PRINTER'S NO. 2066
No. 1739 Session of 1981
INTRODUCED BY L. E. SMITH, RYAN, DORR AND BURD, JULY 1, 1981
REFERRED TO COMMITTEE ON BUSINESS AND COMMERCE, JULY 1, 1981
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 investment in fixed assets,
17 purchase of acceptances, deposits in savings banks, deposits
18 by institutions, recognition of Federal legal reserve
19 requirements, revising restrictions on officer and employe
20 loans, conversion of Federal savings banks; easing
21 restrictions on loans to clerical employes of the Department
22 of Banking; placing restrictions against a trust company
23 holding its own stock and permitting a restricted number of
24 trustees of a savings bank to serve as directors of trust
25 companies.
26 The General Assembly of the Commonwealth of Pennsylvania
27 hereby enacts as follows:
28 Section 1. Subsection (e) of section 202, act of November
29 30, 1965 (P.L.847, No.356), known as the "Banking Code of 1965,"
1 amended July 23, 1970 (P.L.597, No.199), is amended to read:
2 Section 202. Additional Powers of Incorporated Institutions
3 Related to Conduct of Business
4 An incorporated institution shall have in addition to other
5 powers granted by this act or its articles and subject to the
6 limitations and restrictions contained in this act or in its
7 articles:
8 * * *
9 (e) Ownership of real property--the power to acquire and
10 hold such real property as it:
11 (i) occupies or intends to occupy for the transaction of
12 its business or partly so occupies and partly leases,
13 (ii) acquires for the purpose of providing parking
14 facilities for the use of its customers, officers and
15 employes, or
16 (iii) acquires solely or jointly with others for the
17 purpose of providing data processing facilities for the
18 institution or for the institution and others
19 subject to the limitation that the book value of all such real
20 property, of all furniture, fixtures and equipment acquired in
21 connection with any real property owned or leased by the
22 institution, of all alterations of buildings on real property
23 owned or leased by the institution, of all shares of stock or
24 corporations acquired under subsection (d) of this section, and
25 investments in obligations of or for the benefit of corporations
26 described in subsection (d) of this section or loans upon the
27 security of the stock of such corporations shall not exceed
28 twenty-five percent of the aggregate of surplus, unallocated
29 reserves, undivided profits and subordinated securities in the
30 case of a savings bank, or twenty-five percent of the aggregate
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1 of capital, surplus, undivided profits and capital securities in
2 the case of any other institution, or such larger amount as may
3 be approved by the department, and subject to the requirement
4 that estimates of costs of any building on real property owned
5 or leased by the institution shall be submitted to the
6 department for its approval prior to the erection thereof;
7 * * *
8 Section 2. Subsections (b) and (c) of section 308,
9 subsection (d) of section 407, subsection (c) of section 610 and
10 section 702 of the act are amended to read:
11 Section 308. Acceptances
12 * * *
13 (b) Limits on acceptances under subsection (a)--The
14 aggregate amount of acceptances under subsection (a) of this
15 section shall not at any time exceed:
16 (i) for all such acceptances on behalf of one customer,
17 ten percent of capital [and], surplus and undivided profits,
18 exclusive of any acceptance secured by documents of title or
19 other security growing out of the same transaction as the
20 acceptance, and
21 (ii) for all such acceptances:
22 (A) fifty percent of capital [and], surplus and
23 undivided profits, or
24 (B) with the prior written approval of the
25 department, one hundred percent of capital [and], surplus
26 and undivided profits, so long as acceptances growing out
27 of domestic transactions do not exceed fifty percent of
28 capital [and], surplus and undivided profits.
29 (c) Dollar exchange--An institution may, with the prior
30 written approval of the department, accept drafts having not
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1 more than three months sight to run drawn upon it by banks or
2 bankers in foreign countries, or in dependencies or insular
3 possessions of the United States, for the purpose of creating
4 dollar exchange as required by the usages of trade where the
5 drafts are drawn in an aggregate amount which shall not at any
6 time exceed:
7 (i) for all such acceptances on behalf of a single bank
8 or banker, ten percent of capital [and], surplus and
9 undivided profits, and
10 (ii) for all such acceptances, fifty percent of capital
11 [and], surplus and undivided profits.
12 Section 407. Provisions Applicable to Trust Companies
13 * * *
14 (d) Limitation on dealings in own shares--may not acquire or
15 hold for its own account any shares of its own stock, except as
16 specifically provided by this act.
17 Section 610. Deposits by an Institution
18 * * *
19 (c) Amount of deposit--An institution shall not have on
20 deposit in a single depository at any time an amount which is in
21 excess of ten percent of the aggregate of its surplus, undivided
22 profits and unallocated reserves in the case of a savings bank,
23 in excess of ten percent of its net worth in the case of a
24 private bank [or employes' mutual banking association] or in
25 excess of ten percent of its capital [and], surplus and
26 undivided profits in the case of any other institution, without
27 the approval of the depository for that purpose by the
28 department.
29 Section 702. Definitions for Purpose of Reserve Requirement
30 For the purposes of the reserve requirement imposed by
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1 section 703 and the composition of the required reserve fund
2 under section 704, the terms:
3 [(a) "demand deposits" shall mean the aggregate of deposits
4 which can be required to be paid on demand or within less than
5 thirty days after demand;
6 (b) "time deposits" shall mean deposits which cannot be
7 required to be paid within less than thirty days;
8 (c)] (a) "reserve agent" shall mean a depository of the
9 institution selected as provided in section 610 and approved by
10 the department for the deposit of funds included in the required
11 reserve fund; and
12 [(d)] (b) "instrumentality of the United States" shall mean
13 the Federal National Mortgage Association, a Federal Land Bank,
14 a Federal Home Loan Bank, a Bank for Cooperatives and a Federal
15 Intermediate Credit Bank.
16 Section 3. Section 703 of the act, amended May 21, 1980
17 (P.L.173, No.51), is amended to read:
18 Section 703. Requirement of Reserve Fund
19 (a) An institution which is not [a member] subject to
20 reserve fund requirements of the Federal Reserve System shall
21 maintain at all times a reserve fund in an amount fixed by
22 regulation of the department[:].
23 [(i) in the case of a savings bank, in the same amount
24 fixed for demand deposits of other institutions for all
25 deposits of the savings bank subject to withdrawal by
26 negotiable or transferable instruments of withdrawal and not
27 in excess of six percent and not less than three percent of
28 the total of other deposits, and
29 (ii) in the case of any other institution, not in excess
30 of the aggregate of twenty-two percent of demand deposits and
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1 six percent of other deposits and not less than the aggregate
2 of seven percent of demand deposits and three percent of
3 other deposits.]
4 The amount of the required reserve for each day shall be
5 computed on the basis of average daily deposits covering such
6 bi-weekly or shorter periods as shall be fixed by regulation of
7 the department.
8 (b) An institution which is [a member] subject to reserve
9 fund requirements of the Federal Reserve System shall maintain
10 at all times a reserve fund in accordance with the requirements
11 [applicable to a member bank under] of the laws of the United
12 States.
13 Section 4. Subsection (a) of section 1403 of the act,
14 amended July 30, 1975 (P.L.108, No.56), is amended and a
15 subsection is added to read:
16 Section 1403. Number, Qualifications and Eligibility of
17 Directors or Trustees
18 (a) Number--The by-laws may fix the number of trustees of a
19 savings bank at not less than [eleven] seven. The by-laws of any
20 other institution may fix the number of directors at not less
21 than five or more than twenty-five and may provide that the
22 board may, within such limitation, increase the number of
23 directors by not more than two in any one year.
24 * * *
25 (d) Authorization--Subject to the provisions of this act:
26 (i) No more than two trustees of a savings bank may
27 serve at the same time as directors of a trust company which
28 does not make real estate mortgage loans and does not accept
29 savings deposits from persons.
30 (ii) No more than two directors of a trust company which
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1 does not make real estate mortgage loans and does not accept
2 savings deposits from persons may serve at the same time as
3 trustees of a savings bank.
4 Section 5. Section 1414 of the act is amended to read:
5 Section 1414. Preferential Rates of Interest
6 (a) Preferences prohibited--An institution shall not pay to
7 any director, trustee, executive officer or attorney a higher
8 rate of interest on deposits than the rate paid to any other
9 depositor on similar deposits and shall not grant to any such
10 individual a lower rate of interest on a loan, or a lower rate
11 of charge on an agreement for the payment of money, than the
12 rate granted to other customers under similar circumstances.
13 (b) Limited definition--The term "executive officer" for the
14 purposes of this section shall be defined by regulation of the
15 Department of Banking.
16 Section 6. Subsections (a), (b) and (d) of section 1609 of
17 the act, added August 1, 1969 (P.L.211, No.85), are amended to
18 read:
19 Section 1609. Mergers, Consolidations and Conversions of
20 Savings Banks
21 (a) Authority to merge, consolidate or convert--
22 (i) upon compliance with the requirements of sections
23 1602, 1603, 1604, 1605 and 1606, a savings bank may enter
24 into a merger or consolidation with one or more other savings
25 banks.
26 (ii) upon compliance with the requirements of this
27 section and other applicable law, one or more savings banks
28 and one or more associations may merge into a savings bank or
29 into an association or consolidate into a new savings bank or
30 a new association. The word "association" in this chapter
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1 shall mean an association subject to the Savings Association
2 Code of 1967.
3 (iii) upon compliance with the requirements of this
4 section, one or more savings banks, one or more Federal
5 mutual savings banks and one or more Federal savings and loan
6 associations may merge into a savings bank, Federal mutual
7 savings bank or a Federal savings and loan association or
8 consolidate into a new savings bank, a new Federal mutual
9 savings bank or a new Federal savings and loan association.
10 (iv) the authority of a savings bank to merge or
11 consolidate into a Federal mutual savings bank or Federal
12 savings and loan association shall be subject to the
13 condition that at the time of the transaction the laws of the
14 United States shall authorize a Federal mutual savings bank
15 or Federal savings and loan association to merge or
16 consolidate into a savings bank.
17 (v) upon compliance with the requirements of this section
18 and other applicable law, a savings bank may be converted
19 into a Federal mutual savings bank, a Federal savings and
20 loan association or an association, subject to the condition
21 that at the time of the transaction the laws of the United
22 States shall authorize a Federal mutual savings bank or a
23 Federal savings and loan association to convert into a
24 savings bank.
25 (vi) upon compliance with the requirements of this
26 section and other applicable law and subject to the laws of
27 the United States, a Federal mutual savings bank or a Federal
28 savings and loan association may be converted into a savings
29 bank or an association.
30 (vii) all mergers, consolidations and conversions in
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1 which the resulting corporation is a savings bank or an
2 association shall be subject to the approval of the
3 department.
4 (b) Requirements for a merger, consolidation or conversion--
5 The requirements for a merger, consolidation or conversion under
6 clauses (ii), (iii), (v) or (vi) of subsection (a) which must be
7 satisfied by the parties thereto are as follows:
8 (i) the parties shall adopt a plan stating the method,
9 terms and conditions of the merger, consolidation or
10 conversion, including the rights under the plan of the
11 members and depositors of each of the parties, and any
12 agreement concerning the merger or consolidation.
13 (ii) if the proposed merger, consolidation or conversion
14 will result in a Federal mutual savings bank, a savings bank,
15 a Federal savings and loan association or an association,
16 adoption of the plan by each party thereto shall require the
17 affirmative vote, in the case of a savings bank, of at least
18 two-thirds of the trustees present at a meeting at which the
19 plan is proposed, and two-thirds of all the trustees at a
20 subsequent meeting held upon not less than ten days' notice
21 to all the trustees, and in the case of any other party, of
22 two-thirds of the entire membership of the board of directors
23 of each Federal mutual savings bank, Federal savings and loan
24 association, or association. The notice required to be given
25 to the trustees of a savings bank shall include a copy or
26 summary of the plan. The department may require such vote of
27 the members of an association as it deems proper.
28 (iii) any modification of a plan which has been adopted
29 shall be made by any method provided therein, or in the
30 absence of such provision by the same vote as that required
19810H1739B2066 - 9 -
1 for adoption.
2 (iv) if a proposed merger, consolidation or conversion
3 will result in a savings bank or an association, an
4 application for the required approval thereof by the
5 department shall be made in a manner prescribed by the
6 department. The department may require notice to be given to
7 such persons as it designates. There shall also be delivered
8 to the department:
9 (A) articles of merger, consolidation or conversion,
10 (B) applicable fees payable to the department in
11 connection with the articles and with the conduct of the
12 investigation required by subsection (e),
13 (C) if the resulting corporation is an association,
14 any documents or other items required under the Savings
15 Association Code of 1967.
16 (D) if the proposed name of the resulting savings
17 bank or association is not identical with the name of one
18 of the parties to the plan, evidence of reservation of
19 such name in the Department of State, and
20 (E) if there is any modification of the plan at any
21 time prior to the approval by the department, an
22 amendment of the application and, if necessary, of the
23 articles, signed in the same manner as the originals,
24 setting forth the modification of the plan, the method by
25 which such modification was adopted and any related
26 change in the provisions of the articles of merger,
27 consolidation or conversion.
28 * * *
29 (d) Action where approval by department not required--If a
30 proposed merger, consolidation or conversion will result in a
19810H1739B2066 - 10 -
1 Federal mutual savings bank or a Federal savings and loan
2 association, a savings bank which is a party to a plan shall:
3 (i) notify the department of the proposed merger,
4 consolidation or conversion,
5 (ii) provide such evidence of the adoption of the plan as
6 the department may request,
7 (iii) notify the department of any abandonment or
8 disapproval of the plan,
9 (iv) file with the department and with the Department of
10 State a certificate of the approval of the merger [or],
11 consolidation or conversion by the Federal Home Loan Bank
12 Board or its successor which has the right on behalf of the
13 United States to approve such mergers, consolidations or
14 conversions into Federal mutual savings banks or Federal
15 savings and loan associations.
16 * * *
17 Section 7. Subsection (a) of section 2004 of the act is
18 amended to read:
19 Section 2004. Relationship of Institutions and Their Personnel
20 with Officials and Employes of Department
21 (a) Loans and Gifts--Except as provided in subsection (d) of
22 this section, an institution or any director, trustee, officer,
23 employe or attorney thereof shall not grant or give to the
24 Secretary of Banking, any official or employe of the department,
25 any deputy receiver or any employe of the Secretary of Banking
26 as receiver, none of whom shall receive, any sum of money or any
27 property as a gift or loan or otherwise, directly or
28 indirectly--subject to the penalty provisions of this act. This
29 subsection shall not apply to loans to employes of the
30 Department of Banking who function in a clerical or nondecision
19810H1739B2066 - 11 -
1 making capacity with regard to institutions, including but not
2 limited to clerks, typists and stenographers.
3 * * *
4 Section 8. This act shall take effect immediately.
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