HB 648-FN - AS INTRODUCED

 

 

2023 SESSION

23-0584

08/05

 

HOUSE BILL 648-FN

 

AN ACT relative to establishing a state bank of New Hampshire.

 

SPONSORS: Rep. Gerhard, Merr. 25

 

COMMITTEE: Commerce and Consumer Affairs

 

─────────────────────────────────────────────────────────────────

 

ANALYSIS

 

This bill establishes a state bank of New Hampshire.

 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

 

Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

23-0584

08/05

 

STATE OF NEW HAMPSHIRE

 

In the Year of Our Lord Two Thousand Twenty Three

 

AN ACT relative to establishing a state bank of New Hampshire.

 

Be it Enacted by the Senate and House of Representatives in General Court convened:

 

1  New Chapter; State Bank of New Hampshire.  Amend RSA by inserting after chapter 389-A the following new chapter:

CHAPTER 389-B

STATE BANK OF NEW HAMPSHIRE

389-B:1 Definitions. In this chapter:

I. “Advisory committee” means the state bank of New Hampshire advisory committee established in RSA 389-B:4.

II. “Bank” means the state bank of New Hampshire established under this chapter.

III. “Board” means the board of directors for the state bank of New Hampshire established in RSA 389-B:2.

IV. “Public funds” means funds under the control or in the custody of a public official by virtue of office.

389-B:2 Board; Duties and Powers.

I. The board of directors for the state bank of New Hampshire is established and shall consist of 5 voting members appointed by the governor, subject to approval by the general court. The state treasurer and the banking commissioner shall serve as ex officio nonvoting members of the board. The board shall oversee the operation, management, and control of the bank in accordance with this chapter. The board shall designate one of its members as chair and shall determine the location of the bank and maintain places of business of the bank.

II. The board shall establish the frequency of regular board meetings in bylaws and public notice requirements for meetings through rulemaking under RSA 389-B:7. A special meeting may be called at any time upon notice by the governor, or by 3 members of the board. Three voting members constitute a quorum and may transact business and exercise all rights, duties, and powers of the board.

III. The board shall appoint a person with extensive experience in banking as the president of the bank. The board may appoint and employ any subordinate officers, employees, and agents that the board considers necessary and shall define the duties, designate the titles, and fix the compensation of those positions.

IV. The board may designate the president or another officer or employee as its agent with respect to the functions of the bank, subject to the supervision, limitation, and control of the board. The board may remove and discharge any person appointed and employed under this chapter.

V. Board members serve without compensation, except that members may be reimbursed for travel expenses associated with their duties under this chapter.

389-B:3 Advisory Committee.

I. The board shall appoint the state bank of New Hampshire advisory committee to actively enlist the help of private enterprise and encourage use of the bank. The advisory committee shall consist of 7 members and shall include representatives of the state’s financial, business, agricultural, and labor sectors and at least 2 officers of state-chartered financial institutions that do not maintain offices outside the state.

II. The board shall appoint a chair, vice-chair, and secretary for the advisory committee from the members of the advisory committee.

III. Advisory committee members shall serve a term of office of 4 years, except as provided by law for initial appointments. Initial appointments for the state bank of New Hampshire advisory committee shall be for staggered terms. The first 2 members shall be appointed for one-year terms, the second 2 members shall be appointed for 2-year terms, the third 2 members shall be appointed for 3-year terms, and the remaining members shall be appointed for 4-year terms.

IV. The advisory committee shall:

(a) Meet regularly with the board to review and make recommendations concerning the bank’s operations, finances, and loan practices;

(b) Make recommendations to the board for improving management performance, customer service, and internal methods, procedures, and operating policies of the bank;

(c) Make recommendations to the board relating to the establishment of additional objectives for the operation of the bank;

(d) Make recommendations to the board concerning the appointment of officers of the bank; and

(e) Participate on loan committees.

V. Advisory committee members serve without compensation except that members may be reimbursed for travel expenses associated with their duties under this chapter.

389-B:4 Deposit of Funds.

I. The bank may accept deposits of public funds. Except as provided in RSA 389-B:5, the bank may not accept deposits of private funds. All income earned by the bank on public funds shall be credited to and shall become a part of the revenues and income of the bank.

II. The bank shall pay interest on public deposits at a rate comparable to rates paid by private depositories of public funds and may offer other financial products to the state treasurer on a competitive basis.

III. Funds may also be appropriated from the general fund to allow the bank to fulfill its duties under this chapter.

389-B:5 Powers of the Bank.

I. The bank may:

(a) Make, purchase, guarantee, modify, or hold loans:

(1) To state-chartered financial institutions;

(2) That are insured or guaranteed in whole or in part by the United States or its agencies or instrumentalities;

(3) Obtained as security pledged for, or originated in the restructuring of, any other loan properly originated or participated in by the bank; and

(4) To instrumentalities of this state; and

(b) Purchase, guarantee, modify, or hold loans originated by financial institutions authorized to do business in this state.

(c)  Purchase participation interests in loans made or held by banks, bank holding companies, state-chartered or federally chartered financial institutions, any other financial institutions, or any other entity that provides financial services and that meets underwriting standards that are generally accepted by state or federal financial regulatory agencies; and

(d)  Make loans in the form of participation loans to qualified persons residing in or doing business in this state when the originator of the loan is a private financial institution.

II.  The bank shall not make loans to any private individual or legal entity.

III.  The bank shall invest its funds in conformity with policies of the board and the investment standards in RSA 6:8, RSA 387:6, RSA 387:6-a, and RSA 387:14.

IV.  The bank may buy and sell federal bonds.

V.  The bank may lease, assign, sell, exchange, transfer, convey, grant, pledge, or mortgage all real and personal property, title to which has been acquired in any manner.

VI.  The bank may:

(a)  Act as a custodian bank for financial institutions authorized to do business in this state and accept deposits from the financial institutions in connection with this function;

(b)  Issue bank stock loans to financial institutions authorized to do business in this state; and

(c)  For financial institutions that make the bank a reserve depository, perform the functions and render the services of a clearinghouse, including all functions for providing domestic and foreign exchange, and rediscount notes, on terms prescribed by the board.

VII.  The bank may perform all acts and do all things necessary, convenient, advisable, or desirable to carry out the powers expressly granted or necessarily implied in this chapter through or by means of its president, officers, agents, or employees or by contracts with any person, firm, or corporation.

389-B:6  Transfer to General Fund.  As soon as possible after the end of each calendar year, the board shall determine the amount of income, if any, earned by the bank in that prior calendar year that is in excess of amounts necessary to pay for expenses of administering the activities of the bank less any reserves required pursuant to rules adopted in accordance with RSA 389-B:7, for delinquencies and future business and payment of debts from any initial funding.  The amount of the excess shall be transferred to the general fund.

389-B:7  Rulemaking.  The board shall adopt rules pursuant to RSA 541-A, relative to banking policies and procedures including:

I.  Ensuring the safety and soundness of the bank that, to the extent possible, reflect applicable standards for safety and soundness set forth in part 34 of title 12 of the Code of Federal Regulations.

II.  Specifying the bank’s powers and permissible investments and activities consistent with RSA 389-B:5;

III.  Specifying services that the bank may provide;

IV.  Specifying limits for loans and other obligations the bank makes or undertakes;

V.  Specifying reserve requirements; and

VI.  Setting other requirements that the board considers necessary to administer the bank under this chapter and to accomplish the purposes listed in RSA 389-B:1.

389-B:8  Examination and Report.  The banking department shall examine the bank at least once each calendar quarter to verify and ensure that the bank is complying with the rules adopted under RSA 389-B:7.  The banking department shall report the results of the examination to the board and to the banking commissioner.  The bureau’s report shall be a public record subject to disclosure.

389-B:9  Audit.  The audit division of the legislative budget assistant shall audit the accounts and financial affairs of the bank at least once every 2 years.

389-B:10  Annual Report; Performance Measures.  Beginning July 1, 2024 and annually thereafter, the bank shall report to the governor and the legislature on the financial condition and performance of the bank and provide an analysis of the bank’s impact on the state consistent with the bank’s purposes set forth in RSA 389-B:1, particularly the bank’s impact on job creation and economic development.

389-B:11  Exempt from Liability.  Whenever any public funds are deposited in the bank, the public official who deposited the funds and the sureties on any bond of the public official shall be exempt from liability for loss of any of the funds while the funds are deposited in the bank.

389-B:12  Use of Name; Execution of Instruments.

I.  All business of the bank shall be conducted under the name of the state bank of New Hampshire.  Title to property pertaining to the operation of the bank shall be obtained and conveyed in the name of the state bank of New Hampshire.

II.  Instruments shall be executed in the name of the state.  Within the scope of authority granted by the board, the president of the bank may execute instruments on behalf of the bank, including any instrument granting, conveying, or otherwise affecting any interest in or lien upon real or personal property.

III.  Officers or employees of and legal counsel to the bank may execute instruments on behalf of the bank when authorized by the board.

2  State Treasurer and Bank Commissioner to Make Recommendations.  No later than January 15, 2023, the state treasurer and the bank commissioner, in consultation with the attorney general, shall submit a report to the house and senate finance committees with recommendations for implementing the state bank of New Hampshire.  The report shall include:

(a)  A draft of any legislation needed to amend the New Hampshire constitution to authorize the state to establish the bank;

(b)  A recommendation on the amount of money needed to adequately capitalize the bank;

(c)  A draft of any legislation needed to transfer funds to the bank;

(d)  A description and draft of statutory changes needed to fully utilize the resources and powers of the bank and to eliminate any duplication of efforts or conflict with the authority or responsibilities of the New Hampshire municipal bond bank and any other state agencies;

(e)  Recommendations for guaranteeing funds deposited in the bank;

(f)  Recommendations pertaining to the liability of the state and the bank in civil actions; and

(g)  Recommendations regarding the confidentiality of certain records held by the bank.

3  Effective Date.  This act shall take effect upon its passage.

 

LBA

23-0584

Revised 1/26/23

 

HB 648-FN- FISCAL NOTE

AS INTRODUCED

 

AN ACT relative to establishing a state bank of New Hampshire.

 

FISCAL IMPACT:      [ X ] State              [ X ] County               [ X ] Local              [    ] None

 

 

 

Estimated Increase / (Decrease)

STATE:

FY 2023

FY 2024

FY 2025

FY 2026

   Appropriation

$0

$0

$0

$0

   Revenue

$0

Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

   Expenditures

$0

Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

Funding Source:

  [ X ] General            [    ] Education            [    ] Highway           [ X ] Other - Banking Department Assessments

 

 

 

 

 

METHODOLOGY:

This bill establishes a State Bank of New Hampshire (State Bank).  The Department of Justice indicates the bill requires that, no later than January 15, 2023 (note this date has already passed), the State Treasurer and the Commissioner of the Banking Department, in consultation with the Department of Justice, shall submit a report to the house and state finance committees with recommendations for implementation of the Bank.  

 

The Department of Justice assumes that it would need to hire a full time attorney, with the requisite experience, on a contract basis to assist the Banking Commissioner and the State Treasurer with developing the required recommendations and the report to the legislature.  The Department estimates the cost would be between $147,000 and $150,000.  After the State Bank is established, the Department assumes that the State Bank would hire its own in-house legal counsel and the Department  would not be involved in providing advice or representing the State Bank in the event of a lawsuit.  Assuming contract attorney work on the state banking project would begin in FY 2024, the fiscal impact to the Department of Justice for State Fiscal Year 2024 would be approximately $150,000.

 

The State Treasury indicates the sources of funds for the State Bank will come from interest earned on deposits of public funds, and from appropriations from the State’s general fund, if necessary, to allow the State Bank to fulfill its responsibilities.  No private deposits are to be accepted by the State Bank.  The State Bank may conduct banking and financing activities as permitted by the chapter but not with private individuals. The bill provides for the annual transfer of  excess funds, after covering the necessary expenses to administer the State Bank’s functions and responsibilities amounts necessary to pay for expenses of administering the activities of the State Bank less any required reserves, to the State’s general fund.  The bill sets a January 15, 2023 deadline for the State Treasurer and Bank Commissioner, working in concert with the Attorney General, to determine among other things “the amount of money needed to adequately capitalize the bank”.  (It is assumed this should read: January 15, 2024)

 

The bill does not specify where the general fund appropriation necessary to fund the State Bank operations will be housed, however the State Treasury assumes a sum will be appropriated directly to the State Bank and as a result, there would be no impact on the revenues and expenditures budgeted by the State Treasury.  

 

The Banking Department makes the following assumptions concerning the fiscal impact of the bill:

  • The Department would charge the proposed State Bank an assessment as it does all state-chartered banks that it examines.  The amount of the assessment charged to each state-chartered bank is determined in accordance with state law and is based on each bank’s assets proportionally. Therefore, the amount of assessment charged to the proposed State Bank is indeterminable until such time as pro forma financial reports are generated.
  • The Department will bill the State Bank for the quarterly examinations conducted pursuant to the proposed RSA 389-B:8.
  • Each quarterly examination required by law will take 5 days of examiner time; however, if issues of concern are discovered during the examinations, more time may be required.
  • Because proposed RSA 389-B:9 would require the Legislative Budget Assistant to conduct full financial and accounting examinations at least once every two years, the Department assumes that the quarterly examinations contemplated by the proposed RSA 389-B:8 are not the complete safety and soundness examinations that would typically be conducted by the Department on state-chartered banks and credit unions in accordance with current RSA 383:9-d.  Instead, the Department assumes it is required only to review the State Bank’s compliance with administrative rules adopted pursuant to the proposed RSA 389-B:7.  Complete safety and soundness examinations conducted by the Department in accordance with RSA 383:9-d can take up to 65 days each, depending on the complexity and the number of issues identified during the examination.
  • If this bill is intended to require the Department to conduct complete safety and soundness examinations on a quarterly basis, the fiscal impact would be significantly higher, and would require at least one additional Financial Examiner position to complete.  The Department assumes examiner would increase by 4% annually fees due to inflation.

 

Based on these assumptions, the Banking Department anticipates the following fiscal impacts in each fiscal year:

FY 2023

Additional examiner and legal staff time will be used to provide the recommendations and prepare the report contemplated in section 2 of the bill.

 

FY 2024  

Assuming the State Bank is now formed, Commissioner time will be spent serving as an ex officio nonvoting member of the board of directors pursuant to proposed RSA 389-B:2. The Department will conduct 4 examinations, estimated at 5 examiner days per exam, for a yearly total of 20 examiner days.  The estimated daily exam rate will be $992 (20 x $992 = $19,840 annually).

 

FY 2025

Commissioner time will be spent serving as ex officio nonvoting member of the board of directors. The Department will conduct 4 examinations, estimated at 5 examiner days per exam, for a yearly total of 20 examiner days.  The estimated daily exam rate will be $1,031.85, after accounting for 4% inflation. (20 x $1,032 = $20,640 annually)

 

FY 2026

Commissioner time will be spent serving as ex officio nonvoting member of the board of directors. The Department will conduct 4 examinations, estimated at 5 examiner days per exam, for a yearly total of 20 examiner days.  The estimated daily exam rate will be $1,073, after accounting for 4% inflation.  (20 x $1,073 = $21,460 annually)

The Banking Department is self-funded and, as such, the Department’s costs and expenses, including personnel costs, are paid by the fees, fines, and assessments charged and collected from licensed and chartered entities.

 

The Legislative Budget Assistant would complete the required audit every two years with no additional appropriation.  Adding this audit requirement may result in the scheduling of audits of other state agencies being delayed.

 

No fiscal impact at the local and county level is anticipated.

 

It is assumed that any fiscal impact would occur after FY 2023.

 

AGENCIES CONTACTED:

Departments of Banking, Justice and the State Treasury