19 to conduct through an operating or financial subsidiary,
20 provided that:
21 (A) any activity permissible for an operating
22 subsidiary shall be subject to conditions, limitations
23 and restrictions as may be imposed by the department
24 which shall not be more restrictive than conditions,
25 limitations and restrictions otherwise imposed upon an
26 operating subsidiary of a national banking association;
27 and
28 (B) any activity only permissible for a financial
29 subsidiary, and not permissible for an operating
30 subsidiary, shall comply with the requirements of section
20000H2533B3518 - 4 -
1 121(d) of the Gramm-Leach-Bliley Act (Public Law 106-102,
2 113 Stat. 1380 et seq);
3 (iv) To control or hold an interest in a subsidiary that
4 engages in any activity permissible for a subsidiary of a
5 Federal savings association pursuant to 12 U.S.C. § 1464
6 subject to conditions, limitations and restrictions as may be
7 imposed by the department which shall not be more restrictive
8 than conditions, limitations and restrictions otherwise
9 imposed upon a subsidiary of a Federal savings association;
10 or
11 (v) To engage in any activity determined to be
12 permissible for an insured state bank or the subsidiary of an
13 insured state bank by the Federal Deposit Insurance
14 Corporation pursuant to 12 U.S.C. § 1831a subject to
15 conditions, limitations and restrictions as may be imposed by
16 the department with respect to the safety and soundness of
17 the incorporated institution.
18 (d) If an incorporated institution engages in an activity or
19 holds an interest permissible under more than one clause of
20 subsection (c), the incorporated institution may elect under
21 which clause such notice is given and the activity is conducted
22 or the interest is held.
23 (e) Unless earlier approval is granted by the department, an
24 incorporated institution shall provide at least thirty days
25 prior written notice to the department before it engages in an
26 activity or acquires an interest permissible under subsection
27 (c). During the review period provided by this subsection, the
28 department may:
29 (i) Request further information concerning any proposed
30 activity or interest;
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1 (ii) Impose any conditions, limitations or restrictions
2 upon such interests or activities to the extent authorized by
3 subsection (c); or
4 (iii) Prohibit an incorporated institution from engaging
5 in an activity or acquiring an interest if to do so would
6 have a significant adverse impact upon the safety and
7 soundness of the incorporated institution.
8 Except as otherwise agreed to by an incorporated institution,
9 the department shall be deemed to have granted approval for an
10 incorporated institution to engage in an activity or acquire an
11 interest if within thirty days of receipt of written notice from
12 an incorporated institution the department does not impose
13 conditions, limitations or restrictions upon interests or
14 activities as authorized by subsection (c) or prohibit the
15 incorporated institution from engaging in an activity or
16 acquiring an interest authorized by subsection (c).
17 (f) Notwithstanding any other provisions of this act or any
18 other law, an incorporated institution shall have the same power
19 to engage in fiduciary activities, both within and outside of
20 this Commonwealth, as a national banking association pursuant to
21 12 U.S.C. § 92a. The department shall interpret the provisions
22 of 12 U.S.C. § 92a in a manner consistent with regulations and
23 interpretations as provided by the Comptroller of the Currency.
24 Section 202. Additional Powers of Incorporated Institutions
25 Related to Conduct of Business
26 An incorporated institution shall have in addition to other
27 powers granted by this act or its articles and subject to the
28 limitations and restrictions contained in this act or in its
29 articles:
30 * * *
20000H2533B3518 - 6 -
1 (k) Delivery service--the power to pick up from and deliver
2 to customers cash or other valuables relating to financial
3 services provided by the incorporated institution using a
4 contract carrier or employes or affiliates of the incorporated
5 institution. No separate authorization or approval by the
6 department shall be required for an incorporated institution to
7 provide delivery service, provided that the incorporated
8 institution complies with other laws and regulations applicable
9 to the provision of delivery service.
10 Section 3. Section 203(d) of the act, amended July 6, 1984
11 (P.L.621, No.128), is amended to read:
12 Section 203. Additional Powers Related to Conduct of Business
13 of Incorporated Institutions Other Than Trust
14 Companies
15 A bank, a bank and trust company and a savings bank shall
16 have in addition to other powers granted by this act or its
17 articles and subject to the limitations and restrictions
18 contained in this act or in its articles:
19 * * *
20 [(d) Subsidiaries--the power to acquire and hold, without
21 limitation of amount, the stock of subsidiary corporations
22 engaged in activities permissible for such institution and
23 activities permissible under the Bank Service Corporation Act
24 (Public Law 87-856, 12 U.S.C. § 1861 et seq.), if the shares are
25 acquired with the prior written approval of the department and
26 in accordance with the terms and conditions of transfer
27 prescribed by the department.]
28 * * *
29 Section 4. Section 310(a) of the act, amended December 21,
30 1988 (P.L.1416, No.173), is amended to read:
20000H2533B3518 - 7 -
1 Section 310. Real Estate Loans
2 (a) Permissible loans; [maximum amount and] term and maximum
3 amount--An institution may, subject to the requirements of this
4 section, make or acquire a loan secured by a lien on real estate
5 (including a lease-hold) located in any state or the District of
6 Columbia, in a dependency or insular possession of the United
7 States or in the Commonwealth of Puerto Rico[, in an amount and
8 for a term not to exceed]:
9 (i) in the case of improved real estate, including farm
10 land for a term not to exceed:
11 (A) [two-thirds of the value for] ten years, if
12 unamortized, or
13 (B) [four-fifths of the value for thirty] forty
14 years, if the terms of the loan require substantially
15 equal payments at successive intervals of not more than
16 one year each and in an amount sufficient to pay all
17 principal of and interest on the loan within the term of
18 the loan, except that a loan to a commercial or
19 industrial borrower is exempted from the requirement of
20 substantially equal payments and the date of the initial
21 payment on a loan to such borrower may be deferred for a
22 period not in excess of [three] five years from the date
23 of the loan; or
24 [(C) ninety percent of the value of a one family
25 residential property for thirty years, in an amount not
26 to exceed forty thousand dollars ($40,000), or such
27 larger amount as the department may permit by regulation,
28 subject to the same requirements set forth in clause (B);
29 or
30 (D) ninety-five percent of the value for thirty
20000H2533B3518 - 8 -
1 years, if that principal portion of the loan in excess of
2 seventy-five percent of the value is made in reliance
3 upon a private company mortgage insurance or guarantee
4 acceptable to the Department of Banking, subject to the
5 same requirements set forth in clause (B); or]
6 (ii) in the case of unimproved real estate to be
7 acquired or developed with the proceeds of the loan, [three-
8 fourths of the value for five years.] for a term not to
9 exceed five years; and
10 (iii) in an amount not to exceed ninety percent of the
11 value of the loan, except that if the amount of the loan does
12 not exceed one hundred thousand dollars ($100,000) or is made
13 in reliance upon a private mortgage insurance or guarantee
14 acceptable to the department regardless of the amount of the
15 loan, then one-hundred percent of the value of the loan.
16 * * *
17 Section 5. Section 311 of the act, is amended by adding
18 subsections to read:
19 Section 311. Transactions With Respect to Shares of Corporate
20 Stock and Capital Securities
21 * * *
22 (c.1) Collateral loans with affiliates--An institution may
23 engage in a covered transaction with an affiliate, including the
24 acceptance of securities issued by an affiliate as collateral
25 security for a loan or extension of credit, if the institution
26 complies with the requirements of 12 U.S.C. § 371c. The
27 department shall interpret the requirements of 12 U.S.C. § 371c
28 in a manner consistent with regulations, orders and
29 interpretations as issued by the Board of Governors of the
30 Federal Reserve System.
20000H2533B3518 - 9 -
1 * * *
2 (e.1) Transactions with Affiliates--An institution may
3 engage in a transaction with an affiliate, including the
4 extension of credit to acquire or hold shares of capital
5 securities of an affiliate, if the institution complies with the
6 requirements of 12 U.S.C. § 371c-1. The department shall
7 interpret the requirements of 12 U.S.C. § 371c-1 in a manner
8 consistent with regulations, orders and interpretations as
9 issued by the Board of Governors of the Federal Reserve System.
10 (f) Determination of surplus--For the purposes of this
11 section, an institution may determine its surplus in the same
12 manner as calculated for purposes of satisfying limitations upon
13 the ownership of shares of banks and holding companies as
14 provided by 12 U.S.C. § 24.
15 Section 6. Section 403(g) of the act is repealed.
16 Section 7. Section 505(a) of the act, amended December 21,
17 1988 (P.L.146, No.173), is amended to read:
18 Section 505. Real Estate Loans
19 (a) Permissible loans; [maximum amount and] term and maximum
20 amount--A savings bank may, subject to the requirements of this
21 section, make or acquire a loan secured by a lien on real estate
22 (including a leasehold) located in any state or the District of
23 Columbia, in a dependency or insular possession of the United
24 States or in the Commonwealth of Puerto Rico[, in an amount and
25 for a term not to exceed]:
26 (i) in the case of improved real estate, including farm
27 land, for a term not to exceed:
28 (A) [two-thirds of the value for] ten years, if
29 unamortized[, or three-fourths of the value for five
30 years, if unamortized]; or
20000H2533B3518 - 10 -
1 (B) [four-fifths of the value for thirty] forty
2 years, if the terms of the loan require payments which
3 are substantially equal except for the last payment at
4 successive intervals of not more than one year each and
5 in an amount sufficient to pay all principal of and
6 interest on the loan within [thirty years] the term of
7 the loan, except that a loan to a commercial or
8 industrial borrower is exempted from the requirement of
9 substantially equal payments and the date of the initial
10 payment on a loan to such borrower may be deferred for a
11 period not in excess of five years from the date of the
12 loan; or
13 [(C) ninety percent of the value of a one family
14 residential property for thirty years, in an amount not
15 to exceed forty thousand dollars ($40,000), unless the
16 department by regulation approves the granting of loans
17 under this subsection in greater amounts, subject to the
18 same requirements set forth in clause (B); or
19 (D) ninety-five percent of the value for thirty
20 years, if that portion of the loan in excess of seventy-
21 five percent of the value is made in reliance upon a
22 private company mortgage insurance or guarantee
23 acceptable to the Department of Banking, subject to the
24 same requirements set forth in clause (B); or]
25 (ii) in the case of unimproved real estate to be
26 acquired or developed with the proceeds of the loan[, three-
27 fourths of the value for five years.] for a term not to
28 exceed five years; and
29 (iii) in an amount not to exceed ninety percent of the
30 value of the loan, except that if the amount of the loan does
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1 not exceed one hundred thousand dollars ($100,000) or is made
2 in reliance upon a private mortgage insurance or guarantee
3 acceptable to the department regardless of the amount of the
4 loan, then one hundred percent of the value of the loan.
5 * * *
6 Section 8. Section 1003(a) of the act is amended to read:
7 Section 1003. Prohibition of Promoters' Fees
8 (a) Prohibited fees--An institution shall not pay any fee,
9 compensation or commission for promotion in connection with its
10 organization or apply any money received on account of shares or
11 subscriptions for shares to promoters' fees for obtaining
12 subscriptions, selling shares or other services in connection
13 with its organization, except legal fees and other usual and
14 ordinary expenses, including reasonable broker's fees,
15 commissions and underwriting costs, necessary for its
16 organization.
17 * * *
18 Section 9. Section 1407 of the act is amended by adding a
19 subsection to read:
20 Section 1407. Audits and Reports by Directors or Trustees;
21 Accountants; Internal Auditors
22 * * *
23 (d) Accounting standards--Audits and reports shall be deemed
24 to satisfy the requirements of the section to the extent the
25 audits and reports conform to accounting standards and
26 principles applicable pursuant to 12 U.S.C. § 1831n to reports
27 or statements required to be filed with Federal banking
28 agencies.
29 Section 10. Section 1414 of the act, amended April 8, 1982
30 (P.L.262, No.79), is amended to read:
20000H2533B3518 - 12 -
1 Section 1414. Preferential Rates of Interest
2 (a) Preferences prohibited--[An] Notwithstanding the
3 provisions of section 306 and except as provided by subsection
4 (c), an institution shall not pay to any director, trustee,
5 executive officer or attorney a higher rate of interest on
6 deposits than the rate paid to any other depositor on similar
7 deposits and shall not grant to any such individual a lower rate
8 of interest on a loan, or a lower rate of charge on an agreement
9 for the payment of money, than the rate granted to other
10 customers under similar circumstances.
11 [(b) Limited definition--The term "executive officer" for
12 the purposes of this section shall be defined by regulation of
13 the Department of Banking.]
14 (c) Authorized activities--Notwithstanding any other
15 provision of this act, an institution may extend credit to any
16 director, trustee, executive officer, attorney or principal
17 shareholder, or to any related interest of such a person, to the
18 extent permissible pursuant to 12 U.S.C. §§ 375a and 375b. The
19 department shall interpret the provisions of 12 U.S.C. §§ 375a
20 and 375b in a manner consistent with regulations, orders and
21 interpretations as issued by the Board of Governors of the
22 Federal Reserve System. A regulation, order or interpretation of
23 the provisions of 12 U.S.C. §§ 375a and 375b by the Board of
24 Governors of the Federal Reserve System shall take effect for
25 the purposes of this subsection within thirty days of
26 promulgation by the Board of Governors, except that the
27 department may for good cause suspend the application of such
28 regulation, order or interpretation for up to a one-year period.
29 Notice of such suspension shall be published by the department
30 in the Pennsylvania Bulletin. Thereafter the regulation, order
20000H2533B3518 - 13 -
1 or interpretation shall take effect for the purposes of this
2 subsection unless the department adopts administrative
3 regulations setting forth a contrary interpretation of the
4 provisions of 12 U.S.C. §§ 375a and 375b. A regulation, order or
5 interpretation of the provisions of 12 U.S.C. §§ 375a and 375b
6 by the Board of Governors of the Federal Reserve System may take
7 effect for the purposes of this subsection within less than
8 thirty days of promulgation by the Board of Governors if
9 approved by the department.
10 Section 11. Section 1415 of the act is repealed.
11 Section 12. All acts and parts of acts are repealed insofar
12 as they are inconsistent with this act.
13 Section 13. This act shall take effect immediately.
E4L07DMS/20000H2533B3518 - 14 -