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.


LRB099 11040 MGM 31420 b

 

 

A BILL FOR

 

HB3227LRB099 11040 MGM 31420 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Banking Act is amended by changing
5Sections 5, 14, and 14.1 as follows:
 
6    (205 ILCS 5/5)  (from Ch. 17, par. 311)
7    Sec. 5. General corporate powers. A bank organized under
8this Act or subject hereto shall be a body corporate and
9politic and shall, without specific mention thereof in the
10charter, have all the powers conferred by this Act and the
11following additional general corporate powers:
12        (1) To sue and be sued, complain, and defend in its
13    corporate name.
14        (2) To have a corporate seal, which may be altered at
15    pleasure, and to use the same by causing it or a facsimile
16    thereof to be impressed or affixed or in any manner
17    reproduced, provided that the affixing of a corporate seal
18    to an instrument shall not give the instrument additional
19    force or effect, or change the construction thereof, and
20    the use of a corporate seal is not mandatory.
21        (3) To make, alter, amend, and repeal bylaws, not
22    inconsistent with its charter or with law, for the
23    administration of the affairs of the bank. If this Act does

 

 

HB3227- 2 -LRB099 11040 MGM 31420 b

1    not provide specific guidance in matters of corporate
2    governance, the provisions of the Business Corporation Act
3    of 1983 may be used if so provided in the bylaws, and if
4    the bank is a limited liability company, the provisions of
5    the Limited Liability Company Act shall be used.
6        (4) To elect or appoint and remove officers and agents
7    of the bank and define their duties and fix their
8    compensation.
9        (5) To adopt and operate reasonable bonus plans,
10    profit-sharing plans, stock-bonus plans, stock-option
11    plans, pension plans and similar incentive plans for its
12    directors, officers and employees.
13        (5.1) To manage, operate and administer a fund for the
14    investment of funds by a public agency or agencies,
15    including any unit of local government or school district,
16    or any person. The fund for a public agency shall invest in
17    the same type of investments and be subject to the same
18    limitations provided for the investment of public funds.
19    The fund for public agencies shall maintain a separate
20    ledger showing the amount of investment for each public
21    agency in the fund. "Public funds" and "public agency" as
22    used in this Section shall have the meanings ascribed to
23    them in Section 1 of the Public Funds Investment Act.
24        (6) To make reasonable donations for the public welfare
25    or for charitable, scientific, religious or educational
26    purposes.

 

 

HB3227- 3 -LRB099 11040 MGM 31420 b

1        (7) To borrow or incur an obligation; and to pledge its
2    assets:
3            (a) to secure its borrowings, its lease of personal
4        or real property or its other nondeposit obligations;
5            (b) to enable it to act as agent for the sale of
6        obligations of the United States;
7            (c) to secure deposits of public money of the
8        United States, whenever required by the laws of the
9        United States, including without being limited to,
10        revenues and funds the deposit of which is subject to
11        the control or regulation of the United States or any
12        of its officers, agents, or employees and Postal
13        Savings funds;
14            (d) to secure deposits of public money of any state
15        or of any political corporation or subdivision thereof
16        including, without being limited to, revenues and
17        funds the deposit of which is subject to the control or
18        regulation of any state or of any political corporation
19        or subdivisions thereof or of any of their officers,
20        agents, or employees;
21            (e) to secure deposits of money whenever required
22        by the National Bankruptcy Act;
23            (f) (blank); and
24            (g) to secure trust funds commingled with the
25        bank's funds, whether deposited by the bank or an
26        affiliate of the bank, pursuant to Section 2-8 of the

 

 

HB3227- 4 -LRB099 11040 MGM 31420 b

1        Corporate Fiduciary Act.
2        (8) To own, possess, and carry as assets all or part of
3    the real estate necessary in or with which to do its
4    banking business, either directly or indirectly through
5    the ownership of all or part of the capital stock, shares
6    or interests in any corporation, association, trust
7    engaged in holding any part or parts or all of the bank
8    premises, engaged in such business and in conducting a safe
9    deposit business in the premises or part of them, or
10    engaged in any activity that the bank is permitted to
11    conduct in a subsidiary pursuant to paragraph (12) of this
12    Section 5.
13        (9) To own, possess, and carry as assets other real
14    estate to which it may obtain title in the collection of
15    its debts or that was formerly used as a part of the bank
16    premises, but title to any real estate except as herein
17    permitted shall not be retained by the bank, either
18    directly or by or through a subsidiary, as permitted by
19    subsection (12) of this Section for a total period of more
20    than 10 years after acquiring title, either directly or
21    indirectly.
22        (10) To do any act, including the acquisition of stock,
23    necessary to obtain insurance of its deposits, or part
24    thereof, and any act necessary to obtain a guaranty, in
25    whole or in part, of any of its loans or investments by the
26    United States or any agency thereof, and any act necessary

 

 

HB3227- 5 -LRB099 11040 MGM 31420 b

1    to sell or otherwise dispose of any of its loans or
2    investments to the United States or any agency thereof, and
3    to acquire and hold membership in the Federal Reserve
4    System.
5        (11) Notwithstanding any other provisions of this Act
6    or any other law, to do any act and to own, possess, and
7    carry as assets property of the character, including stock,
8    that is at the time authorized or permitted to national
9    banks by an Act of Congress, but subject always to the same
10    limitations and restrictions as are applicable to national
11    banks by the pertinent federal law and subject to
12    applicable provisions of the Financial Institutions
13    Insurance Sales Law.
14        (12) To own, possess, and carry as assets stock of one
15    or more corporations that is, or are, engaged in one or
16    more of the following businesses:
17            (a) holding title to and administering assets
18        acquired as a result of the collection or liquidating
19        of loans, investments, or discounts; or
20            (b) holding title to and administering personal
21        property acquired by the bank, directly or indirectly
22        through a subsidiary, for the purpose of leasing to
23        others, provided the lease or leases and the investment
24        of the bank, directly or through a subsidiary, in that
25        personal property otherwise comply with Section 35.1
26        of this Act; or

 

 

HB3227- 6 -LRB099 11040 MGM 31420 b

1            (c) carrying on or administering any of the
2        activities excepting the receipt of deposits or the
3        payment of checks or other orders for the payment of
4        money in which a bank may engage in carrying on its
5        general banking business; provided, however, that
6        nothing contained in this paragraph (c) shall be deemed
7        to permit a bank organized under this Act or subject
8        hereto to do, either directly or indirectly through any
9        subsidiary, any act, including the making of any loan
10        or investment, or to own, possess, or carry as assets
11        any property that if done by or owned, possessed, or
12        carried by the State bank would be in violation of or
13        prohibited by any provision of this Act.
14        The provisions of this subsection (12) shall not apply
15    to and shall not be deemed to limit the powers of a State
16    bank with respect to the ownership, possession, and
17    carrying of stock that a State bank is permitted to own,
18    possess, or carry under this Act.
19        Any bank intending to establish a subsidiary under this
20    subsection (12) shall give written notice to the
21    Commissioner 60 days prior to the subsidiary's commencing
22    of business or, as the case may be, prior to acquiring
23    stock in a corporation that has already commenced business.
24    After receiving the notice, the Commissioner may waive or
25    reduce the balance of the 60 day notice period. The
26    Commissioner may specify the form of the notice, may

 

 

HB3227- 7 -LRB099 11040 MGM 31420 b

1    designate the types of subsidiaries not subject to this
2    notice requirement, and may promulgate rules and
3    regulations to administer this subsection (12).
4        (13) To accept for payment at a future date not
5    exceeding one year from the date of acceptance, drafts
6    drawn upon it by its customers; and to issue, advise, or
7    confirm letters of credit authorizing the holders thereof
8    to draw drafts upon it or its correspondents.
9        (14) To own and lease personal property acquired by the
10    bank at the request of a prospective lessee and upon the
11    agreement of that person to lease the personal property
12    provided that the lease, the agreement with respect
13    thereto, and the amount of the investment of the bank in
14    the property comply with Section 35.1 of this Act.
15        (15)(a) To establish and maintain, in addition to the
16    main banking premises, branches offering any banking
17    services permitted at the main banking premises of a State
18    bank.
19        (b) To establish and maintain, after May 31, 1997,
20    branches in another state that may conduct any activity in
21    that state that is authorized or permitted for any bank
22    that has a banking charter issued by that state, subject to
23    the same limitations and restrictions that are applicable
24    to banks chartered by that state.
25        (16) (Blank).
26        (17) To establish and maintain terminals, as

 

 

HB3227- 8 -LRB099 11040 MGM 31420 b

1    authorized by the Electronic Fund Transfer Act.
2        (18) To establish and maintain temporary service
3    booths at any International Fair held in this State which
4    is approved by the United States Department of Commerce,
5    for the duration of the international fair for the sole
6    purpose of providing a convenient place for foreign trade
7    customers at the fair to exchange their home countries'
8    currency into United States currency or the converse. This
9    power shall not be construed as establishing a new place or
10    change of location for the bank providing the service
11    booth.
12        (19) To indemnify its officers, directors, employees,
13    and agents, as authorized for corporations under Section
14    8.75 of the Business Corporation Act of 1983.
15        (20) To own, possess, and carry as assets stock of, or
16    be or become a member of, any corporation, mutual company,
17    association, trust, or other entity formed exclusively for
18    the purpose of providing directors' and officers'
19    liability and bankers' blanket bond insurance or
20    reinsurance to and for the benefit of the stockholders,
21    members, or beneficiaries, or their assets or businesses,
22    or their officers, directors, employees, or agents, and not
23    to or for the benefit of any other person or entity or the
24    public generally.
25        (21) To make debt or equity investments in corporations
26    or projects, whether for profit or not for profit, designed

 

 

HB3227- 9 -LRB099 11040 MGM 31420 b

1    to promote the development of the community and its
2    welfare, provided that the aggregate investment in all of
3    these corporations and in all of these projects does not
4    exceed 10% of the unimpaired capital and unimpaired surplus
5    of the bank and provided that this limitation shall not
6    apply to creditworthy loans by the bank to those
7    corporations or projects. Upon written application to the
8    Commissioner, a bank may make an investment that would,
9    when aggregated with all other such investments, exceed 10%
10    of the unimpaired capital and unimpaired surplus of the
11    bank. The Commissioner may approve the investment if he is
12    of the opinion and finds that the proposed investment will
13    not have a material adverse effect on the safety and
14    soundness of the bank.
15        (22) To own, possess, and carry as assets the stock of
16    a corporation engaged in the ownership or operation of a
17    travel agency or to operate a travel agency as a part of
18    its business.
19        (23) With respect to affiliate facilities:
20            (a) to conduct at affiliate facilities for and on
21        behalf of another commonly owned bank, if so authorized
22        by the other bank, all transactions that the other bank
23        is authorized or permitted to perform; and
24            (b) to authorize a commonly owned bank to conduct
25        for and on behalf of it any of the transactions it is
26        authorized or permitted to perform at one or more

 

 

HB3227- 10 -LRB099 11040 MGM 31420 b

1        affiliate facilities.
2        Any bank intending to conduct or to authorize a
3    commonly owned bank to conduct at an affiliate facility any
4    of the transactions specified in this paragraph (23) shall
5    give written notice to the Commissioner at least 30 days
6    before any such transaction is conducted at the affiliate
7    facility.
8        (24) To act as the agent for any fire, life, or other
9    insurance company authorized by the State of Illinois, by
10    soliciting and selling insurance and collecting premiums
11    on policies issued by such company; and to receive for
12    services so rendered such fees or commissions as may be
13    agreed upon between the bank and the insurance company for
14    which it may act as agent; provided, however, that no such
15    bank shall in any case assume or guarantee the payment of
16    any premium on insurance policies issued through its agency
17    by its principal; and provided further, that the bank shall
18    not guarantee the truth of any statement made by an assured
19    in filing his application for insurance.
20        (25) Notwithstanding any other provisions of this Act
21    or any other law, to offer any product or service that is
22    at the time authorized or permitted to any insured savings
23    association or out-of-state bank by applicable law,
24    provided that powers conferred only by this subsection
25    (25):
26            (a) shall always be subject to the same limitations

 

 

HB3227- 11 -LRB099 11040 MGM 31420 b

1        and restrictions that are applicable to the insured
2        savings association or out-of-state bank for the
3        product or service by such applicable law;
4            (b) shall be subject to applicable provisions of
5        the Financial Institutions Insurance Sales Law;
6            (c) shall not include the right to own or conduct a
7        real estate brokerage business for which a license
8        would be required under the laws of this State; and
9            (d) shall not be construed to include the
10        establishment or maintenance of a branch, nor shall
11        they be construed to limit the establishment or
12        maintenance of a branch pursuant to subsection (11).
13        Not less than 30 days before engaging in any activity
14    under the authority of this subsection, a bank shall
15    provide written notice to the Commissioner of its intent to
16    engage in the activity. The notice shall indicate the
17    specific federal or state law, rule, regulation, or
18    interpretation the bank intends to use as authority to
19    engage in the activity.
20        (26) Nothing in this Section shall be construed to
21    require the filing of a notice or application for approval
22    with the United States Office of the Comptroller of the
23    Currency or a bank supervisor of another state as a
24    condition to the right of a State bank to exercise any of
25    the powers conferred by this Section in this State.
26(Source: P.A. 98-44, eff. 6-28-13.)
 

 

 

HB3227- 12 -LRB099 11040 MGM 31420 b

1    (205 ILCS 5/14)  (from Ch. 17, par. 321)
2    Sec. 14. Stock. Unless otherwise provided for in this Act
3provisions of general application to stock of a state bank
4shall be as follows:
5    (1) All banks shall have their capital divided into shares
6of a par value of not less than $1 each and not more than $100
7each, however, the par value of shares of a bank effecting a
8reverse stock split pursuant to item (8) of subsection (a) of
9Section 17 may temporarily exceed this limit provided it
10conforms to the limits immediately after the reverse stock
11split is completed. No issue of capital stock or preferred
12stock shall be valid until not less than the par value of all
13such stock so issued shall be paid in and notice thereof by the
14president, a vice-president or cashier of the bank has been
15transmitted to the Commissioner. In the case of an increase in
16capital stock by the declaration of a stock dividend, the
17capitalization of retained earnings effected by such stock
18dividend shall constitute the payment for such shares required
19by the preceding sentence, provided that the surplus of said
20bank after such stock dividend shall be at least equal to fifty
21per cent of the capital as increased. The charter shall not
22limit or deny the voting power of the shares of any class of
23stock except as provided in Section 15(3) of this Act.
24    (2) Pursuant to action taken in accordance with the
25requirements of Section 17, a bank may issue preferred stock of

 

 

HB3227- 13 -LRB099 11040 MGM 31420 b

1one or more classes as shall be approved by the Commissioner as
2hereinafter provided, and make such amendment to its charter as
3may be necessary for this purpose; but in the case of any newly
4organized bank which has not yet issued capital stock the
5requirements of Section 17 shall not apply.
6    (3) Without limiting the authority herein contained a bank,
7when so provided in its charter and when approved by the
8Commissioner, may issue shares of preferred stock:
9        (a) Subject to the right of the bank to redeem any of
10    such shares at not exceeding the price fixed by the charter
11    for the redemption thereof;
12        (b) Subject to the provisions of subsection (8) of this
13    Section 14 entitling the holders thereof to cumulative or
14    noncumulative dividends;
15        (c) Having preference over any other class or classes
16    of shares as to the payment of dividends;
17        (d) Having preference as to the assets of the bank over
18    any other class or classes of shares upon the voluntary or
19    involuntary liquidation of the bank;
20        (e) Convertible into shares of any other class of
21    stock, provided that preferred shares shall not be
22    converted into shares of a different par value unless that
23    part of the capital of the bank represented by such
24    preferred shares is at the time of the conversion equal to
25    the aggregate par value of the shares into which the
26    preferred shares are to be converted.

 

 

HB3227- 14 -LRB099 11040 MGM 31420 b

1    (4) If any part of the capital of a bank consists of
2preferred stock, the determination of whether or not the
3capital of such bank is impaired and the amount of such
4impairment shall be based upon the par value of its stock even
5though the amount which the holders of such preferred stock
6shall be entitled to receive in the event of retirement or
7liquidation shall be in excess of the par value of such
8preferred stock.
9    (5) Pursuant to action taken in accordance with the
10requirements of Section 17 of this Act, a state bank may
11provide for a specified number of authorized but unissued
12shares of capital stock for one or more of the following
13purposes:
14        (a) Reserved for issuance under stock option plan or
15    plans to directors, officers or employees;
16        (b) Reserved for issuance upon conversion of
17    convertible preferred stock issued pursuant to and in
18    compliance with the provisions of subsections (2) and (3)
19    of this Section 14.
20        (c) Reserved for issuance upon conversion of
21    convertible debentures or other convertible evidences of
22    indebtedness issued by a state bank, provided always that
23    the terms of such conversion have been approved by the
24    Commissioner;
25        (d) Reserved for issuance by the declaration of a stock
26    dividend. If and when any shares of capital stock are

 

 

HB3227- 15 -LRB099 11040 MGM 31420 b

1    proposed to be authorized and reserved for any of the
2    purposes set forth in subparagraphs (a), (b) or (c) above,
3    the notice of the meeting, whether special or annual, of
4    stockholders at which such proposition is to be considered
5    shall be accompanied by a statement setting forth or
6    summarizing the terms upon which the shares of capital
7    stock so reserved are to be issued, and the extent to which
8    any preemptive rights of stockholders are inapplicable to
9    the issuance of the shares so reserved or to the
10    convertible preferred stock or convertible debentures or
11    other convertible evidences of indebtedness, and the
12    approving vote of the holders of at least two-thirds of the
13    outstanding shares of stock entitled to vote at such
14    meeting of the terms of such issuance shall be requisite
15    for the adoption of any amendment providing for the
16    reservation of authorized but unissued shares for any of
17    said purposes. Nothing in this subsection (5) contained
18    shall be deemed to authorize the issuance of any capital
19    stock for a consideration less than the par value thereof.
20    (6) Upon written application to the Commissioner 60 days
21prior to the proposed purchase and receipt of the written
22approval of the Commissioner, a state bank may purchase and
23hold as treasury stock such amounts of the total number of
24issued and outstanding shares of its capital and preferred
25stock outstanding as the Commissioner determines is consistent
26with safety and soundness of the bank. The Commissioner may

 

 

HB3227- 16 -LRB099 11040 MGM 31420 b

1specify the manner of accounting for the treasury stock and the
2form of notice prior to ultimate disposition of the shares.
3Except as authorized in this subsection, it shall not be lawful
4for a state bank to purchase or hold any additional such shares
5or securities described in subsection (2) of Section 37 unless
6necessary to prevent loss upon a debt previously contracted in
7good faith, in which event such shares or securities so
8purchased or acquired shall, within 6 months from the time of
9purchase or acquisition, be sold or disposed of at public or
10private sale. Any state bank which intends to purchase and hold
11treasury stock as authorized in this subsection (6) shall file
12a written application with the Commissioner 60 days prior to
13any such proposed purchase. The application shall state the
14number of shares to be purchased, the consideration for the
15shares, the name and address of the person from whom the shares
16are to be purchased, if known, and the total percentage of its
17issued and outstanding shares to be held by the bank after the
18purchase. The total consideration paid by a state bank for
19treasury stock shall reduce capital and surplus of the bank for
20purposes of Sections of this Act relating to lending and
21investment limits which require computation of capital and
22surplus. After considering and approving an application to
23purchase and hold treasury stock under this subsection, the
24Commissioner may waive or reduce the balance of the 60 day
25application period. The Commissioner may specify the form of
26the application for approval to acquire treasury stock and

 

 

HB3227- 17 -LRB099 11040 MGM 31420 b

1promulgate rules and regulations for the administration of this
2subsection (6). A state bank may acquire or resell its own
3shares as treasury stock pursuant to this subsection (6)
4without a change in its charter pursuant to Section 17. Such
5stock may be held for any purpose permitted in subsection (5)
6of this Section 14 or may be resold upon such reasonable terms
7as the board of directors may determine provided notice is
8given to the Commissioner prior to the resale of such stock.
9    (7) During the time that a state bank shall continue its
10banking business, it shall not withdraw or permit to be
11withdrawn, either in the form of dividends or otherwise, any
12portion of its capital, but nothing in this subsection shall
13prevent a reduction or change of the capital stock or the
14preferred stock under the provisions of Sections 17 through 30
15of this Act, a purchase of treasury stock under the provisions
16of subsection (6) of this Section 14 or a redemption of
17preferred stock pursuant to charter provisions therefor.
18    (8) (a) Subject to the provisions of this Act, the board of
19    directors of a state bank from time to time may declare a
20    dividend of so much of the net profits of such bank as it
21    shall judge expedient, subject to item (b) of this Section
22    and applicable federal law, but each bank before the
23    declaration of a dividend shall carry at least one-tenth of
24    its net profits since the date of the declaration of the
25    last preceding dividend, or since the issuance of its
26    charter in the case of its first dividend, to its surplus

 

 

HB3227- 18 -LRB099 11040 MGM 31420 b

1    until the same shall be equal to its capital.
2        (b) No dividends shall be paid by a state bank while it
3    continues its banking business to an amount greater than
4    its net profits then on hand, deducting first therefrom its
5    losses and bad debts. All debts due to a state bank on
6    which interest is past due and unpaid for a period of 6
7    months or more, unless the same are well secured and in the
8    process of collection, shall be considered bad debts.
9        (c) For the purpose of declaring dividends pursuant to
10    paragraph (b) of this Section, upon prior written approval
11    of the Secretary, and without undergoing a
12    quasi-reorganization pursuant to Section 14.1, a State
13    bank may restate its capital accounts to remove a deficit
14    in its undivided profit account by eliminating such deficit
15    into its surplus account so that the undivided profit
16    account is restated to zero. The Secretary shall adopt
17    rules to implement this paragraph (c) and Section 14.1.
18    (9) A State bank may, but shall not be obliged to, issue a
19certificate for a fractional share, and, by action of its board
20of directors, may in lieu thereof, pay cash equal to the value
21of the fractional share. A certificate for a fractional share
22shall entitle the holder to exercise fractional voting rights,
23to receive dividends, and to participate in any of the assets
24of the bank in the event of liquidation.
25(Source: P.A. 92-483, eff. 8-23-01; 92-651, eff. 7-11-02.)
 

 

 

HB3227- 19 -LRB099 11040 MGM 31420 b

1    (205 ILCS 5/14.1)  (from Ch. 17, par. 321.1)
2    Sec. 14.1. Quasi-Reorganization of Capital Upon a Change in
3Control. For the purposes of declaring dividends pursuant to
4Section 14(8)(b) of this Act, subject to rules adopted by the
5Secretary under paragraph (c) of subsection (8) of Section 14,
6if a State bank:
7    (1) incurs a change in ownership of more than 50% of its
8voting stock; and
9    (2) has a deficit in its net profits then on hand at the
10time of such change in ownership; and
11    (3) receives the prior written approval of the Secretary
12Commissioner; such bank may restate its asset and liability
13accounts to fair value for the purpose of reorganizing the
14capital accounts of the bank so that net profits then on hand
15are restated to zero; provided that in no event may total
16capital be increased as a result of a capital reorganization
17made pursuant to this Section.
18(Source: P.A. 87-841.)
 
19    Section 99. Effective date. This Act takes effect upon
20becoming law.