OLR Bill Analysis
AN ACT CONCERNING THE MODERNIZATION OF CERTAIN BANKING STATUTES.
This bill eliminates the requirement that public depositories provide collateral for deposits that are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). It also makes changes to required collateral amounts, including the amount required for an institution that has received a memorandum of understanding, a cease and desist order, or other similar letter or order from a supervisory agency.
The bill allows state chartered banks to satisfy certain notice requirements by providing the banking commissioner with a copy of the same notice the bank must provide to FDIC under federal law. It also enables banks to use regional federal home loan banks other than the Federal Home Loan Bank of Boston to issue letter of credit.
Additionally, the bill redefines the meaning of “influencing real estate appraisals” for residential property.
EFFECTIVE DATE: Upon passage
§§ 3–9 — UNINSURED PUBLIC DEPOSITS
Definition of Uninsured Public Deposit (§ 4)
The bill defines “uninsured public deposit” as the portion of a public deposit not insured or guaranteed by FDIC or NCUA. This does not include amounts in a public depository (an institution allowed to hold public funds) that have been, with the authorization of the public depositor, redeposited into accounts in one or more federally insured banks, out-of-state banks, Connecticut credit unions or federal credit unions including the public depository, as long as the full amounts included are eligible for FDIC or NCUA insurance coverage.
Collateral Requirements (§§ 5, 6, 8, & 9)
The bill eliminates the requirement that public depositories provide collateral for deposits that are insured by FDIC or NCUA and makes several additional conforming changes.
Current law requires a public depository that is subject to a cease and desist order, or that entered into a stipulation and agreement or letter of understanding and agreement with a bank or credit union supervisor, to maintain, apart from its other assets, 120% of all public deposits it holds, unless the depository and the public depositor agree on a greater percentage.
The bill changes the collateral requirement to 120% of the public depository's uninsured public deposits. The bill makes this requirement dependent on the commissioner's reasonable determination, based on the events or circumstances that are the subject of the order, agreement, memorandum, or letter, that a lower collateral requirement would be inadequate to protect public depositors because the events or circumstances had, or are likely to have, a material adverse impact on the depository's safety and soundness.
Letters of Credit (§ 7)
Under current law, a public depository may supply a letter of credit only from the Federal Home Loan Bank of Boston as collateral support for public deposits.
The bill expands the public depository's options by allowing it to supply such a letter of credit from (1) a federal home loan bank that has the highest rating from a rating service recognized by the banking commissioner, or (2) a federal home loan bank that the banking commissioner has deemed acceptable for such purposes.
Reporting Requirements (§ 9)
Under current law, a public depository must regularly report to the banking commissioner, among other things, the total amount of public deposits it holds.
The bill modifies the reporting requirement to apply to the depository's public deposits other than those that have been redeposited into the depository by another insured depository institution according to a reciprocal deposit arrangement that makes such funds eligible for FDIC or NCUA insurance coverage.
§ 2 — INFLUENCING REAL ESTATE APPRAISALS
The law prohibits any person from influencing real estate appraisals of residential property. The bill redefines the meaning of such influence.
Current law defines “influencing residential real estate appraisals” as directly or indirectly coercing, influencing, or otherwise encouraging an appraiser to misstate or misrepresent the value of residential property. It includes (1) refusal, or intentional failure, to pay an appraiser for an appraisal that reflects a fair market value estimate that is less than the sale contract price or (2) refusal, or intentional failure, to utilize, or encouraging other mortgage brokers not to utilize, an appraiser based solely on the fact that the appraiser provided an appraisal reflecting a fair market value estimate that was less than the contract price.
The bill defines “influencing real estate appraisals” as directly or indirectly causing or attempting to cause, through coercion, extortion, inducement, bribery, intimidation, compensation, instruction, or collusion, the value assigned to the residential property to be based on any factor other than the appraiser's independent judgment.
Joint Favorable Substitute