House Bill No. 6817

Public Act No. 99-158

An Act Concerning Bank Powers, Uninsured Banks, the Enforcement Authority of the Commissioner of Banking and the Limitation of Interest Rates for Certain Commercial Loans.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-3 of the general statutes is repealed and the following is substituted in lieu thereof:

Other definitions applying to this title or to specified parts thereof and the sections in which they appear are:

"Account". Sections 36a-155 and 36a-365.

"Advance fee". Sections 36a-510, 36a-485 and 36a-615.

"Agency bank". Section 36a-285.

"Alternative mortgage loan". Section 36a-265.

"Amount financed". Section 36a-690.

"Annual percentage rate". Section 36a-690.

"Annual percentage yield". Section 36a-316.

"Applicant". Section 36a-736.

"Associate". Section 36a-184.

"Bank". Section 36a-30.

"Bankers' bank". Section 36a-70.

"Banking business". Section 36a-425.

"Billing cycle". Section 36a-565.

"Bona fide nonprofit organization". Section 36a-655.

"Branch". Sections 36a-145 and 36a-410.

"Branch or agency net payment entitlement". Section 36a-428n.

"Branch or agency net payment obligation". Section 36a-428n.

"Broker". Section 36a-510.

"Business and Industrial Development Corporation". Section 36a-626.

"Business and property in this state". Section 36a-428n.

"Cash advance". Section 36a-564.

"Cash price". Section 36a-770.

"Certificate of organization". Section 36a-435.

"Closely related activities". Section 36a-250, as amended by this act.

"Collective managing agency account". Section 36a-365.

"Commercial vehicle". Section 36a-770.

"Community bank". Section 36a-70.

"Community development bank". Section 36a-70.

"Connecticut holding company". Section 36a-410.

"Consumer". Sections 36a-155, 36a-676 and 36a-695.

"Consumer Credit Protection Act". Section 36a-676.

"Consumer debtor" and "debtor". Sections 36a-645 and 36a-800.

"Consumer collection agency". Section 36a-800.

"Controlling interest". Section 36a-276.

"Credit". Sections 36a-645 and 36a-676.

"Creditor". Sections 36a-676, 36a-695 and 36a-800.

"Credit card", "cardholder" and "card issuer". Section 36a-676.

"Credit clinic". Section 36a-695.

"Credit rating agency". Section 36a-695.

"Credit report". Section 36a-695.

"Credit sale". Section 36a-676.

"De novo branch". Section 36a-410.

"Debt". Section 36a-645.

"Debt adjustment". Section 36a-655.

"Debt mutual fund". Section 36a-275.

"Debt securities". Section 36a-275.

"Deliver". Section 36a-316.

"Deposit". Section 36a-316.

"Deposit account". Section 36a-316.

"Deposit account charge". Section 36a-316.

"Deposit account disclosures". Section 36a-316.

"Deposit contract". Section 36a-316.

"Deposit services". Section 36a-425.

"Depositor". Section 36a-316.

"Earning period". Section 36a-316.

"Electronic payment instrument". Section 36a-596.

"Eligible account holder". Section 36a-136.

"Eligible collateral". Section 36a-330.

"Equity mutual fund". Section 36a-276.

"Federal Home Mortgage Disclosure Act". Section 36a-736.

"Fiduciary". Section 36a-365.

"Filing fee". Section 36a-770.

"Finance charge". Sections 36a-690 and 36a-770.

"Financial institution". Sections 36a-41, 36a-155, 36a-316, 36a-330 and 36a-736.

"Financial records". Section 36a-41.

"First mortgage loan". Sections 36a-485, 36a-705 and 36a-715.

"Fiscal year". Section 36a-435.

"Foreign banking corporation". Section 36a-425.

"General facility". Section 36a-580.

"Global net payment entitlement". Section 36a-428n.

"Global net payment obligation". Section 36a-428n.

"Goods". Sections 36a-535 and 36a-770.

"Graduated payment mortgage loan". Section 36a-265.

"Groups having a common bond of occupation or association". Section 36a-435.

"Guardian". Section 36a-365.

"Holder". Section 36a-596.

"Home banking services". Section 36a-170.

"Home banking terminal". Section 36a-170.

"Home improvement loan". Section 36a-736.

"Home purchase loan". Section 36a-736.

"Home state". Section 36a-410.

"Immediate family". Section 36a-435.

"Instalment loan contract". Sections 36a-535 and 36a-770.

"Instrument". Section 36a-596.

"Insurance bank". Section 36a-285.

"Insurance department". Section 36a-285.

"Interest". Section 36a-316.

"Interest rate". Section 36a-316.

"Lender". Sections 36a-510 and 36a-770.

"Lessor". Section 36a-676.

"License". Section 36a-626.

"Licensee". Sections 36a-510, 36a-596 and 36a-626.

"Limited branch". Section 36a-145.

"Limited facility". Section 36a-580.

"Loan broker". Section 36a-615.

"Loss". Section 36a-330.

"Made in this state". Section 36a-770.

"Managing agent". Section 36a-365.

"Member". Section 36a-435.

"Membership share". Section 36a-435.

"Money order". Section 36a-596.

"Mortgage broker". Section 36a-485.

"Mortgage insurance". Section 36a-725.

"Mortgage lender". Sections 36a-485 and 36a-705.

"Mortgage loan". Sections 36a-261 and 36a-265.

"Mortgage rate lock-in". Section 36a-705.

"Mortgage servicing company". Section 36a-715.

"Mortgagor". Section 36a-715.

"Motor vehicle". Section 36a-770.

"Municipality". Section 36a-800.

"Net worth". Section 36a-596.

"Network". Section 36a-155.

"Note account". Sections 36a-301 and 36a-445.

"Office". Section 36a-316.

"Open-end credit plan". Section 36a-676.

"Open-end loan". Section 36a-565.

"Organization". Section 36a-800.

"Out-of-state holding company". Section 36a-410.

"Outstanding". Section 36a-596.

"Passbook savings account". Section 36a-316.

"Periodic statement". Section 36a-316.

"Permissible investment". Section 36a-596.

"Person". Section 36a-184.

"Post". Section 36a-316.

"Prime quality". Section 36a-596.

"Principal amount of the loan". Section 36a-510.

"Principal officer". Section 36a-485.

"Processor". Section 36a-155.

"Public deposit". Section 36a-330.

"Purchaser". Section 36a-596.

"Qualified financial contract". Section 36a-428n.

"Qualified public depository" and "depository". Section 36a-330.

"Records". Section 36a-17.

"Relocate". Section 36a-145.

"Residential property". Section 36a-485.

"Retail buyer". Sections 36a-535 and 36a-770.

"Retail credit transaction". Section 42-100b.

"Retail deposits". Section 36a-70, as amended by this act.

"Retail instalment contract". Sections 36a-535 and 36a-770.

"Retail instalment sale". Sections 36a-535 and 36a-770.

"Retail seller". Sections 36a-535 and 36a-770.

"Reverse annuity mortgage loan". Section 36a-265.

"Sales finance company". Sections 36a-535 and 36a-770.

"Savings department". Section 36a-285.

"Savings deposit". Section 36a-316.

"Secondary mortgage loan". Section 36a-510.

"Security convertible into a voting security". Section 36a-184.

"Share". Section 36a-435.

"Social purpose investment". Section 36a-277.

"Standard mortgage loan". Section 36a-265.

"Tax and loan account". Sections 36a-301 and 36a-445.

"The Savings Bank Life Insurance Company". Section 36a-285.

"Time account". Section 36a-316.

"Transaction". Section 36a-215.

"Travelers check". Section 36a-596.

"Troubled financial institution". Section 36a-215.

"Uninsured bank". Section 36a-70, as amended by this act.

"Unsecured loan". Section 36a-615.

Sec. 2. Subsection (c) of section 36a-53 of the general statutes is repealed and the following is substituted in lieu thereof:

(c) (1) Whenever the commissioner finds as the result of an investigation that any such officer, director, Connecticut bank or Connecticut credit union has (A) violated any provision of the general statutes within the jurisdiction of the commissioner, or any regulation, rule or order adopted or issued thereunder, or any condition imposed in writing by the commissioner, (B) breached any written agreement with the commissioner, (C) engaged or participated in any unsafe or unsound practice, or (D) used such officer's or director's official position in a manner contrary to the interest of any bank, Connecticut credit union or federal credit union or its depositors or members, the commissioner may send notice to and take action against such officer, director, Connecticut bank or Connecticut credit union regarding the violation, breach, unsafe or unsound practice, or misuse of official position in accordance with section 36a-50. Any finding made by the commissioner pursuant to this subdivision shall be considered a violation of this subsection for purposes of section 36a-50.

(2) Notwithstanding the provisions of section 36a-50, unless the violation, breach, unsafe or unsound practice, or misuse of official position found to have occurred pursuant to this subsection and section 36a-50 is such that it [is] (A) is part of a pattern of misconduct, (B) has caused or is likely to cause a loss other than a de minimis loss to any bank, Connecticut credit union or federal credit union, [or] (C) will result or has resulted in a pecuniary gain to an officer or director of any Connecticut bank [,] or Connecticut credit union, or (D) is a violation of section 3 of this act, the civil penalty the commissioner may impose under this subsection and section 36a-50 shall not exceed one thousand dollars.

(3) In determining the amount of any penalty imposed under this subsection and section 36a-50, the commissioner shall take into account (A) the size of the financial resources and good faith of the Connecticut bank, Connecticut credit union, officer or director of such Connecticut bank or Connecticut credit union, (B) the gravity of the violation, breach, unsafe or unsound practice or misuse of official position, (C) the history of previous violations, breaches, unsafe or unsound practices, or misuse of official position, and (D) such other matters as justice may require, except that this subdivision does not apply to any violation of section 3 of this act.

Sec. 3. (NEW) No person shall make or cause to be made in any document filed with the commissioner or in any proceeding, investigation or examination under title 36a of the general statutes, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.

Sec. 4. Section 36a-70 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) One or more persons may organize a Connecticut bank.

(b) [Any] Except as otherwise provided in this section, any such Connecticut bank [, except a Connecticut bank organized to function solely in a fiduciary capacity,] shall commence business with a minimum equity capital of at least five million dollars. Any Connecticut bank organized to function solely in a fiduciary capacity shall commence business with a minimum equity capital of at least two million dollars. Such equity capital shall be paid for in cash before any Connecticut bank commences business. For purposes of this section, nonwithdrawable accounts and pledged deposits of mutual savings banks and mutual savings and loan associations shall constitute capital of such mutual banks and associations to the extent that such accounts or deposits have no fixed maturity date, cannot be withdrawn at the option of the account holders and do not earn interest that carries over to subsequent periods.

(c) The person or persons organizing a Connecticut bank shall execute, acknowledge and file with the commissioner an application to organize. Such application to organize shall include: (1) A proposed certificate of incorporation stating: (A) The name and type of the Connecticut bank; (B) the town in which the main office is to be located; (C) in the case of a capital stock Connecticut bank, the amount, authorized number and par value, if any, of shares of its capital stock; (D) the minimum amount of equity capital with which the Connecticut bank shall commence business, which amount may be less than its authorized capital but shall not be less than that required by subsection (b) of this section; (E) the name, occupation and residence, post office or business address of each organizer and prospective initial director of the Connecticut bank; and (2) a proposed business plan. The organizers shall separately file with the commissioner a notice of the residence of each organizer and prospective initial director whose residence address is not included in the proposed certificate of incorporation.

(d) Within twenty days after receipt of the application to organize, the commissioner shall order, at the expense of the organizers, an independent feasibility study and an independent three-year financial forecast prepared by a certified public accounting firm or other professional firm designated by the commissioner.

(e) Upon receipt of the feasibility study and financial forecast required by subsection (d) of this section, the commissioner shall issue an order designating a time and place for a hearing on the application. Such hearing shall be held in accordance with chapter 54 not more than thirty days from receipt of such feasibility study and financial forecast. A copy of such feasibility study and financial forecast shall be made available to the organizers. Any exhibit or documentation submitted to the commissioner by the organizers at the time of filing or by the preparer or preparers of the feasibility study and financial forecast, other than financial statements and biographical information relating to the individual organizers, shall be available for public inspection prior to such hearing unless the commissioner determines that good cause exists to keep any such exhibit or documentation confidential.

(f) The organizers shall cause to be published a copy of the proposed certificate of incorporation and the time and place set for the hearing once a week for three consecutive weeks prior to the date of the hearing, in a newspaper designated by the commissioner published in the town where the main office of the Connecticut bank is to be located or, if there is no newspaper published in such town, in a newspaper having a circulation therein; and a like copy sent by registered or certified mail, return receipt requested, to each bank and out-of-state bank having its main office or a branch in such town, not less than twenty days prior to the hearing.

(g) For applications to organize bank and trust companies and capital stock savings banks, the commissioner shall notify the State Treasurer and State Comptroller of the time and place of the hearing.

(h) (1) The approving authority shall consider the following factors before granting a temporary certificate of authority: (A) The population of the area to be served by the proposed Connecticut bank; (B) the adequacy of existing banking facilities in the area to be served by the proposed Connecticut bank; (C) the convenience and necessity to the public of the proposed facilities; and (D) the character and experience of the proposed directors and officers. (2) The application shall be approved if the approving authority determines: (A) That the interest of the public will be served to advantage by the establishment of the proposed Connecticut bank; (B) that conditions in the locality in which the proposed bank will transact business afford reasonable promise of successful operation; and (C) that the proposed directors possess capacity and fitness for the duties and responsibilities with which they will be charged. (3) [For purposes of this section] Except as otherwise provided in subsections (p), (q), (r), (s) and (t) of this section, the approving authority shall be, in the case of an application to organize a bank and trust company or a capital stock savings bank, a majority of the commissioner, State Treasurer, and State Comptroller, and, in the case of an application to organize a mutual savings bank or a mutual or capital stock savings and loan association, the commissioner acting alone.

(i) If the application is approved by the approving authority, a temporary certificate of authority, valid for eighteen months, shall be issued to the organizers authorizing them to complete the organization of the Connecticut bank. The organizers shall thereupon file one copy of the temporary certificate of authority and one copy of the certificate of incorporation with the Secretary of the State. The commissioner may, upon the application of the organizers and after a hearing thereon, extend, for cause, the period for which the temporary certificate of authority is valid.

(j) If the application is not approved by the approving authority, the approving authority shall, in writing, so notify the organizers.

(k) An appeal from the decision approving or disapproving the application may be taken in accordance with chapter 54.

(l) The approving authority shall cause to be made an examination of the proposed Connecticut bank upon notice from the organizers that the following conditions have occurred: (1) The proposed bank has been fully organized according to law; (2) the State Treasurer has been paid the franchise tax and filing fee specified in subsection (o) of this section; (3) the proposed bank has raised the minimum equity capital required; and (4) in the case of a proposed capital stock Connecticut bank, a certified list of each subscriber who will own at least five per cent of any class of voting securities of the proposed bank, showing the number of shares owned by each, has been filed with the commissioner. If all provisions of law have been complied with, a final certificate of authority to commence the business for which the bank was organized shall be issued by the approving authority, except as provided in subdivision (5) of subsection (r) of this section. One copy of the final certificate shall be filed with the Secretary of the State, one copy shall be retained by the bank, and one copy shall be retained by the commissioner.

(m) The reasonable charges and expenses of organization or reorganization of a capital stock Connecticut bank, and the reasonable expenses of any compensation or discount for the sale, underwriting or purchase of its shares, may be paid or allowed by such bank out of the par value received by it for its shares, or in the case of shares without par value, out of the stated capital received by it for its shares, without rendering such shares not fully paid and nonassessable.

(n) The Connecticut bank shall not commence business until a final certificate of authority has been issued in accordance with subsection (l) of this section and, except in the case of a Connecticut bank organized to function solely in a fiduciary capacity, [or] an interim Connecticut bank organized pursuant to subsection (p) of this section, or an uninsured bank organized pursuant to subsection (t) of this section, until its insurable accounts or deposits are insured by the Federal Deposit Insurance Corporation or its successor agency. The acceptance of subscriptions for deposits by a mutual savings bank or mutual savings and loan association as may be necessary to obtain insurance by the Federal Deposit Insurance Corporation or its successor agency shall not be considered to be commencing business. No Connecticut bank other than a Connecticut bank organized to function solely in a fiduciary capacity may exercise any of the fiduciary powers granted to Connecticut banks by law until express authority therefor has been given by the commissioner.

(o) Prior to the issuance of a final certificate of authority to commence business in accordance with subsection (l) of this section, the Connecticut bank shall pay to the State Treasurer a franchise tax, together with a filing fee of twenty dollars for the required papers. The franchise tax for a mutual savings bank and mutual savings and loan association shall be thirty dollars. The franchise tax for all capital stock Connecticut banks shall be one cent per share of the authorized capital stock.

(p) One or more persons may organize an interim Connecticut bank solely (1) for the acquisition of an existing bank, whether by acquisition of stock, of assets, or by merger or consolidation, or (2) to facilitate any other corporate transaction authorized by this title in which the commissioner has determined that such transaction has adequate regulatory supervision to justify the organization of an interim Connecticut bank. Such interim Connecticut bank shall not accept deposits or otherwise commence business. Subdivisions (2), (3) and (4) of subsection (c) and subsections (d), (f), (g), (h) and (o) of this section shall not apply to the organization of an interim bank, provided the commissioner may, in the commissioner's discretion, order a hearing under subsection (d) or require that organizers publish or mail the proposed certificate of incorporation or both. The approving authority for an interim Connecticut bank shall be the commissioner acting alone. If the approving authority determines that the organization of the interim Connecticut bank complies with applicable law, the approving authority shall issue a temporary certificate of authority conditioned on the approval by the appropriate supervisory agency of the corporate transaction for which the interim Connecticut bank is formed.

(q) (1) As used in this subsection, "bankers' bank" means a Connecticut bank that is (A) owned exclusively by any combination of banks or out-of-state banks having their principal office in Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island or Vermont and (B) organized to engage exclusively in providing services for such other banks or out-of-state banks and their directors, officers and employees.

(2) One or more persons may organize a bankers' bank in accordance with the provisions of this section, except that subsections (g) and (h) of this section shall not apply. The approving authority for a bankers' bank shall be the commissioner acting alone. Before granting a temporary certificate of authority in the case of an application to organize a bankers' bank, the approving authority shall consider (A) whether the proposed bankers' bank will facilitate the provision of services that such banks or out-of-state banks would not otherwise be able to readily obtain, and (B) the character and experience of the proposed directors and officers. The application to organize a bankers' bank shall be approved if the approving authority determines that the interest of the public will be directly or indirectly served to advantage by the establishment of the proposed bankers' bank, and the proposed directors possess capacity and fitness for the duties and responsibilities with which they will be charged.

(3) A bankers' bank shall have all of the powers of and be subject to all of the requirements applicable to a Connecticut bank under this title which are not inconsistent with this subsection, except: (A) A bankers' bank may provide services only for other banks or out-of-state banks having their principal office in Maine, Massachusetts, New Hampshire, New York, Rhode Island or Vermont and for the directors, officers and employees of such banks or out-of-state banks; (B) only such other banks or out-of-state banks, or both, may own the capital stock of or otherwise invest in a bankers' bank; (C) upon the written request of the organizers of a bankers' bank, the commissioner may waive specific requirements of this title and the regulations adopted thereunder if the commissioner finds that (i) the requirement pertains primarily to banks that provide retail or consumer banking services and is inconsistent with this subsection, and (ii) the requirement may impede the ability of the bankers' bank to compete or to provide desired services to its market provided, any such waiver and the commissioner's findings shall be in writing and shall be made available for public inspection; and (D) the commissioner may, by regulation, limit the powers that may be exercised by a bankers' bank.

(4) The commissioner may adopt regulations, in accordance with chapter 54, to administer the provisions of this subsection.

(r) (1) As used in this subsection and section 36a-252, "community bank" means a Connecticut bank that is organized pursuant to this subsection and is subject to the provisions of this subsection and section 36a-252.

(2) One or more persons may organize a community bank in accordance with the provisions of this section, except that subsection (g) of this section shall not apply. Any such community bank shall commence business with a minimum equity capital of at least three million dollars. In the case of a capital stock community bank, no person, whether acting individually or in concert with others, shall subscribe for, purchase or otherwise acquire, by merger, acquisition or otherwise, in excess of nine and nine-tenths per cent of the capital stock of the bank. The approving authority for a community bank shall be the commissioner acting alone. In addition to the considerations and determinations required by subsection (h) of this section, before granting a temporary certificate of authority to organize a community bank, the approving authority shall determine that (A) each of the proposed directors and proposed executive officers, as defined in subparagraph (D) of subdivision (3) of this subsection, possesses capacity and fitness for the duties and responsibilities with which such director or officer will be charged and (B) there is satisfactory community support for the proposed community bank based on evidence of such support provided by the organizers to the approving authority. If the approving authority cannot make such determination with respect to any such proposed director or proposed executive officer, the approving authority may refuse to allow such proposed director or proposed executive officer to serve in such capacity in the proposed community bank.

(3) A community bank shall have all of the powers of and be subject to all of the requirements and limitations applicable to a Connecticut bank under this title which are not inconsistent with this subsection, except: (A) No community bank may (i) exercise any of the fiduciary powers granted to Connecticut banks by law until express authority therefor has been given by the approving authority, (ii) establish and maintain one or more mutual funds, (iii) invest in derivative securities other than mortgage backed securities fully guaranteed by governmental agencies or government sponsored agencies, (iv) own any real estate for the present or future use of the bank unless the approving authority finds, based on an independently prepared analysis of costs and benefits, that it would be less costly to the bank to own instead of lease such real estate, or (v) make mortgage loans secured by nonresidential real estate the aggregate amount of which, at the time of origination, exceeds ten per cent of all assets of such bank; (B) the aggregate amount of all loans made by a community bank shall not exceed eighty per cent of the total deposits held by such bank; (C) (i) the total direct or indirect liabilities of any one obligor, whether or not fully secured and however incurred, to any community bank, exclusive of such bank's investment in the investment securities of such obligor, shall not exceed at the time incurred ten per cent of the equity capital and reserves for loan and lease losses of such bank, and (ii) the limitations set forth in subsection (a) of section 36a-262 shall apply to this subparagraph; and (D) the limitations set forth in subsection (a) of section 36a-263 shall apply to all community banks, provided, a community bank may (i) make a mortgage loan to any director or executive officer secured by premises occupied or to be occupied by such director or officer as a primary residence, (ii) make an educational loan to any director or executive officer for the education of any child of such director or executive officer, and (iii) extend credit to any director or executive officer in an amount not exceeding ten thousand dollars for extensions of credit not otherwise specifically authorized in this subparagraph. The aggregate amount of all loans or extensions of credit made by a community bank pursuant to this subparagraph shall not exceed thirty-three and one-third per cent of the equity capital and reserves for loan and lease losses of such bank. As used in this subparagraph, "executive officer" means every officer of a community bank who participates or has authority to participate, other than in the capacity of a director, in major policy-making functions of the bank, regardless of whether such officer has an official title or whether such officer serves without salary or other compensation. The vice president, chief financial officer, secretary and treasurer of a community bank are presumed to be executive officers unless, by resolution of the governing board or by the bank's bylaws, any such officer is excluded from participation in major policy-making functions, other than in the capacity of a director of the bank, and such officer does not actually participate in major policy-making functions.

(4) The audit and examination requirements set forth in section 36a-86 shall apply to each community bank.

(5) Any organizers who filed an application to organize a Connecticut bank under this section prior to November 1, 1996, and have not been issued or denied a final certificate of authority under subsection (l) of this section, and who give notice to the applicable approving authority specified in subsection (h) of this section that the proposed bank has raised equity capital in an amount not less than three million dollars, may amend such application to an application to organize a community bank under this subsection. Such organizers shall file (A) an amended certificate of incorporation limiting the powers of the proposed bank in accordance with this subsection, (B) an amended proposed business plan, (C) an amended feasibility study, (D) an amended three-year financial forecast prepared by a certified public accounting firm or other professional firm approved by the commissioner, and (E) evidence satisfactory to the approving authority under this subsection that there is community support for the proposed community bank. Within twenty days after receipt of the amended feasibility study, the commissioner may, at the expense of the organizers, order an independent feasibility study. The approving authority under this subsection shall make the considerations and determinations required by subdivision (2) of this subsection. If the amended application is approved by the approving authority under this subsection and the organizers have given notice to said approving authority that the requirements of subsection (l) of this section have been met, a final certificate of authority to commence business as a community bank shall be issued by the approving authority under this subsection.

(6) The commissioner may adopt regulations, in accordance with chapter 54, to administer the provisions of this subsection and section 36a-252.

(s) (1) As used in this subsection, "community development bank" means a Connecticut bank that is organized to serve the banking needs of a well-defined neighborhood, community or other geographic area as determined by the commissioner, primarily, but not exclusively, by making commercial loans in amounts of one hundred fifty thousand dollars or less to existing businesses or to persons seeking to establish businesses located within such neighborhood, community or geographic area.

(2) One or more persons may organize a community development bank in accordance with the provisions of this section, except that subsection (g) of this section shall not apply. The approving authority for a community development bank shall be the commissioner acting alone. Any such community development bank shall commence business with a minimum equity capital determined by the commissioner to be appropriate for the proposed activities of such bank, provided, if such proposed activities include accepting deposits, such minimum equity capital shall be sufficient to enable such deposits to be insured by the Federal Deposit Insurance Corporation or its successor agency.

(3) The state, acting through the State Treasurer, may be the sole organizer of a community development bank or may participate with any other person or persons in the organization of any community development bank, and may own all or a part of any capital stock of such bank. No application fee shall be required under subparagraph (E) of subdivision (1) of subsection (d) of section 36a-65 and no franchise tax shall be required under subsection (o) of this section for any community development bank organized by or in participation with the state.

(4) In addition to the considerations and determinations required by subsection (h) of this section, before granting a temporary certificate of authority to organize a community development bank, the approving authority shall determine that (A) each of the proposed directors and proposed executive officers possesses capacity and fitness for the duties and responsibilities with which such director or officer will be charged and (B) there is satisfactory community support for the proposed community development bank based on evidence of such support provided by the organizers to the approving authority. If the approving authority cannot make such determination with respect to any such proposed director or proposed executive officer, the approving authority may refuse to allow such proposed director or proposed executive officer to serve in such capacity in the proposed community development bank. As used in this subdivision, "executive officer" means every officer of a community development bank who participates or has authority to participate, other than in the capacity of a director, in major policy-making functions of the bank, regardless of whether such officer has an official title or whether such officer serves without salary or other compensation. The vice president, chief financial officer, secretary and treasurer of a community development bank are presumed to be executive officers unless, by resolution of the governing board or by the bank's bylaws, any such officer is excluded from participation in major policy-making functions, other than in the capacity of a director of the bank, and such officer does not actually participate in major policy-making functions.

(5) Notwithstanding any contrary provision of this title: (A) The commissioner may limit the powers that may be exercised by a community development bank or impose conditions on the exercise by such bank of any power allowed by this title as the commissioner deems necessary in the interest of the public and for the safety and soundness of the community development bank, provided, any such limitations or conditions, or both, shall be set forth in the final certificate of authority issued in accordance with subsection (l) of this section; and (B) the commissioner may waive in writing any requirement imposed on a community development bank under this title or any regulation adopted under this title if the commissioner finds that such requirement is inconsistent with the powers that may be exercised by such community development bank under its final certificate of authority.

(6) The commissioner may adopt regulations, in accordance with chapter 54, to carry out the provisions of this subsection.

(t) (1) As used in this subsection, "uninsured bank" means a Connecticut bank that does not accept retail deposits and for which insurance of deposits by the Federal Deposit Insurance Corporation or its successor agency is not required, and "retail deposits" means any deposits made by individuals who are not accredited investors, as defined in 17 CFR Section 230.501(a).

(2) One or more persons may organize an uninsured bank in accordance with the provisions of this section, except that subsection (g) of this section shall not apply. The approving authority for an uninsured bank shall be the commissioner acting alone. Any such uninsured bank shall commence business with a minimum equity capital of at least five million dollars unless the commissioner establishes a different minimum capital requirement for such uninsured bank based upon its proposed activities.

(3) An uninsured bank shall have all of the powers of and be subject to all of the requirements and limitations applicable to a Connecticut bank under this title which are not inconsistent with this subsection, except no uninsured bank may accept retail deposits and, notwithstanding any provision of this title, sections 36a-30 to 36a-34, inclusive, do not apply to uninsured banks.

(4) (A) An uninsured bank shall display conspicuously, at each window or other place where deposits are usually accepted, a sign stating that deposits are not insured by the Federal Deposit Insurance Corporation or its successor agency.

(B) An uninsured bank shall either (i) include in boldface conspicuous type on each signature card, passbook, and instrument evidencing a deposit the following statement: "This deposit is not insured by the FDIC" or (ii) require each depositor to execute a statement that acknowledges that the initial deposit and all future deposits at the uninsured bank are not insured by the Federal Deposit Insurance Corporation or its successor agency. The uninsured bank shall retain such acknowledgment as long as the depositor maintains any deposit with the uninsured bank.

(C) An uninsured bank shall include on all of its deposit-related advertising a conspicuous statement that deposits are not insured by the Federal Deposit Insurance Corporation or its successor agency.

Sec. 5. Subdivision (1) of subsection (a) of section 36a-250 of the general statutes is repealed and the following is substituted in lieu thereof:

(1) Transact a general banking business and exercise by its governing board or duly authorized officers or agents, subject to applicable law, all such incidental powers as are necessary thereto. The express powers authorized for a Connecticut bank under subdivisions (2) to [(39)] (41), inclusive, of this subsection do not preclude the existence of additional powers deemed to be incidental to the transaction of a general banking business pursuant to this subdivision.

Sec. 6. Subsection (a) of section 36a-250 of the general statutes is amended by adding subdivisions (40) and (41) as follows:

(NEW) (40) With the prior written approval of the commissioner, engage in closely related activities, unless the commissioner determines that any such activity shall be conducted by a subsidiary of the Connecticut bank, utilizing such organizational, structural or other safeguards as the commissioner may require, in order to protect the Connecticut bank from exposure to loss. As used in this subdivision, "closely related activities" means those activities that are closely related to the business of banking, are convenient and useful to the business of banking, are reasonably related to the operation of a Connecticut bank or are financial in nature including, but not limited to, business and professional services, data processing, courier and messenger services, credit-related activities, consumer services, services related to real estate, financial consulting, tax planning and preparation, community development activities, any activities reasonably related to such activities, or any activity permitted under the Bank Holding Company Act of 1956, 12 USC Section 1841 et seq., as from time to time amended, or the Home Owners' Loan Act of 1933, 12 USC Section 1461 et seq., as from time to time amended, or the regulations promulgated under such acts as from time to time amended.

(NEW) (41) Engage in any activity that a federal bank may be authorized to engage in under federal law, provided the Connecticut bank shall file with the commissioner prior written notice of its intention to engage in such activity. Such notice shall include a description of the activity, a description of the financial impact of the activity on the Connecticut bank, citation of the legal authority to engage in the activity under federal law, a description of any limitations or restrictions imposed on such activity under federal law, and any other information that the commissioner may require. The Connecticut bank may engage in such activity unless the commissioner disapproves such activity not later than thirty days after the notice is filed. The commissioner may adopt regulations in accordance with chapter 54 to ensure that any such activity is conducted in a safe and sound manner with adequate consumer protections. The provisions of this subdivision do not authorize a Connecticut bank or a subsidiary of a Connecticut bank to sell title insurance.

Sec. 7. Subdivision (4) of subsection (a) of section 36a-412 of the general statutes is repealed and the following is substituted in lieu thereof:

(4) (A) Except as provided in this section, [any branch in this state of an out-of-state bank, other than a federally-chartered out-of-state bank, may exercise all the powers possessed by a Connecticut bank and the laws of this state shall apply to such branch to the same extent as such laws apply to a branch of a Connecticut bank, and such out-of-state bank may not conduct any activity at such branch that is not permissible for a Connecticut bank. The following laws shall not apply to such branch: Sections 36a-65, 36a-98, 36a-261, 36a-262, 36a-285 unless, at the time of the acquisition, the acquired bank exercised the authority granted by such section, 36a-738 and 36a-739. If the commissioner determines that a branch in this state of such out-of-state bank is being operated in violation of any applicable law of this state or in an unsafe and unsound manner, the commissioner may take any enforcement action authorized under this title against such out-of-state bank to the same extent as if such branch were a Connecticut bank, provided, the commissioner shall promptly give notice of such action to the home state banking regulator of such out-of-state bank and, to the extent practicable, shall consult and cooperate with such regulator in pursuing and resolving such action.

(B) The] the laws of this state shall apply to any branch in this state of [a federally-chartered] an out-of-state bank to the same extent as such laws would apply if the branch were a federal bank, [. The] provided the following laws shall apply to any branch in this state of [a federally-chartered] an out-of-state bank to the same extent as such laws apply to a branch of a Connecticut bank: (i) Community reinvestment laws including sections 36a-30 to 36a-33, inclusive, (ii) consumer protection laws including sections 36a-290 to 36a-304, inclusive, 36a-306, 36a-307, 36a-315 to 36a-323, inclusive, 36a-645 to 36a-647, inclusive, 36a-690, 36a-695 to 36a-700, inclusive, 36a-705 to 36a-707, inclusive, 36a-715 to 36a-718, inclusive, 36a-725, 36a-726, 36a-755 to 36a-759, inclusive, 36a-770 to 36a-788, inclusive, and 36a-800 to 36a-810, inclusive, (iii) fair lending laws including sections 36a-16, 36a-737, 36a-740 and 36a-741, and (iv) branching laws including sections 36a-23 and 36a-145.

(B) Except as provided in this section, an out-of-state bank, other than a federally-chartered out-of-state bank, that establishes a branch in this state may conduct any activity at such branch (i) if such activity is permissible under the laws of the home state of such out-of-state bank, and (ii) to the same extent as such activity is permissible for either a Connecticut bank or a branch in this state of a federally-chartered out-of-state bank. If the commissioner determines that a branch in this state of an out-of-state bank, other than a federally-chartered out-of-state bank, is being operated in violation of any applicable law of this state or in an unsafe and unsound manner, the commissioner may take any enforcement action authorized under this title against such out-of-state bank to the same extent as if such branch were a Connecticut bank, provided the commissioner shall promptly give notice of such action to the home state banking regulator of such out-of-state bank and, to the extent practicable, shall consult and cooperate with such regulator in pursuing and resolving such action.

Sec. 8. (NEW) (a) Any uninsured bank organized pursuant to subsection (t) of section 36a-70 of the general statutes, as amended by this act, may, upon the approval of the commissioner, expand its powers to accept retail deposits, as defined in said subsection, and operate without the limitations provided in subdivisions (3) and (4) of said subsection.

(b) An uninsured bank that proposes to expand its powers shall file with the commissioner a proposed plan of expansion, a copy of the proposed plan of expansion, a copy of the proposed certificate of incorporation and a certificate by the secretary of the uninsured bank that the proposed plan of expansion and proposed certificate of incorporation have been approved in accordance with subsection (c) of this section.

(c) The proposed plan of expansion and proposed certificate of incorporation shall require the approval of a majority of the governing board of the uninsured bank and the favorable vote of not less than two-thirds of the holders of each class of the uninsured bank's capital stock, if any, or in the case of a mutual uninsured bank, the corporators thereof, cast at a meeting called to consider such expansion.

(d) Any shareholder of a capital stock uninsured bank that proposes to expand its powers who, on or before the date of the shareholders' meeting to vote on such expansion, objects to the expansion by filing a written objection with the secretary of such bank may, within ten days after the effective date of such expansion, make written demand upon the bank for payment of such shareholder's stock. Any such shareholder that makes such objection and demand shall have the same rights as those of a shareholder who dissents from the merger of two or more capital stock Connecticut banks.

(e) The commissioner shall approve an expansion of powers under this section if the commissioner determines that: (1) The uninsured bank has complied with all applicable provisions of law; (2) the uninsured bank has equity capital of at least five million dollars; (3) the uninsured bank has received satisfactory ratings on its most recent safety and soundness examination; (4) the proposed expansion of powers will serve the public necessity and convenience; and (5) the uninsured bank will provide adequate services to meet the banking needs of all community residents, including low-income residents and moderate-income residents to the extent permitted by its charter, in accordance with a plan submitted by the uninsured bank to the commissioner, in such form and containing such information as the commissioner may require. Upon receiving any such plan, the commissioner shall make the plan available for public inspection and comment at the Department of Banking and cause notice of its submission and availability for inspection and comment to be published in the department's weekly bulletin. With the concurrence of the commissioner, the uninsured bank shall publish, in the form of a legal advertisement in a newspaper having a substantial circulation in the area, notice of such plan's submission and availability for public inspection and comment. The notice shall state that the inspection and comment period will last for a period of thirty days from the date of publication. The commissioner shall not make such determination until the expiration of the thirty-day period. In making such determination, the commissioner shall, unless clearly inapplicable, consider, among other factors, whether the plan identifies specific unmet credit and consumer banking needs in the local community and specifies how such needs will be satisfied, provides for sufficient distribution of banking services among branches or satellite devices, or both, located in low-income neighborhoods, contains adequate assurances that banking services will be offered on a nondiscriminatory basis and demonstrates a commitment to extend credit for housing, small business and consumer purposes in low-income neighborhoods.

(f) After receipt of the commissioner's approval, the uninsured bank shall promptly file such approval and its certificate of incorporation with the Secretary of the State and with the town clerk of the town in which its principal office is located. Upon such filing, the bank shall cease to be an uninsured bank subject to the provisions of subdivisions (3) and (4) of subsection (t) of section 36a-70 of the general statutes, as amended by this act, and shall be a Connecticut bank subject to all of the requirements and limitations and possessed of all rights, privileges and powers granted to it by its certificate of incorporation and by the provisions of the general statutes applicable to its type of Connecticut bank. Such Connecticut bank shall not commence business unless its insurable accounts and deposits are insured by the Federal Deposit Insurance Corporation or its successor agency. Upon such filing with the Secretary of the State and with the town clerk, all of the assets, business and good will of the uninsured bank shall be transferred to and vested in such Connecticut bank without any deed or instrument of conveyance, provided the Connecticut bank may execute any deed or instrument of conveyance as is convenient to confirm such transfer. Such Connecticut bank shall be subject to all of the duties, relations, obligations, trusts and liabilities of the uninsured bank, whether as debtor, depository, registrar, transfer agent, executor, administrator or otherwise, and shall be liable to pay and discharge all such debts and liabilities, to perform all such duties in the same manner and to the same extent as if the Connecticut bank had itself incurred the obligation or liability or assumed the duty or relation. All rights of creditors of the predecessor uninsured bank and all liens upon the property of such bank shall be preserved unimpaired and the Connecticut bank shall be entitled to receive, accept, collect, hold and enjoy any and all gifts, bequests, devises, conveyances, trusts and appointments in favor of or in the name of the uninsured bank and whether made or created to take effect prior to or after the expansion of powers.

(g) The persons named as directors in the certificate of incorporation shall be the directors of such Connecticut bank until the first annual election of directors after the expansion of powers or until the expiration of their terms as directors, and shall have the power to take all necessary actions and to adopt bylaws concerning the business and management of such Connecticut bank.

(h) No such Connecticut bank may exercise any of the fiduciary powers granted to Connecticut banks by law until express authority therefor has been given by the commissioner, unless such authority was previously granted to the predecessor uninsured bank.

(i) The franchise tax required to be paid by capital stock Connecticut banks upon an increase of capital stock shall be paid upon the capital stock of any such Connecticut bank, provided, any franchise tax paid by the predecessor uninsured bank shall be subtracted from any amount owed under this subsection.

Sec. 9. Section 37-9 of the general statutes is repealed and the following is substituted in lieu thereof:

The provisions of sections 37-4, 37-5 and 37-6 shall not affect: (1) Any loan made prior to September 12, 1911; (2) any loan made by (A) any national bank, or any bank or trust company or state or federal savings bank incorporated under the laws of this state, (B) any wholly-owned subsidiary of such national bank, bank or trust company or state or federal savings bank, except a loan for consumer purposes, (C) any federal or state chartered savings and loan association, or (D) any credit union or federal credit union; (3) any bona fide mortgage of real property for a sum in excess of five thousand dollars; (4) (A) any loan, carrying an annual interest rate of not more than the deposit index determined pursuant to subsection (c) of section 49-2a for the calendar year in which the loan is made plus seventeen per cent, made to a foreign or domestic corporation, statutory trust, limited liability company, general, limited or limited liability partnership or association organized for a profit or any individual, provided such corporation, trust, company, partnership, association or individual is engaged primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such corporation, trust, company, partnership, association or individual are utilized in such entity's business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of ten thousand dollars but less than or equal to two hundred fifty thousand dollars, or, in the case of one or more advances of money of less than ten thousand dollars made pursuant to a revolving loan agreement or similar agreement or a loan agreement providing for the making of advances to the borrower from time to time up to an aggregate maximum amount, the total principal amount of all loans owing by the borrower to the lender at the time of any such advance is in excess of ten thousand dollars but less than or equal to two hundred fifty thousand dollars, or (B) any loan made to a foreign or domestic corporation, statutory trust, limited liability company, general, limited or limited liability partnership or association organized for a profit or any individual, provided such corporation, trust, company, partnership, association or individual is engaged primarily in commercial, manufacturing, industrial or nonconsumer pursuits and provided further that the funds received by such corporation, trust, company, partnership, association or individual are utilized in such entity's business or investment activities and are not utilized for consumer purposes and provided further that the original indebtedness to be repaid is in excess of [ten] two hundred fifty thousand dollars, or, in the case of one or more advances of money of less than [ten] two hundred fifty thousand dollars made pursuant to a revolving loan agreement or similar agreement or a loan agreement providing for the making of advances to the borrower from time to time up to an aggregate maximum amount, the total principal amount of all loans owing by the borrower to the lender at the time of any such advance is in excess of [ten] two hundred fifty thousand dollars; (5) any obligations, including bonds, notes or other obligations, issued by (A) the state, (B) any municipality, including any city, town, borough, district, whether consolidated or not, or other public body corporate, or (C) any authority, instrumentality, public agency or other political subdivision of the state or of a municipality; (6) any loan made by (A) the state, (B) any municipality, including any city, town, borough, district, whether consolidated or not, or other public body corporate, or (C) any authority, instrumentality, public agency or other political subdivision of the state or of a municipality; (7) any loan made for the purpose of financing the purchase of a motor vehicle, a recreational vehicle or a boat, carrying an interest rate of not more than (A) eighteen per cent per annum on loans made on or after July 1, 1981, and prior to October 1, 1985, and (B) on loans made on or after October 1, 1985, and prior to October 1, 1993, (i) sixteen per cent per annum for new motor vehicles, recreational vehicles or boats, and (ii) eighteen per cent per annum for used motor vehicles, recreational vehicles or boats, payable in four or more monthly, quarterly or yearly instalments which is unsecured or in which a security interest is taken in such property; (8) any loan by an institution of higher education made to an individual for the purpose of enabling attendance at such institution and carrying an interest rate of not more than the greater of (A) the maximum rate then permitted by section 37-4, or (B) a rate which is not more than five per cent in excess of the discount rate, including any surcharge, on ninety-day commercial paper in effect from time to time at the federal reserve bank in the federal reserve district where such institution is located; (9) any loan made to a plan participant or beneficiary from an employee pension benefit plan as defined in the Employee Retirement Income Security Act of 1974, Public Law 93-406, as from time to time amended. The provisions of part III of chapter 668 shall not apply to loans made pursuant to subdivision (7) of this section. No provision of this section shall prevent any such bank, trust company or federal or state chartered savings and loan association, credit union or federal credit union or other lender from recovering by an action at law the amount of the principal and the interest stipulated or interest at the legal rate, if interest is not stipulated, in any negotiable instrument which it has acquired for value and in good faith without notice of illegality in the consideration. For the purpose of this section: "Interest" shall not be construed to include attorney's fees, including preparation of mortgage deed and note, security agreements, title search, waivers and closing fees, survey charges or recording fees paid by the mortgagor or borrower; "consumer purposes" shall mean the utilization of funds for personal, family or household purchases, acquisitions or uses.

Approved June 23, 1999

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