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Session Law

2006

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Chapter 221 AN ACT RELATIVE TO STATE CHARTERED BANKS.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. Paragraph 2 of the first paragraph of section 11 of chapter 168 of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by striking out the first paragraph and inserting in place thereof the following paragraph:-

The chief executive officer or chief financial officer or board of investment shall submit a report summarizing loan activity, investment activity, loans in arrears, foreclosure actions, changes to reserve requirements, and deposit activity, for the period since the last regular meeting of the trustees. Said report shall be presented to the trustees present at the meeting or a copy of the report shall be furnished to each trustee. A summary of said report containing a recapitulation of the several items, and such other portion of the contents as may be determined at the meeting, shall be read or presented to the trustees present thereat. Upon application in writing by the corporation the commissioner in his discretion may waive or modify the list of transactions to be included in such report.

SECTION 2. Said chapter 168 is hereby further amended by striking out section 12, as so appearing, and inserting in place thereof the following section:-
Section 12. The corporation shall have a board of investment of not less than 5 members, who shall be trustees of the corporation. Only 1 of the persons holding the offices or performing the duties of president, executive vice president, senior vice president or treasurer shall at the same time be a member of the board of investment. The board shall elect a clerk who may, but need not be a member of the board. The board of investment may invite 1 or more trustees who are not members of the board to attend its meetings during the monthly, quarterly or semi-annual periods as the board may determine.
At least monthly, the treasurer or other officer designated by the board of investment shall submit to the board of investment, a written report, over his signature, covering the period for which the report has not yet been submitted. The report shall be filed with the records of the meeting and shall be retained for a period of 6 years from the date of the meeting. The report shall cover the following transactions:

(1) changes in investments;
(2) changes in reserve or contingency accounts;
(3) lists of the following loans, setting forth the total liabilities of the borrower to the corporation, both secured and unsecured:-

(i) loans in excess of $50,000 each, overdue for more than 30 days, other than real estate mortgage loans;
(ii) real estate mortgage loans on which interest is more than 6 months in arrears;
(iii) real estate mortgage loans concerning which any tax upon the underlying security has been paid by and not repaid to the corporations; and
(iv) all loans secured and unsecured, and discounts of any borrower including both direct and indirect liabilities made during which the period which brings aggregate liabilities of the borrower to an amount in excess of $100,000, with annotation of any line of credit possessed by the borrower, but, for banks with total assets in excess of $1,000,000,000 as of the most recent call report, the amount of aggregate liabilities outstanding to a single borrower shall be the greater of $500,000 or 1 per cent of undistributed capital and surplus.

Upon application in writing by the corporation, the commissioner in his discretion may waive or modify the list of transactions to be included in the report.
Meetings of the board of investment shall be held at least once in each month. A record shall be made at each meeting of the transactions of the board and of the names of those present; but, lists of loans or securities submitted to and considered or acted upon at such meeting may be incorporated by reference in the record if the lists are filed with the records of the meeting and are identified by the signatures of the clerk of the board and 1 or more members thereof. The approval of change in security for loans made may be evidenced either by vote of the board of investment or by a statement signed by at least 2 of its members.

SECTION 3. Said chapter 168 is hereby further amended by striking out section 19, as so appearing, and inserting in place thereof the following section:

Section 19. A corporation, except as provided in this section, shall not make a loan or extend credit in any manner to any of its officers or to any of its directors or trustees, including a member of its board of investment, and an officer, director or trustee, except as provided in this section, shall not borrow from or otherwise become indebted to the corporation or be surety for loans by it to others or directly or indirectly, whether acting individually or as trustee holding property in trust for another person, or be an obligor for money borrowed of the corporation. With the prior approval of a majority of the entire board of investment, excluding any member of that board involved in the loan or extension of credit, the corporation may make a loan or extend credit to the officer in an amount not exceeding $100,000 on a loan or extension of credit, secured or unsecured, and in an amount not exceeding $200,000 on a loan or extension of credit intended or secured for educational purposes, and in an amount not exceeding $750,000 on a loan secured by a mortgage on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer. The corporation may make a loan or extension of credit to the director or trustee, who is not an officer of the corporation, subject to the limitations contained in chapter 167E. The corporation shall not give a preferential rate of interest or other preferential terms on a loan or extension of credit to any officer, director or trustee. A loan or extension of credit made under this section shall be subject to section 20. For the purposes of this section and section 20, the term “officer” shall include a president, executive vice-president, senior vice-president or treasurer, and any other officer who participates in major policy functions of the corporation whether or not: (1) the other officer has an official title; but the term shall not include a person who may have an official title and may exercise a certain measure of discretion in the performance of his duties, including discretion in the making of loans, but who does not participate in the determination of major policies of the corporation and whose decisions are limited by policy standards fixed by the senior management of the corporation; (2) the title designates the officer an assistant; or (3) the officer is serving without salary or compensation.

An officer, whether acting individually or as trustee holding property in trust for another person, shall not become the owner of real estate upon which a mortgage is held by the corporation; but this prohibition shall not apply to an officer who becomes the owner of real estate upon which a mortgage is held by the corporation securing a loan in an amount not exceeding $750,000 on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer. This section shall not apply to loans made to an officer on deposit books, or to loans as are guaranteed or insured, in whole or in part, as authorized by chapter 46 of the acts of 1945 or by regulations thereunder.

SECTION 4. Section 20 of said chapter 168, as so appearing, is hereby amended by striking out the second paragraph and inserting in place thereof the following paragraph:-

The report to the commissioner shall consist of, but not be limited to, the following: (1) the name of the officer as defined in section 19, director, trustee or principal shareholder of said corporation, bank holding company or other subsidiary to whom any such loan or extension of credit has been given or the name of such company to which such loan or extension of credit has been made, (2) the original amount of the loan and the interest rate thereon, (3) the date of the loan, (4) the type of loan, (5) if the loan is secured in any manner, the type of secured asset and its valuation, (6) the terms of the payment, (7) the current balance, and (8) the amount of principal or interest payments in default, if any, and the length of the default. The report shall be considered a public record in accordance with section 10 of chapter 66.

SECTION 5. The second paragraph of section 11 of chapter 170 of the General Laws, as so appearing, is hereby amended by adding the following sentence:- At each meeting of the directors, the security committee shall submit a report consisting of a detailed written statement containing the following information for the period since the last regular meeting of the directors, such report to be filed with the records of the meeting and shall be retained for a period of 6 years from the date of the meeting; such report shall cover the following transactions:

  1. changes in investments;
  2. changes in reserve or contingency accounts;

(3) lists of the following loans, setting forth the total liabilities of the borrower to the corporation, both secured and unsecured:
(i) loans in excess of $50,000 each, overdue for more than 30 days, other than real estate mortgage loans;
(ii) real estate mortgage loans on which interest is more than 6 months in arrears;
(iii) real estate mortgage loans concerning which any tax upon the underlying security has been paid by and not repaid to such corporations;
(iv) all loans secured and unsecured, and discounts of any borrower including both direct and indirect liabilities made during which the period which brings aggregate liabilities of the borrower to an amount in excess of $100,000, with a notation of any line of credit possessed by the borrower, but, for banks with total assets in excess of $1,000,000,000 as of the most recent call report, the amount of aggregate liabilities outstanding to a single borrower shall be the greater of $500,000 or 1 per cent of undistributed capital and surplus.

SECTION 6. Said section 11 of said chapter 170, as so appearing, is hereby further amended by striking out the third paragraph and inserting in place thereof the following paragraph:-

At the first meeting the board shall elect an audit committee of not less than 3 directors who shall not be operating officers or members of the security committee. The members of the audit committee shall take an oath of office in the manner and within the period prescribed by section 9 and a record thereof shall be made and preserved as provided in said section 9. The directors shall determine the compensation, if any, to be paid to the members of the security committee and the audit committee.

SECTION 7. Section 19 of said chapter 170, as so appearing, is hereby amended by striking out the first and second paragraphs and inserting in place thereof the following 2 paragraphs:-

An officer or director of a bank, except as provided in this section, shall not borrow from or otherwise become indebted to the bank of which he is an officer or director and a bank, except as provided in this section, shall not make a loan or extend credit in any other manner to any of its officers or directors. With the prior approval of a majority of the entire board of directors, excluding any member of that board involved in the loan or extension of credit, a bank may make a loan or extend credit to the officer and the officer may become indebted to the bank in an amount not exceeding $100,000 on a loan or extension of credit, secured or unsecured, and in an amount not exceeding $200,000 on a loan or extension of credit intended or secured for educational purposes, and in an amount not exceeding $750,000 on a loan secured by a mortgage on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer, and in an amount secured by a deposit account of the officer in the bank. A bank may make a loan or extension of credit to the director, who is not an officer of such bank, subject to the limitations contained in chapter 167E. The bank shall not give a preferential rate of interest or other preferential terms on any loan or extension of credit to an officer or director. For the purposes of this section, the term “officer” shall mean a president, executive vice-president, senior vice-president or treasurer, and any other officer who participates in major policy functions of the bank whether or not: (1) the other officer has an official title; but the term shall not include a person who may have an official title and may exercise a certain measure of discretion in the performance of his duties, including discretion in the making of loans, but who does not participate in the determination of major policies of the bank and whose decisions are limited by policy standards fixed by the senior management of the bank; (2) the title designates the officer an assistant; or (3) the officer is serving without salary or compensation.

An officer, whether acting individually or as trustee holding property in trust for another person, shall not become the owner of real estate upon which a mortgage is held by the corporation; but, this prohibition shall not apply to an officer who becomes the owner of real estate upon which a mortgage is held by the corporation securing a loan in an amount not exceeding $750,000 on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer. This section shall not apply to loans made to an officer on deposit books, or to loans as are guaranteed or insured in whole or in part as authorized by chapter 46 of the acts of 1945 or by regulations thereunder.

SECTION 8. Chapter 172 of the General Laws is hereby amended by striking out section 16, as so appearing, and inserting in place thereof the following section:-

Section 16. The board of directors shall meet at intervals of not less than quarterly; but, upon application in writing by the corporation, the commissioner may waive or modify this requirement. Unless the articles of incorporation or the by-laws otherwise provide, members of the board of directors or a committee designated thereby may participate in a meeting of the board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting may simultaneously hear each other, and participation by these means shall constitute presence in person at a meeting. Members may transmit written authorizations that may be required during the meeting by electronic facsimile or other commercially acceptable transmission. At intervals of not less than quarterly, the treasurer or other officer designated by the board of directors shall submit to a meeting of the board of directors a written report, over his signature, for the period running from the last regular meeting of the directors to the date of the meeting on which the report is submitted. The report shall be filed with the records of the meeting and shall be retained for a period of 6 years from the date of the meeting. The report shall provide a summary of the following transactions:
(1) changes in investments;
(2) changes in reserve or contingency accounts;
(3) lists of the following loans, setting forth total liabilities of the borrower to the corporations, both secured and unsecured:

(i) loans in excess of $500,000 each, overdue for more than 30 days, other than real estate mortgage loans;
(ii) real estate mortgage loans on which interest is more than 6 months in arrears;
(iii) real estate mortgage loans concerning which any tax upon the underlying security has been paid and not repaid to the corporations;
(iv) all loans secured and unsecured, and discounts of a borrower including both direct and indirect liabilities made during which the period which brings aggregate liabilities of the borrower to an amount in excess of $100,000, with a notation of any line of credit possessed by the borrower, but, for banks with total assets in excess of $1,000,000,000 as of the most recent call report, the amount of aggregate liabilities outstanding to a single borrower shall be the greater of $500,000 or 1 per cent of undistributed capital and surplus.
Upon application in writing by the corporation the commissioner in his discretion may waive or modify the list of transactions to be included in the report.

SECTION 9. Section 18 of said chapter 172, as so appearing, is hereby amended by striking out the first and second paragraphs and inserting in place thereof the following 2 paragraphs:-

An officer or director of a trust company, except as provided in this section, shall not borrow from or otherwise become indebted to a trust company of which he is an officer or director, and a trust company, except as provided in this section, shall not make a loan or extend credit in any other manner to any of its officers or directors. With the prior approval of a majority of the entire board of directors, excluding a member of that board involved in the loan or extension of credit, a trust company may loan or extend credit to an officer and the officer may become indebted to the trust company in an amount not exceeding $100,000 on a loan or extension of credit, secured or unsecured, and in an amount not exceeding $200,000 on a loan or extension of credit intended or secured for educational purposes, and in an amount not exceeding $750,000 on a loan secured by a mortgage on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer. A trust company may make a loan or extension of credit to a director, who is not an officer of the trust company, subject to the limitations contained in chapter 167E. The trust company shall not give a preferential rate of interest or other preferential terms on a loan or extension of credit to an officer or to a director. For the purposes of this section, the term “officer” shall mean a president, executive vice-president, senior vice-president or treasurer, and any other officer who participates in major policy functions of the trust company whether or not: (1) such other officer has an official title; but the term shall not include a person who may have an official title and may exercise a certain measure of discretion in the performance of his duties, including discretion in the making of loans, but who does not participate in the determination of major policies of the trust company and whose decisions are limited by policy standards fixed by the senior management of the trust company; (2) the title designates the officer an assistant; or (3) the officer is serving without salary or compensation.
An officer, whether acting individually or as trustee holding property in trust for another person, shall not become the owner of real estate upon which a mortgage is held by the corporation; but, provided, however, that this prohibition shall not apply to an officer who becomes the owner of real estate upon which a mortgage is held by the corporation securing a loan in an amount not exceeding $750,000 dollars on real estate improved with a 1 to 4 family dwelling or a condominium established in accordance with chapter 183A which is to be occupied, in whole or in part, by the officer. This section shall not apply to loans made to an officer on deposit books, or to loans as are guaranteed or insured in whole or in part as authorized by chapter 46 of the acts of 1945 or by regulations thereunder.

Approved August 9, 2006.


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