HB3227 99TH GENERAL ASSEMBLY

LRB099 11040 MGM 31420 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB3227

Introduced , by Rep. Frank J. Mautino

SYNOPSIS AS INTRODUCED:

205 ILCS 5/5	from Ch. 17, par. 311
205 ILCS 5/14	from Ch. 17, par. 321
205 ILCS 5/14.1	from Ch. 17, par. 321.1

Amends the Illinois Banking Act. Provides that, for the purpose of declaring dividends pursuant specified provisions, upon prior written approval of the Secretary of Financial and Professional Regulation, and without undergoing a quasi-reorganization, a State bank may restate its capital accounts to remove a deficit in its undivided profit account by eliminating such deficit into its surplus account so that the undivided profit account is restated to zero. Provides that nothing in provisions concerning general corporate powers shall be construed to require the filing of a notice or application for approval with the United States Office of the Comptroller of the Currency or a bank supervisor of another state as a condition to the right of a State bank to exercise any of the powers conferred in this State. Provides that the Secretary shall adopt rules under specified provisions. Effective immediately.

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Banking Act is amended by changing Sections 5, 14, and 14.1 as follows:

(205 ILCS 5/5) (from Ch. 17, par. 311)

Sec. 5. General corporate powers. A bank organized under this Act or subject hereto shall be a body corporate and politic and shall, without specific mention thereof in the charter, have all the powers conferred by this Act and the following additional general corporate powers:

(1) To sue and be sued, complain, and defend in its corporate name.

(2) To have a corporate seal, which may be altered at pleasure, and to use the same by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced, provided that the affixing of a corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of a corporate seal is not mandatory.

(3) To make, alter, amend, and repeal bylaws, not inconsistent with its charter or with law, for the administration of the affairs of the bank. If this Act does not provide specific guidance in matters of corporate governance, the provisions of the Business Corporation Act of 1983 may be used if so provided in the bylaws, and if the bank is a limited liability company, the provisions of the Limited Liability Company Act shall be used.

(4) To elect or appoint and remove officers and agents of the bank and define their duties and fix their compensation.

(5) To adopt and operate reasonable bonus plans, profit-sharing plans, stock-bonus plans, stock-option plans, pension plans and similar incentive plans for its directors, officers and employees.

(5.1) To manage, operate and administer a fund for the investment of funds by a public agency or agencies, including any unit of local government or school district, or any person. The fund for a public agency shall invest in the same type of investments and be subject to the same limitations provided for the investment of public funds. The fund for public agencies shall maintain a separate ledger showing the amount of investment for each public agency in the fund. "Public funds" and "public agency" as used in this Section shall have the meanings ascribed to them in Section 1 of the Public Funds Investment Act.

(6) To make reasonable donations for the public welfare or for charitable, scientific, religious or educational purposes.

(7) To borrow or incur an obligation; and to pledge its assets:

(a) to secure its borrowings, its lease of personal or real property or its other nondeposit obligations;

(b) to enable it to act as agent for the sale of obligations of the United States;

(c) to secure deposits of public money of the United States, whenever required by the laws of the United States, including without being limited to, revenues and funds the deposit of which is subject to the control or regulation of the United States or any of its officers, agents, or employees and Postal Savings funds;

(d) to secure deposits of public money of any state or of any political corporation or subdivision thereof including, without being limited to, revenues and funds the deposit of which is subject to the control or regulation of any state or of any political corporation or subdivisions thereof or of any of their officers, agents, or employees;

(e) to secure deposits of money whenever required by the National Bankruptcy Act;

(f) (blank); and

(g) to secure trust funds commingled with the bank's funds, whether deposited by the bank or an affiliate of the bank, pursuant to Section 2-8 of the Corporate Fiduciary Act.

(8) To own, possess, and carry as assets all or part of the real estate necessary in or with which to do its banking business, either directly or indirectly through the ownership of all or part of the capital stock, shares or interests in any corporation, association, trust engaged in holding any part or parts or all of the bank premises, engaged in such business and in conducting a safe deposit business in the premises or part of them, or engaged in any activity that the bank is permitted to conduct in a subsidiary pursuant to paragraph (12) of this Section 5.

(9) To own, possess, and carry as assets other real estate to which it may obtain title in the collection of its debts or that was formerly used as a part of the bank premises, but title to any real estate except as herein permitted shall not be retained by the bank, either directly or by or through a subsidiary, as permitted by subsection (12) of this Section for a total period of more than 10 years after acquiring title, either directly or indirectly.

(10) To do any act, including the acquisition of stock, necessary to obtain insurance of its deposits, or part thereof, and any act necessary to obtain a guaranty, in whole or in part, of any of its loans or investments by the United States or any agency thereof, and any act necessary to sell or otherwise dispose of any of its loans or investments to the United States or any agency thereof, and to acquire and hold membership in the Federal Reserve System.

(11) Notwithstanding any other provisions of this Act or any other law, to do any act and to own, possess, and carry as assets property of the character, including stock, that is at the time authorized or permitted to national banks by an Act of Congress, but subject always to the same limitations and restrictions as are applicable to national banks by the pertinent federal law and subject to applicable provisions of the Financial Institutions Insurance Sales Law.

(12) To own, possess, and carry as assets stock of one or more corporations that is, or are, engaged in one or more of the following businesses:

(a) holding title to and administering assets acquired as a result of the collection or liquidating of loans, investments, or discounts; or

(b) holding title to and administering personal property acquired by the bank, directly or indirectly through a subsidiary, for the purpose of leasing to others, provided the lease or leases and the investment of the bank, directly or through a subsidiary, in that personal property otherwise comply with Section 35.1 of this Act; or

(c) carrying on or administering any of the activities excepting the receipt of deposits or the payment of checks or other orders for the payment of money in which a bank may engage in carrying on its general banking business; provided, however, that nothing contained in this paragraph (c) shall be deemed to permit a bank organized under this Act or subject hereto to do, either directly or indirectly through any subsidiary, any act, including the making of any loan or investment, or to own, possess, or carry as assets any property that if done by or owned, possessed, or carried by the State bank would be in violation of or prohibited by any provision of this Act.

The provisions of this subsection (12) shall not apply to and shall not be deemed to limit the powers of a State bank with respect to the ownership, possession, and carrying of stock that a State bank is permitted to own, possess, or carry under this Act.

Any bank intending to establish a subsidiary under this subsection (12) shall give written notice to the Commissioner 60 days prior to the subsidiary's commencing of business or, as the case may be, prior to acquiring stock in a corporation that has already commenced business. After receiving the notice, the Commissioner may waive or reduce the balance of the 60 day notice period. The Commissioner may specify the form of the notice, may designate the types of subsidiaries not subject to this notice requirement, and may promulgate rules and regulations to administer this subsection (12).

(13) To accept for payment at a future date not exceeding one year from the date of acceptance, drafts drawn upon it by its customers; and to issue, advise, or confirm letters of credit authorizing the holders thereof to draw drafts upon it or its correspondents.

(14) To own and lease personal property acquired by the bank at the request of a prospective lessee and upon the agreement of that person to lease the personal property provided that the lease, the agreement with respect thereto, and the amount of the investment of the bank in the property comply with Section 35.1 of this Act.

(15)(a) To establish and maintain, in addition to the main banking premises, branches offering any banking services permitted at the main banking premises of a State bank.

(b) To establish and maintain, after May 31, 1997, branches in another state that may conduct any activity in that state that is authorized or permitted for any bank that has a banking charter issued by that state, subject to the same limitations and restrictions that are applicable to banks chartered by that state.

(16) (Blank).

(17) To establish and maintain terminals, as authorized by the Electronic Fund Transfer Act.

(18) To establish and maintain temporary service booths at any International Fair held in this State which is approved by the United States Department of Commerce, for the duration of the international fair for the sole purpose of providing a convenient place for foreign trade customers at the fair to exchange their home countries' currency into United States currency or the converse. This power shall not be construed as establishing a new place or change of location for the bank providing the service booth.

(19) To indemnify its officers, directors, employees, and agents, as authorized for corporations under Section 8.75 of the Business Corporation Act of 1983.

(20) To own, possess, and carry as assets stock of, or be or become a member of, any corporation, mutual company, association, trust, or other entity formed exclusively for the purpose of providing directors' and officers' liability and bankers' blanket bond insurance or reinsurance to and for the benefit of the stockholders, members, or beneficiaries, or their assets or businesses, or their officers, directors, employees, or agents, and not to or for the benefit of any other person or entity or the public generally.

(21) To make debt or equity investments in corporations or projects, whether for profit or not for profit, designed to promote the development of the community and its welfare, provided that the aggregate investment in all of these corporations and in all of these projects does not exceed 10% of the unimpaired capital and unimpaired surplus of the bank and provided that this limitation shall not apply to creditworthy loans by the bank to those corporations or projects. Upon written application to the Commissioner, a bank may make an investment that would, when aggregated with all other such investments, exceed 10% of the unimpaired capital and unimpaired surplus of the bank. The Commissioner may approve the investment if he is of the opinion and finds that the proposed investment will not have a material adverse effect on the safety and soundness of the bank.

(22) To own, possess, and carry as assets the stock of a corporation engaged in the ownership or operation of a travel agency or to operate a travel agency as a part of its business.

(23) With respect to affiliate facilities:

(a) to conduct at affiliate facilities for and on behalf of another commonly owned bank, if so authorized by the other bank, all transactions that the other bank is authorized or permitted to perform; and

(b) to authorize a commonly owned bank to conduct for and on behalf of it any of the transactions it is authorized or permitted to perform at one or more affiliate facilities.

Any bank intending to conduct or to authorize a commonly owned bank to conduct at an affiliate facility any of the transactions specified in this paragraph (23) shall give written notice to the Commissioner at least 30 days before any such transaction is conducted at the affiliate facility.

(24) To act as the agent for any fire, life, or other insurance company authorized by the State of Illinois, by soliciting and selling insurance and collecting premiums on policies issued by such company; and to receive for services so rendered such fees or commissions as may be agreed upon between the bank and the insurance company for which it may act as agent; provided, however, that no such bank shall in any case assume or guarantee the payment of any premium on insurance policies issued through its agency by its principal; and provided further, that the bank shall not guarantee the truth of any statement made by an assured in filing his application for insurance.

(25) Notwithstanding any other provisions of this Act or any other law, to offer any product or service that is at the time authorized or permitted to any insured savings association or out-of-state bank by applicable law, provided that powers conferred only by this subsection (25):

(a) shall always be subject to the same limitations and restrictions that are applicable to the insured savings association or out-of-state bank for the product or service by such applicable law;

(b) shall be subject to applicable provisions of the Financial Institutions Insurance Sales Law;

(c) shall not include the right to own or conduct a real estate brokerage business for which a license would be required under the laws of this State; and

(d) shall not be construed to include the establishment or maintenance of a branch, nor shall they be construed to limit the establishment or maintenance of a branch pursuant to subsection (11).

Not less than 30 days before engaging in any activity under the authority of this subsection, a bank shall provide written notice to the Commissioner of its intent to engage in the activity. The notice shall indicate the specific federal or state law, rule, regulation, or interpretation the bank intends to use as authority to engage in the activity.

(26) Nothing in this Section shall be construed to require the filing of a notice or application for approval with the United States Office of the Comptroller of the Currency or a bank supervisor of another state as a condition to the right of a State bank to exercise any of the powers conferred by this Section in this State.

(Source: P.A. 98-44, eff. 6-28-13.)

(205 ILCS 5/14) (from Ch. 17, par. 321)

Sec. 14. Stock. Unless otherwise provided for in this Act provisions of general application to stock of a state bank shall be as follows:

(1) All banks shall have their capital divided into shares of a par value of not less than $1 each and not more than $100 each, however, the par value of shares of a bank effecting a reverse stock split pursuant to item (8) of subsection (a) of Section 17 may temporarily exceed this limit provided it conforms to the limits immediately after the reverse stock split is completed. No issue of capital stock or preferred stock shall be valid until not less than the par value of all such stock so issued shall be paid in and notice thereof by the president, a vice-president or cashier of the bank has been transmitted to the Commissioner. In the case of an increase in capital stock by the declaration of a stock dividend, the capitalization of retained earnings effected by such stock dividend shall constitute the payment for such shares required by the preceding sentence, provided that the surplus of said bank after such stock dividend shall be at least equal to fifty per cent of the capital as increased. The charter shall not limit or deny the voting power of the shares of any class of stock except as provided in Section 15(3) of this Act.

(2) Pursuant to action taken in accordance with the requirements of Section 17, a bank may issue preferred stock of one or more classes as shall be approved by the Commissioner as hereinafter provided, and make such amendment to its charter as may be necessary for this purpose; but in the case of any newly organized bank which has not yet issued capital stock the requirements of Section 17 shall not apply.

(3) Without limiting the authority herein contained a bank, when so provided in its charter and when approved by the Commissioner, may issue shares of preferred stock:

(a) Subject to the right of the bank to redeem any of such shares at not exceeding the price fixed by the charter for the redemption thereof;

(b) Subject to the provisions of subsection (8) of this Section 14 entitling the holders thereof to cumulative or noncumulative dividends;

(c) Having preference over any other class or classes of shares as to the payment of dividends;

(d) Having preference as to the assets of the bank over any other class or classes of shares upon the voluntary or involuntary liquidation of the bank;

(e) Convertible into shares of any other class of stock, provided that preferred shares shall not be converted into shares of a different par value unless that part of the capital of the bank represented by such preferred shares is at the time of the conversion equal to the aggregate par value of the shares into which the preferred shares are to be converted.

(4) If any part of the capital of a bank consists of preferred stock, the determination of whether or not the capital of such bank is impaired and the amount of such impairment shall be based upon the par value of its stock even though the amount which the holders of such preferred stock shall be entitled to receive in the event of retirement or liquidation shall be in excess of the par value of such preferred stock.

(5) Pursuant to action taken in accordance with the requirements of Section 17 of this Act, a state bank may provide for a specified number of authorized but unissued shares of capital stock for one or more of the following purposes:

(a) Reserved for issuance under stock option plan or plans to directors, officers or employees;

(b) Reserved for issuance upon conversion of convertible preferred stock issued pursuant to and in compliance with the provisions of subsections (2) and (3) of this Section 14.

(c) Reserved for issuance upon conversion of convertible debentures or other convertible evidences of indebtedness issued by a state bank, provided always that the terms of such conversion have been approved by the Commissioner;

(d) Reserved for issuance by the declaration of a stock dividend. If and when any shares of capital stock are proposed to be authorized and reserved for any of the purposes set forth in subparagraphs (a), (b) or (c) above, the notice of the meeting, whether special or annual, of stockholders at which such proposition is to be considered shall be accompanied by a statement setting forth or summarizing the terms upon which the shares of capital stock so reserved are to be issued, and the extent to which any preemptive rights of stockholders are inapplicable to the issuance of the shares so reserved or to the convertible preferred stock or convertible debentures or other convertible evidences of indebtedness, and the approving vote of the holders of at least two-thirds of the outstanding shares of stock entitled to vote at such meeting of the terms of such issuance shall be requisite for the adoption of any amendment providing for the reservation of authorized but unissued shares for any of said purposes. Nothing in this subsection (5) contained shall be deemed to authorize the issuance of any capital stock for a consideration less than the par value thereof.

(6) Upon written application to the Commissioner 60 days prior to the proposed purchase and receipt of the written approval of the Commissioner, a state bank may purchase and hold as treasury stock such amounts of the total number of issued and outstanding shares of its capital and preferred stock outstanding as the Commissioner determines is consistent with safety and soundness of the bank. The Commissioner may specify the manner of accounting for the treasury stock and the form of notice prior to ultimate disposition of the shares. Except as authorized in this subsection, it shall not be lawful for a state bank to purchase or hold any additional such shares or securities described in subsection (2) of Section 37 unless necessary to prevent loss upon a debt previously contracted in good faith, in which event such shares or securities so purchased or acquired shall, within 6 months from the time of purchase or acquisition, be sold or disposed of at public or private sale. Any state bank which intends to purchase and hold treasury stock as authorized in this subsection (6) shall file a written application with the Commissioner 60 days prior to any such proposed purchase. The application shall state the number of shares to be purchased, the consideration for the shares, the name and address of the person from whom the shares are to be purchased, if known, and the total percentage of its issued and outstanding shares to be held by the bank after the purchase. The total consideration paid by a state bank for treasury stock shall reduce capital and surplus of the bank for purposes of Sections of this Act relating to lending and investment limits which require computation of capital and surplus. After considering and approving an application to purchase and hold treasury stock under this subsection, the Commissioner may waive or reduce the balance of the 60 day application period. The Commissioner may specify the form of the application for approval to acquire treasury stock and promulgate rules and regulations for the administration of this subsection (6). A state bank may acquire or resell its own shares as treasury stock pursuant to this subsection (6) without a change in its charter pursuant to Section 17. Such stock may be held for any purpose permitted in subsection (5) of this Section 14 or may be resold upon such reasonable terms as the board of directors may determine provided notice is given to the Commissioner prior to the resale of such stock.

(7) During the time that a state bank shall continue its banking business, it shall not withdraw or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital, but nothing in this subsection shall prevent a reduction or change of the capital stock or the preferred stock under the provisions of Sections 17 through 30 of this Act, a purchase of treasury stock under the provisions of subsection (6) of this Section 14 or a redemption of preferred stock pursuant to charter provisions therefor.

(8) (a) Subject to the provisions of this Act, the board of directors of a state bank from time to time may declare a dividend of so much of the net profits of such bank as it shall judge expedient, subject to item (b) of this Section and applicable federal law, but each bank before the declaration of a dividend shall carry at least one-tenth of its net profits since the date of the declaration of the last preceding dividend, or since the issuance of its charter in the case of its first dividend, to its surplus until the same shall be equal to its capital.

(b) No dividends shall be paid by a state bank while it continues its banking business to an amount greater than its net profits then on hand, deducting first therefrom its losses and bad debts. All debts due to a state bank on which interest is past due and unpaid for a period of 6 months or more, unless the same are well secured and in the process of collection, shall be considered bad debts.

(c) For the purpose of declaring dividends pursuant to paragraph (b) of this Section, upon prior written approval of the Secretary, and without undergoing a quasi-reorganization pursuant to Section 14.1, a State bank may restate its capital accounts to remove a deficit in its undivided profit account by eliminating such deficit into its surplus account so that the undivided profit account is restated to zero. The Secretary shall adopt rules to implement this paragraph (c) and Section 14.1.

(9) A State bank may, but shall not be obliged to, issue a certificate for a fractional share, and, by action of its board of directors, may in lieu thereof, pay cash equal to the value of the fractional share. A certificate for a fractional share shall entitle the holder to exercise fractional voting rights, to receive dividends, and to participate in any of the assets of the bank in the event of liquidation.

(Source: P.A. 92-483, eff. 8-23-01; 92-651, eff. 7-11-02.)

(205 ILCS 5/14.1) (from Ch. 17, par. 321.1)

Sec. 14.1. Quasi-Reorganization of Capital Upon a Change in Control. For the purposes of declaring dividends pursuant to Section 14(8)(b) of this Act, subject to rules adopted by the Secretary under paragraph (c) of subsection (8) of Section 14, if a State bank:

(1) incurs a change in ownership of more than 50% of its voting stock; and

(2) has a deficit in its net profits then on hand at the time of such change in ownership; and

(3) receives the prior written approval of the Secretary Commissioner; such bank may restate its asset and liability accounts to fair value for the purpose of reorganizing the capital accounts of the bank so that net profits then on hand are restated to zero; provided that in no event may total capital be increased as a result of a capital reorganization made pursuant to this Section.

(Source: P.A. 87-841.)

Section 99. Effective date. This Act takes effect upon becoming law.