Senate Bill No. 254
(By Senators Manchin and Helmick, By Request)
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[Introduced February 3, 1995; referred to the Committee
on Banking and Insurance.]
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A BILL to amend and reenact sections twelve-c and thirteen,
article eight, chapter thirty-one-a of the code of West
Virginia, one thousand nine hundred thirty-one, as amended,
relating to providing for out-of-state loan production
office operations in West Virginia; and allowing for limited
indemnification of officers, directors and employees by
banking institutions.
Be it enacted by the Legislature of West Virginia:
That sections twelve-c and thirteen, article eight, chapter
thirty-one-a of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, be amended and reenacted to read
as follows:
ARTICLE 8. HEARINGS; ADMINISTRATIVE PROCEDURES; JUDICIAL REVIEW;
UNLAWFUL ACTS; PENALTIES.
§31A-8-12c. Loan origination offices permitted.
(a) Origination of loans by employees or agents of a banking institution at offices other than that banking institution's
principal office or branch bank is permitted: Provided, That any
such loans originating at said office are approved and made at
the banking institution's principal place of business or branch
bank.
(b) Origination of loans by employees or agents of a
federally-insured depository institution of banking chartered
outside the state of West Virginia at nonbranch offices within
this state is permitted: Provided, That a license is obtained
pursuant to section five, article two of this chapter and that
any such loans originating at the office are approved and made at
the banking institution's principal place of business or branch
bank: Provided, however, That any consumer loans made in this
manner conform with state consumer protection laws. The
commissioner of banking may examine the operations of such
offices and collect fees for their examination in the amount of
fifty dollars per hour of examiner time. A loan production
office authorized under this section or by federal law may
indicate its bank affiliation notwithstanding section two,
article four of this chapter.
§31A-8-13. Banking institution not to be surety; hypothecation
and other dealings with securities and assets
limited.
No banking institution shall become or be accepted as surety
on any bond or undertaking required by the laws or by the courts
of this state or any other state, or shall become surety or guarantor of any person for the discharge of any duty in any
position or the performance of any contract or undertaking. No
banking institution shall pledge, hypothecate or deliver any of
its assets of any description whatsoever to any person to
indemnify him as surety for such banking institution or as surety
for any other person. But a bank may pledge, hypothecate,
deliver or deposit securities to guarantee deposits of the United
States, or any agency or instrumentality thereof, the state of
West Virginia, or any agency or instrumentality thereof, or any
county, district, municipal corporation, or other governmental
agency or instrumentality, and the deposits of a bankrupt's
estate made pursuant to an order of a court of bankruptcy, and,
with the consent in writing of the commissioner of banking, may
pledge, hypothecate, deliver or deposit securities or assets to
guarantee deposits made by receivers of closed or insolvent
banking institutions; and the receiver of a closed or insolvent
banking institution, if the proceeding be not in court, with the
consent in writing of the commissioner of banking, and if the
proceeding be in court, with the consent in writing of the
commissioner of banking and the approval of the court, may accept
securities or assets of a banking institution to secure deposits
made by such receiver. In every such case, the hypothecation of
such securities or assets shall be by proper legal transfer as
collateral security to protect and indemnify by trust any and all
loss in case of any default on the part of the banking
institution in its capacity as a depository for any such deposits as aforesaid, and such collateral security shall be released only
by order of record of the public officer or public body, or by
the receiver of a closed or insolvent banking institution, if the
proceeding be not in court, with the consent in writing of the
commissioner of banking, and if the proceeding be in court, with
the consent in writing of the commissioner of banking and the
approval of the court, when satisfied that full and faithful
accounting and payment of all the moneys has been made under the
provisions hereof. The public officer or public body, or the
receiver of a closed or insolvent banking institution, shall make
ample provision for the safekeeping of such hypothecated
securities or assets, and the interest thereon when paid shall be
turned over to the banking institution, so long as it is not in
default as aforesaid.
The foregoing shall not prevent the hypothecation of the
securities or assets of any banking institution to secure the
repayment of money borrowed from another banking institution; nor
shall the foregoing prevent a bank's indemnification of its
officers, directors or employees by purchase of insurance or
otherwise, for expenses incurred from legal actions, to the
extent that such indemnification is permitted to that institution
under federal law. Indemnification articles must conform to, or
be more restrictive than, that set forth in section nine, article
one, chapter thirty-one of this code. The commissioner reserves
the right to prohibit or limit, by regulation or order, any
indemnification payment for reasons of safety and soundness or nonconformity to the bank's articles of incorporation or to the
restrictions placed on indemnification contained in this section
or other applicable state law.
NOTE: The purpose of this bill is to clearly permit in West
Virginia the operation of loan production offices by out-of-state
state-chartered banking institutions; and to allow for banking
institutions to provide indemnification of their officers,
directors and employees in certain instances.
Strike-throughs indicate language that would be stricken
from present law, and underscoring indicates new language that
would be added.