2012 -- H 7356

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LC01155

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEFINITIONS AND ESTABLISHMENT OF

FINANCIAL INSTITUTIONS

     Introduced By: Representatives Nunes, Marcello, Medina, Tanzi, and Ruggiero

     Date Introduced: February 02, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 19-1-1 and 19-1-3 of the General Laws in Chapter 19-1 entitled

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"Definitions and Establishment of Financial Institutions" are hereby amended to read as follows:

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     19-1-1. Definitions. -- Unless otherwise specified, the following terms shall have the

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following meanings throughout this title:

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      (1) "Agreement to form" means the agreement to form a financial institution or the

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agreement to form a credit union, as applicable, pursuant to this title, and includes, for financial

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institutions organized before December 31, 1995, the articles of incorporation or the agreement of

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association of the financial institution, where applicable.

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      (2) "Board of bank incorporation" means the board of bank incorporation as constituted

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under this title or the predecessor of the board of bank incorporation.

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      (3)(2) "Branch" means any office or place of business, other than the main office or

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customer-bank-communication-terminal outlets as provided for in this title, at which deposits are

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received, or checks paid or money lent, or at which any trust powers are exercised. Any financial

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institution which had, on or before June 30, 2003, established an office or place of business, other

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than its main office, at which trust powers are exercised, shall not be required to obtain the

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approval of the director or the director's designee pursuant to section 19-2-11 of the general laws

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in chapter 2 of title 19 for any such offices established as of that date.

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      (4)(3) "Credit union" means a credit union duly organized under the laws of this state.

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      (5)(4) "Director" means the director of the department of business regulation.

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      (6)(5) "Division of banking" means the division within the department of business

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regulation responsible for the supervision and examination of regulated institutions and/or

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licensees under chapter 14 of this title.

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      (7)(6) "Federal credit union" means a credit union duly organized under the laws of the

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United States.

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      (8)(7) "Financial institution" means any entity, other than a credit union, duly organized

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under the laws of this state which has the statutory authority to accept money on deposit pursuant

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to title 19, including an entity which is prohibited from accepting deposits by its own by-laws or

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agreement to form; the term includes, but is not limited to banks, trust companies, savings banks,

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loan and investment banks and savings and loan associations.

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      (9)(8) "Main office" means, in the case of financial institutions or credit unions, the

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location stated in the agreement to form, as amended, and, otherwise, the location recognized by

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the institution's primary banking regulator as its main office.

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      (10)(9) "Person" means individuals, partnerships, corporations, limited liability

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companies or any other entity however organized.

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      (11)(10) "Regulated institution" means any financial institution, credit union or other

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insured-deposit-taking institution which is authorized to do business in this state including one

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authorized by operation of an interstate banking statute which allowed its original entry.

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      (12)(11) "Retail installment contract" means any security agreement negotiated or

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executed in this state or under the laws of this state including, but not limited to, any agreement in

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the nature of a mortgage, conditional sale contract, or any other agreement whether or not

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evidenced by any written instrument to pay the retail purchase price of goods, or any part thereof,

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in installments over any period of time and pursuant to which any security interest is retained or

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taken by the retail seller for the payment of the purchase price, or any part thereof, of the retail

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installment contract.

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      (13)(12) "Retail seller" means any person who sells or contracts to sell any goods under

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a retail installment contract to a retail buyer.

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      (14)(13) "Superintendent" means the associate director and superintendent of banking in

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the department of business regulation.

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      (15)(14) "Unimpaired capital" means the sum of all capital and allowance accounts

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minus estimated losses on assets, calculated in accordance with generally accepted accounting

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principles.

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     19-1-3. Applications -- General. -- (a) The director or the director's designee shall

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assume and exercise all powers and duties of the board of bank incorporation relative to All

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applications filed by regulated institutions shall be made to the director or the director’s

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designee, with other than the exceptions set forth in this title. All applications filed with the

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division of banking shall be acted upon by the director or the director's designee, in writing.

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      (b) The director or the director's designee shall cause notice of applications filed to be

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published for three (3) consecutive weeks in a newspaper of general circulation which on the

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department’s website and by any other method deemed by the director or the director’s designee

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to communicate with persons who are or may be interested in the application. The notice shall

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include a provision allowing for a public comment period. During this period, the application

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shall be open for public inspection at the division of banking. If, at the end of the public comment

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period, there are no objectors to the application, the director or the director's designee may

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approve or deny the application. If there are any objectors, the director or the director's designee

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shall may hold a public hearing to take testimony, under oath, and after considering this

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testimony, shall approve or deny the application. Any applicant aggrieved by any order regarding

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an application may appeal pursuant to the provisions of chapter 35 of title 42.

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      (c) The superintendent shall collect a filing fee with respect to applications submitted to

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the division of banking for consideration. All fees pursuant to this section shall be paid to the

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director for the use of the state. The fees to be charged for each type of application shall be

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established by the division of banking by regulation. The division of banking shall publish a

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notice, in a newspaper of general circulation, of a proposed fee structure, receive comments on

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the proposal and establish the fees at a public hearing, the date of which shall be contained in the

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notice of publication.

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      (d) The superintendent is hereby authorized to promulgate rules and regulations for the

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implementation of this section, including, but not limited to, the establishment of specific time

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periods within which a decision for the various types of applications must be rendered by the

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division of banking.

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      (e) Any party adversely affected by a decision of the director or the director's designee

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may make written demand upon the director or the director’s designee within thirty (30) days

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notification of the decision from which the party is appealing. concerning an agreement to form

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or an application filed for interstate mergers, interstate acquisitions or interstate branches may

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appeal the director's or the director's designee's decision by filing an application of appeal with

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the board of bank incorporation within ten (10) days after the issuance of the decision. The board

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of bank incorporation shall thereupon review the decision considering the public interest, the

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public convenience and advantage, the effect on the tax base of the state and the effect on the

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citizens of the state and issue its own decision which shall govern. A hearing conducted pursuant

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to this section shall be conducted pursuant to the “administrative procedures act”, chapter 42-35.

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      (f) Anyone adversely affected by a decision of the director of the board of bank

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incorporation may appeal the decision by filing an appeal with the superior court pursuant to

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section 42-35-15 within thirty (30) days after entry of decision. A copy of the notice of appeal

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shall be forthwith served upon the legal counsel/clerk of the board of bank incorporation. The

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board of bank incorporation shall certify and file in the court a copy of the record upon which the

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decision was entered within thirty (30) days after receipt of the notice of appeal.

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     SECTION 2. Section 19-1-2 of the General Laws in Chapter 19-1 entitled "Definitions

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and Establishment of Financial Institutions" is hereby repealed.

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     19-1-2. Board of bank incorporation. -- (a) (i) There is hereby authorized, created and

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established within the department of business regulation a five (5) member board of bank

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incorporation, (hereinafter the "board"), all of whom shall be voting members and serve without

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compensation. Three (3) who serve as ex-officio shall be the director of the department of

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business regulation (hereinafter the "director") or his or her designee, the general treasurer or his

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or her designee, and the attorney general or his or her designee. The other two (2) members of the

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board shall be members of the general public qualified by training or experience in the fields of

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finance or banking, appointed by the governor with the advice and consent of the senate. In

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appointing public members pursuant to this section, the governor shall solicit and give due

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consideration of the recommendations of the general treasurer with respect thereto. The designee

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of a member serving as ex-officio shall be a subordinate from within the department of the ex-

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officio member and shall represent him or her at all meetings of the board. No one shall be

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eligible for public appointment unless he or she is a resident of this state. The board shall elect a

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chair and may elect from among its own members such other officers as they deem necessary.

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      (ii) The board is a public policy appellate board established to consider appeals from a

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decision of the director or the director's designee concerning major banking matters which affect

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the citizens and tax base of the state and to exercise the powers and perform the duties conferred

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or imposed upon it by this title.

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      (iii) Newly appointed and qualified public members and designees of ex-officio

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members shall, within six (6) months of their qualification or designation, attend a training course

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that shall be developed with board approval and conducted by the director or his or her designee

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and shall include instruction in the provisions of chapters 19-1, 42-46, 36-14, and 38-2 of Rhode

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Island general laws; and the board's rules and regulations. The director of the department of

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administration shall, within ninety (90) days of the effective date of this act, prepare and

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disseminate training materials relating to the provisions of chapters 42-46, 36-14 and 38-2.

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      (iv) Public members of the board shall be removable by the appointing authority for

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cause only, and removal solely for partisan or personal reasons unrelated to capacity or fitness for

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the office shall be unlawful.

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      (v) Three (3) members of the board of bank incorporation shall constitute a quorum for

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the transaction of business. A majority vote of those present shall be required for action. No

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vacancy in the membership of the board shall impair the right of a quorum to exercise all of the

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rights and perform all of the duties of the board. Any vacancy which may occur in the board shall

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be filled by the governor with the advice and consent of the senate, for the remainder of the

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unexpired term in the same manner as the member's predecessor as prescribed in this section.

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      (vi) Those members of the board as of the effective date of this act who are members of

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the general assembly shall cease to be members of the board on the effective date of this act, and

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the governor shall thereupon nominate one new member who shall serve an initial term of three

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(3) years and one new member who shall serve an initial term of four (4) years. Thereafter, all

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appointed members of the board shall be appointed to terms of four (4) years and be eligible for

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reappointment.

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      (b) (i) The board of bank incorporation may adopt, and amend from time to time, rules

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and regulations for the orderly conduct of its affairs and for the administration of its duties

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pursuant to this title. The board of bank incorporation shall collect a filing fee with respect to

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applications submitted to it. All fees pursuant to this section shall be paid to the director, to and

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for the use of the board of bank incorporation. The fees to be charged for each type of application

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shall be established annually at the board of bank incorporation's first public hearing. The board

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of bank incorporation shall publish notice of its proposed fee structure at least once a week for

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three (3) successive weeks in a newspaper of general circulation.

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      (ii) Within ninety (90) days after the end of each fiscal year during which the board has

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conducted business, the board shall approve and submit an annual report to the governor, the

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speaker of the house of representatives, the president of the senate, and the secretary of state of its

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activities during that fiscal year. The report shall provide: an operating statement summarizing

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meetings or hearings held, meeting minutes if requested, subjects addressed, decisions rendered,

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rules or regulations promulgated, studies conducted, policies and plans developed, approved, or

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modified, and programs administered or initiated; a consolidated financial statement of all funds

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received and expended including the source of the funds, a listing of any staff supported by these

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funds, and a summary of any clerical, administrative or technical support received; a summary of

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performance during the previous fiscal year including accomplishments, shortcomings and

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remedies; a synopsis of hearings, complaints, suspensions, or other legal matters related to the

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authority of the board; a summary of any training courses held pursuant to subsection 19-1-

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2(a)(iv); a briefing on anticipated activities in the upcoming fiscal year; and findings and

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recommendations for improvements. The report shall be posted electronically on the general

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assembly and the secretary of state's websites as prescribed in section 42-20-8.2 of the Rhode

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Island general laws. The director of the department of administration shall be responsible for the

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enforcement of this provision.

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     SECTION 3. Section 19-2-3 of the General Laws in Chapter 19-2 entitled "Creation and

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Expansion" is hereby amended to read as follows:

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     19-2-3. Application to form financial institution -- Issuance or denial of certificate. --

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The subscribers to the agreement to form shall make application to the director or the director's

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designee for a certificate that public convenience and advantage will be promoted by the

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establishment of the financial institution, which certificate the director or the director's designee

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is hereby authorized to grant. The decision on the certificate may be appealed pursuant to chapter

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19-1 to the board of bank incorporation pursuant to this title.

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     SECTION 4. Section 19-4-12 of the General Laws in Chapter 19-4 entitled "Regulatory

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Oversight" is hereby amended to read as follows:

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     19-4-12. Order to cease unlawful or unsafe practices -- Impairment of capital --

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Appeal. -- (a) Whenever it appears to the director or the director's designee that a regulated

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institution has violated its agreement to form, or any law or regulation, or is conducting its

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business in an unauthorized or unsafe manner, or the regulated institution has been notified by its

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federal deposit insurer of its intent to terminate deposit insurance, the director or the director's

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designee may exercise any or all of the following powers:

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      (1) Restrict the withdrawal of deposits when he or she finds the restriction necessary for

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the protection of depositors;

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      (2) Order any person to cease violating any provision of the banking laws of this state or

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any rule or regulation issued thereunder, or cease engaging in any unsafe or unsound or deceptive

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banking or credit union practices;

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      (3) Order that capital be restored, to the extent that the capital of the financial institution

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or credit union has been impaired;

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      (4) Suspend or remove any director, committee member, officer, or employee who

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becomes ineligible to hold his or her position or who, after receipt of an order to cease under this

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chapter, violates the banking laws of this state or a rule, regulation, or order issued thereunder, or

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who is reckless or incompetent in the conduct of the financial institution's or credit union's

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business. Each suspension or removal order shall specify the grounds therefor, and a copy of the

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order shall be sent to the financial institution or credit union concerned.

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      (b) Any action taken pursuant to subsection (a) may be taken in the director's or the

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director's designee's discretion before or after affording the regulated institution and/or affected

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individuals an opportunity for hearing. When an action is not preceded by an opportunity for

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hearing, such an opportunity must be afforded to the regulated institution and/or affected

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individuals within a reasonable time after the action; provided further, that a request for hearing

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subsequent to an action by the director or the director's designee shall not act to stay the action of

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the director or the director's designee pending the outcome of the hearing, although the director or

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the director's designee may, in his or her discretion, grant a stay. All hearings requested shall be

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conducted pursuant to this chapter in accordance with the “administrative procedures act,”

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chapter 42-35.

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      (c) Whenever the regulated institution fails to comply with an order of the director or the

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director's designee, or file required reports, or fails to pay any final judgment recovered against it

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in any court of this state within sixty (60) days after the rendition of the order, or pay fees or

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forfeitures, or do any other act required under this title, the superintendent may give notice to the

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board of bank incorporation and the regulated institution of those failures and may request that

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the regulated institution's right to do business be suspended. The board of bank incorporation

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shall hold a hearing within a reasonable time after issuance of the notice, at which time the

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superintendent and the regulated institution shall have the opportunity to present evidence as to

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whether the regulated institution's right to do business should or should not be suspended. After

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the hearing, if it appears to the board of bank incorporation that the regulated institution is in an

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insolvent condition, or is violating its agreement to form or any law or regulation under this title,

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or that it is conducting its business in an unsafe, unauthorized, deceptive, or dishonest manner,

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the board of bank incorporation may give notice to the regulated institution that it is no longer

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authorized to do business. Any of these regulated institutions not in an insolvent condition may be

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reauthorized by the board of bank incorporation to resume its business upon complying with the

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terms and conditions set forth by the board of bank incorporation pursuant to the laws or

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regulations under this title. Any regulated institution aggrieved by an order of the board of bank

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incorporation may appeal that order to the superior court pursuant to chapter 35 of title 42.

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     SECTION 5. This act shall take effect upon passage.

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LC01155

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEFINITIONS AND ESTABLISHMENT OF

FINANCIAL INSTITUTIONS

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     This act would eliminate references to the outdated term “Board of Bank Incorporation”,

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and would clarify who the regulatory body for purposes of financial institutions would be.

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     This act would take effect upon passage.

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LC01155

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