The Massachusetts Bankers Association has one overriding goal directing its legislative agenda for the coming year: ensuring that the state’s banks remain competitive in a future no one can accurately predict.
According to Kevin F. Kiley, executive vice president and chief operating officer of the MBA, the association isn’t filing its own bills in many instances, choosing instead to back legislators and the commissioner of banking in bills they are filing.
“I think that 2001 will be a year in which we will look at a number of major reforms and recodification of the banking laws,” said Kiley in reference to a sweeping reform bill filed by Sen. Andrea F. Nuciforo Jr., D-Pittsfield.
The senator’s bill “streamlines the mortgage lending and investment statutes and the operation of several other key provisions of the banking laws,” said Kiley. “I think the effort will be enhancing and maintaining a competitive balance for state-chartered banks here in Massachusetts. We’re excited about working with the banking committee in trying to focus attention on ways that we can create efficiencies and maintain a vibrant dual banking system.”
As first reported by Banker & Tradesman in October, Nuciforo’s bill would modernize banking practices in the state by addressing concerns over Community Reinvestment Act compliance requirements for Internet banks, mandating that all banks offer “basic bank accounts” and removing the power of the commissioner to forbid a bank from moving its main office. The bill also would ensure that state-chartered banks are granted the same allowances as federally chartered banks under the Gramm-Leach Bliley Act and implement a near total recodification of mortgage laws.
In addition to re-filing and endorsing a number of bills that failed to make it through last year, the MBA has five bills it hopes to follow to fruition in the upcoming legislative session, which begins immediately following the advent of the new year.
A new petition relating to the ability of local banks to offer new products would create “a so-called super-wildcard-powers law for state-chartered banks allowing a bank to offer any product or service that is at the same time authorized for national and federal banks,” according to a draft of the MBA’s 2001 legislative agenda.
The bill, sponsored by Rep. Robert Nyman, D-Hanover, is modeled after a law adopted in another state, said Kiley. “It was adopted in Illinois and Kentucky. Basically, what it tries to do is provide the latitude for the commissioner of banks and for the industry to continue to have flexibility as we move forward in a world with expanded financial services, particularly in light of the ability of non-banking entities, specifically, to offer a range of products and service without the same restraints or limitations that a state-chartered institution might have,” he said.
No specific event precipitated the creation of the bill, said Kiley. Instead, the bill is being filed in anticipation of continued expansion of the financial services market.
“What we’re trying to do is to put it in the mix right now so as financial services, particularly in the future, evolves, there’s greater flexibility to adapt to the changes occurring in the marketplace,” said Kiley.
Level of Uniformity
Another new filing would modernize the Massachusetts electronic banking law to make it parallel with the Federal Reserve’s Regulation E. The bill is sponsored by Rep. Peter Koutoujian, D-Newton.
“Massachusetts banks have a standard separate and distinct from other banks in other parts of the country, so we’re trying to provide for some level of uniformity and consistency there,” said Kiley.
Some of the differences the MBA wants changed include antiquated provisions on the commonwealth’s books. The state requires that any person with a joint account who wishes to expand it into an electronic account must gain separate approvals from each of the joint account holders, according to David Floreen, senior vice president of the MBA. “I won’t go into the reasons why it was put there 20 years ago, but suffice it to say it’s the only state that has it that we’re aware of. It’s creating all kinds of confusion when you open up an account … it’s a trap for the unwary,” said Floreen.
Even language as mundane as “calendar day” is garnering attention. “Banks have so many days to investigate and/or correct [problems] and the state uses calendar days. Reg. E calls for business days,” said Floreen. When a bank uses calendar days and there are holidays, it lessens the time the bank has to react. “It’s not that we want to take anything away, it’s just that when so many banks operate interstate these days, you’ve got different systems and different time periods and slightly different language. It’s just getting to be a real problem in terms of places to get caught up,” he said.
Another bill, sponsored by Rep. James E. Vallee, D-Franklin, seeks, in part, to increase lending limits to officers and directors of state-chartered banks.
Current limits for insider loans to directors and officers of a financial institution are $20,000 for secured or unsecured loans for unspecified purposes, $75,000 for college education loans and $275,000 for residential mortgage loans.
“What the bill proposes to do is to increase from $20,000 to $35,000 for the personal loan, [up to] $150,000 on the college and $500,000 on the real estate. The law was last changed in 1990 … All of that is recognizing all the changes in the prices of various types of things in the marketplace … it’s consistent for all three industries,” he said. While it’s perfectly clear the costs of college and residences have risen dramatically, Kiley explained the personal loan amount must also increase and gave the example of recent car prices rising.
In addition, there are 10 petitions that have been re-filed which the MBA supports. They include a bill by Rep. Robert Koczera, D-New Bedford, which would limit employer liability for disclosing information about a former employee to a prospective employer under certain conditions.
A bill to clarify the provisions regarding the statute of frauds to provide explicitly that certain contracts over $50,000 are invalid unless they are in writing has been filed by Rep. David Donnelly, D-West Roxbury.
Lowell Democratic Rep. Thomas Golden’s bill is also being supported by the MBA. The measure establishes uniform standards for state agencies, boards and departments to deposit funds under their control in savings and cooperative banks.
A filing that would change the method of reporting and paying fiduciary income to model the federal system is being sponsored by Rep. Nancy Flavin, D-Easthampton. It would transfer income tax liability from trustee to Massachusetts resident beneficiaries of irrevocable trusts.
A bill filed by Rep. Kevin Honan, D-Brighton, would clarify the statue of limitations with respect to a bank’s obligation on record retention for certificates of deposits and asks that the non-return of a 1099 INT form constitute activity in a deposit account.
Lynn Democratic Sen. Edward Clancy’s bill would provide additional protection to and authority for fiduciaries to protect themselves when reviewing and accepting real estate to fund a trust.
Floreen said the overall tone of the MBA’s legislative agenda for the upcoming session is to modernize the laws and ensure that Massachusetts keeps up with the benefits reaped on a federal level by the Gramm-Leach Bliley Financial Modernization Act.
