CHAPTER 254

FORMERLY

SENATE BILL NO. 255

AN ACT TO AMEND TITLES 5, 6, 8 AND 12 OF THE DELAWARE CODE RELATING TO THE DEFINITIONS, POWERS, SUPERVISION, REGULATION AND FIDUCIARY OBLIGATIONS OF BANKS AND OTHER FINANCIAL INSTITUTIONS

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Two-thirds of all members elected to each house thereof concurring therein):

Section 1. This Act may be referred to as the "Banking and Financial Services Amendments Act of 1998".

Section 2. Amend §101 of Title 5 of the Delaware Code by deleting the text of that section in its entirety and inserting in lieu thereof the following:

"For the purpose of this Code and any other laws of this State relating to banks or banking, unless otherwise specifically defined, or unless another intention clearly appears, or unless the context requires a different meaning:

(1) 'Affiliate' means a person that directly or indirectly through 1 or more intermediaries, controls or is controlled by or is under common control with, the person specified.

(0) 'Automated service branch' means an automated teller machine, cash dispensing machine or other electronic facility located in this State installed or operated by any bank, remote from its main office or any branch office, by which funds may be deposited into or withdrawn from established accounts, advances may be obtained against previously authorized lines of credit, transfers of funds between accounts may be made, loan and other payments may be made or cash may be received or dispensed.

(1) 'Bank' means every bank and every corporation conducting a banking business of any kind or plan whose principal place of business is in this State, except a national bank.

(2) 'Banking organization' means:

a. A bank or bank and trust company organized and existing under the laws of this State;

. A national bank, including a federal savings bank, with its principal office in this State;

a. An Edge Act corporation organized pursuant to § 25(a) of the Federal Reserve Act, 12 U.S.C. § 611 et seq., or a state chartered corporation exercising the powers granted thereunder pursuant to an agreement with the Board of Governors of the Federal Reserve System, and maintaining an office in this State;

b. A federal branch or agency licensed pursuant to § 4 and § 5 of the International Banking Act of 1978, 12 U.S.C. § 3101 et seq., to maintain an office in this State;

e. A foreign bank limited purpose branch or foreign bank agency organized pursuant to Chapter 14 of this title, or a resulting branch in this State of a foreign bank authorized pursuant to Chapter 14 of this title; or

f. A resulting branch in this State of an out-of-state bank (as defined in § 795 of this title, and also including branch offices in this State of an out-of-state bank, as defined in § 795 of this title).

(5) The terms 'borrowing,' 'deposit' and 'extension of credit' as they relate to the activities of international banking facilities shall have the meanings ascribed to them in pertinent regulations adopted by the Board of Governors of the Federal Reserve System, as such regulations may be amended from time to time.

(6) 'Capital stock' means both common stock and preferred stock.

(7) 'Commissioner' means the State Bank Commissioner.

(8) 'Control' means, directly or indirectly or acting through one or more other persons, to own, control or have the power to vote 25 percent or more of any class of voting securities, to control in any manner the election of a majority of the directors or trustees, or to exercise a controlling influence over the management or policies of a bank, trust company, other financial institution or any other company.

(9) 'Financial institution' means any bank, trust company or other institution either licensed under this title or subject to the supervision and regulation of the State Bank Commissioner.

(0) 'Foreign bank' means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such laws, of any such company. The term 'foreign bank' includes, without limitation, foreign commercial banks, foreign merchant banks and other foreign institutions that engage in banking activities usual in connection with the business of banking in the countries where such foreign companies are organized or operating.

(1) 'Foreign bank agency' means an office in this State of a foreign bank that is exercising the powers authorized by § 1404(a) of this title.

(2) 'Foreign bank limited purpose branch' means an office in this State of a foreign bank that is exercising the powers authorized by § 1404(b) of this title.

(3) 'Foreign country' means any country other than the United States, and includes any colony, dependency or possession of any such country.

(4) 'International banking facility' means a set of asset and liability accounts, segregated on the books and records of a banking organization, that includes only international banking facility deposits, borrowings and extensions of credit.

(15) 'International banking transaction' means any of the following
transactions, whether engaged in by a banking organization, any foreign branch thereof (established pursuant to § 771 of this title or federal law) or any subsidiary corporation directly or indirectly owned by any banking organization:

a. The financing of the exportation from, or the importation into, the United States or between jurisdictions abroad of tangible property or services;

. The financing of the production, preparation, storage or transportation of tangible personal property or services which are identifiable as being directly and solely for export from, or import into, the United States or between jurisdictions abroad;

c. The financing of contracts, projects or activities to be performed substantially abroad, except those transactions secured by a mortgage, deed of trust or other lien upon real property located in this State;

d. The receipt of deposits or borrowings or the extensions of credit by an international banking facility, except the loan or deposit of funds secured by mortgage, deed of trust or other lien upon real property located in this State;

. The underwriting, distributing and dealing in debt and equity securities outside of the United States and the conduct of any activities permissible to a banking organization described in subsection (4)c. of this section, or any of its subsidiaries, in connection with the transaction of banking or other financial operations; or

f. The entering into foreign exchange trading or hedging transactions in connection with the activities described in paragraphs a. through e. of this subdivision.

(16) 'National Bank' means a banking association organized under the authority of the United States and having a principal place of business in this State.

(0) 'Person' means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated association or any other form of entity not specifically listed herein.

(1) 'Representative office' means an office in this State of a foreign bank that is exercising the powers authorized by § 1423 of this title.

(2) 'Subsidiary' means any association, corporation, partnership, business trust or other similar organization, having offices and exercising its powers within or without the State, that is controlled by a bank, trust company, other financial institution or any other company through:

a. Direct or indirect ownership or control of 25 percent or more of the voting rights;

b. Control of the election of majority of the directors; or

c. The power, directly or indirectly, to exercise a controlling influence over the management or policies of the organization.

(20) 'Trust company' means a trust company or corporation doing a trust
company business which has a principal place of business in this State."

Section 3. Amend §108 of Title 5 of the Delaware Code by deleting the words "Deputy Commissioner or examiners" and inserting in lieu thereof the words and punctuation "Deputy Commissioners, examiners or compliance reviewers" after the words and punctuation "Commissioner," and before the word "employed" in the first sentence, by deleting the words "subject to supervision or regulation of the Commissioner" from the end of the first sentence, and by inserting between the existing second and third sentences thereof the following new sentence:

"For the purposes of this section, an entity shall not be considered supervised or regulated by the Office of the State Bank Commissioner solely because it is exempt under Section 2202 of this title or because it is subject to an escheat examination conducted by the Office of the State Bank Commissioner."

Section 4. Amend §121(a)(1) of Title 5 of the Delaware Code by deleting the words and punctuation "safe deposit companies," after the words and punctuation "trust companies," and before the words "building and loan associations".

Section 5. Amend §127(b) of Title 5 of the Delaware Code by deleting the number "3.5" and inserting in lieu thereof the number "5" after the word "exceed" and before the word "cents" in the fourth sentence thereof, beginning with the words "The assessment" and ending with the words and punctuation "total assets."

Section 6. Amend §724 of Title 5 of the Delaware Code by deleting the number "3" and inserting in lieu thereof the number "2" after the word "for" and before the words "successive weeks".

Section 7. Amend §725 of Title 5 of the Delaware Code by deleting the word "third" and inserting in lieu thereof the word "second" after the number and words "60 days after the" and before the word "publication", and by deleting the number and words "30 days from the date of the third publication" and inserting in lieu thereof the number and words "20 days from the date of the second publication" after the words "before the expiration of' and before the comma.

Section 8. Amend §767 of Title 5 of the Delaware Code by deleting existing subsection (e) thereof in its entirety, and by redesignating existing subsection (f) as new subsection (e).

Section 9. Amend §777(c) of Title 5 of the Delaware Code by deleting the words "needs and convenience" from the last sentence of that subsection and inserting in lieu thereof the words "convenience and needs".

Section 10. Amend §795(6) of Title 5 of the Delaware Code by deleting the reference therein to "§101(1)" and inserting in lieu thereof a reference to "§101".

Section 11. Amend §7951(b) by inserting the words and punctuation "a Delaware state bank," after the words "permissible for" and before the words "a bank chartered", and by deleting the words "except to the extent such activities are expressly prohibited by the laws of this State" and inserting in lieu thereof the words "or a branch office of any national bank located in the state where such branch office of the Delaware state bank is located".

Section 12. Amend §796 of Title 5 of the Delaware Code by deleting existing subsection (2) thereof and by redesignating existing subsections (3) and (4) as new subsections (2) and (3), respectively.

Section 13. Amend §905 of Title 5 of the Delaware Code by deleting the words "on forms fumished" and inserting in lieu thereof the words "according to the form which may be prescribed", and by inserting at the end of that section the following new sentence: "The Commissioner shall have power to call for special reports whenever in the Commissioner's judgment the same are necessary."

Section 14. Amend §1101(a) of Title 5 of the Delaware Code by deleting the reference to "§101(7)" in the first sentence of the last paragraph and inserting in lieu thereof a reference to "§101".

Section 15. Amend §1101(c) of Title 5 of the Delaware Code by deleting the reference therein to "§101(9)" and inserting in lieu thereof a reference to "§101".

Section 16. Amend §1101(d) of Title 5 of the Delaware Code by deleting the reference therein to "§101(9)" and inserting in lieu thereof a reference to "§101".

Section 17. Amend §1402(a) of Title 5 of the Delaware Code by inserting the words and punctuation ", except as otherwise provided in Subchapter III of this chapter," after the words "any part thereof" and before the words "unless such foreign bank".

Section 18. Delete existing subsection (c) of §1403 of Title 5 of the Delaware Code, and redesignate existing subsections (d), (e) and (f) of that section as new subsections (c), (d) and (e), respectively.

Section 19. Amend §1404 of Title 5 of the Delaware Code by adding thereto a new subsection (c), as follows:

"(c) No foreign bank holding a certificate of authority pursuant to this subchapter shall concurrently maintain in this State a federal branch or federal agency pursuant to the International Banking Act of 1978, as amended (12 U.S.C. §3101 et seq.)."

Section 20. Amend §1405 of Title 5 of the Delaware Code by adding to the title thereof the words and punctuation "; separate assets" after the word "State" and before the period, and by adding to the text of that section a new subsection (c), as follows:

"(c) Each foreign bank holding a certificate of authority pursuant to this subchapter shall keep the assets of its business in this State separate and apart from the assets of its business outside this State."

Section 21. Amend §1408 by inserting in the title thereof the words and punctuation transfer or assignment of certificate of authority" after the word "business" and before the period, by designating all of the existing text of that section as subsection "(a)" thereof, and by adding thereto a new subsection (b), as follows:

"(b) No certificate of authority issued by the Commissioner pursuant to this subchapter shall be transferable or assignable without approval by the Commissioner."

Section 22. Amend §1410(a) of Title 5 of the Delaware Code by deleting the words and punctuation ": (1) Is engaging in any activity not permitted by §1404 of this title; (2) is engaging in a manner of business activity constituting a violation of §1403(c) of this title; or (3)" and inserting in lieu thereof the words "is engaging in any activity not permitted by §1404 of this title or" after the word "subchapter" and before the words "is not in a safe and satisfactory condition".

Section 23. Amend Subchapter I of Chapter 14 of Title 5 of the Delaware Code by adding thereto a new §1416, as follows:

"§1416. Examinations, cooperative agreements, fees.

(a) The Commissioner may make such examination of any foreign bank limited purpose branch or foreign bank agency in this State as the Commissioner may deem necessary to determine compliance with the laws of this State and operation in a safe and sound manner. The provisions of this title shall apply to such examinations.

() The Commissioner, as a home state regulatory authority, may enter into cooperative agreements with the appropriate host state regulatory authorities for the periodic examination of and otherwise to facilitate a single point of contact with respect to any foreign bank limited purpose branch or foreign bank agency in this State and any such other entities operating in other United States jurisdictions. Additionally, the Commissioner, as a host state regulatory authority, may enter into cooperative agreements with the appropriate home state regulatory authorities for the periodic examination of and otherwise to facilitate a single point of contact with respect to any foreign bank limited purpose branch or foreign bank agency operating in this State, and may accept reports of examination and other records from a home state regulatory authority of such entities in lieu of conducting the Commissioner's own examination of such entities operating in this State. The Commissioner, as a home state or host state regulatory authority, may enter into joint actions, including with respect to asset maintenance, pledge of assets, separation of assets and liquidation, with other regulatory authorities with respect to foreign bank limited purpose branches or foreign bank agencies in this State, or may take such actions independently with notice to the appropriate home state or host state regulatory authorities to carry out the Commissioner's responsibilities to assure the safety and soundness of any such entity in this State and to assure compliance with applicable banking laws of this State. For purposes of this subsection, the term 'home state' in reference to a foreign bank has the meaning set forth in section 5(c) of the International Banking Act of 1978, as amended, at 12 U.S.C. §3103(c), and the term 'host state' means a State other than the home state.

(c) A foreign bank holding a certificate of authority pursuant to this subchapter may be assessed and, if assessed, shall pay supervisory and examination fees in accordance with the laws of this State and regulations of the Commissioner."

Section 24. Amend §1422(b) of Title 5 of the Delaware Code by deleting existing subparagraph (1) thereof in its entirety, and by redesignating existing subparagraphs (2), (3) and (4) as new subparagraphs (1), (2) and (3) thereof, respectively.

Section 25. Amend Subchapter II of Chapter 14 of Title 5 of the Delaware Code by adding thereto a new §1426, as follows:

"§1426. Applicability of other laws.

Every foreign bank holding a license pursuant to this subchapter shall be deemed and held to be subject to this title and any other law or laws of this State making provision for the regulation of banks and trust companies where the same are not inconsistent with the express provisions of this subchapter including, without limitation, §131 and §132 of this title and the provisions of Subchapter I of this chapter for the regulation of foreign banks operating foreign bank limited purpose branches and foreign bank agencies in this State."

Section 26. Amend Chapter 14 of Title 5 of the Delaware Code by adding at the end thereof a new Subchapter III, as follows:

"Subchapter III. Merger of Delaware Banks and Foreign Banks; Resulting Branch Offices of Foreign Banks

§1430. Scope.

This subchapter deals with the conditions under which Delaware banks may merge with or into foreign banks, and under which foreign banks may operate resulting branch offices in this State.

§1431. Definitions.

(a) 'Branch office', 'Delaware bank', 'Delaware state bank', 'existing Delaware bank', 'merger', 'merging bank', 'out-of-state bank' and 'resulting' shall have the meanings ascribed to them in §795 of this title.

() 'Home state' in reference to a foreign bank has the meaning set forth in section 5(c) of the International Banking Act of 1978, as amended, at 12 U.S.C. §3103(c).

(c) 'Out-of-state foreign bank' means a foreign bank whose home state is a state other than this State.

§1432. Authority for merger.

An existing Delaware bank may merge with or into an out-of-state foreign bank, and an out-of-state foreign bank may merge with or into a Delaware bank, in substantially the same manner and under substantially the same terms and conditions as an existing Delaware bank may merge with or into an out-of-state bank, or an out-of-state bank may merge with or into a Delaware bank, pursuant to Subchapter VII of Chapter 7 of this title.

§1433. Authority for interstate branch offices of out-of-state foreign banks.

(a) The place of business or main office and all branch offices of a merging existing Delaware bank may continue as resulting branch offices of the out-of-state foreign bank.

(b) An out-of-state foreign bank with resulting branch offices in this State may open additional branch offices in this State in such manner as the Commissioner shall prescribe by regulation.

(c) Nothing in this subchapter shall be deemed to permit interstate branching either through the original establishment of a branch office in this State by an out-of-state foreign bank or through acquisition of a branch office in this State by an out-of-state foreign bank, without merger with a Delaware bank as provided in this subchapter.

§1434. Powers.

An out-of-state foreign bank which establishes one or more branch offices in this State in accordance with this subchapter may conduct any activities at such branch office or offices that are authorized under the laws of this State for Delaware state banks or pursuant to the laws of the home state of such out-of-state foreign bank to the extent that such activities are permissible in this State for a branch office of an out-of-state national bank.

§1435. Authorized agency activities.

A resulting branch office in this State of an out-of-state foreign bank may exercise agency activities as provided in Subchapter VIII of Chapter 7 of this title.

§1436. Applicability of other laws.

Every foreign bank operating a resulting branch office in this State pursuant to this subchapter shall be deemed and held to be subject to this title and any other law or laws of this State making provision for the regulation of banks and trust companies where the same are not inconsistent with the express provisions of this subchapter including, without limitation, §131 and §132 of this title, the provisions of Subchapter VII of Chapter 7 of this title for the regulation of out-of-state banks operating resulting branch offices in this State, and the provisions of Subchapter I of this chapter for the regulation of foreign banks operating foreign bank limited purpose branches and foreign bank agencies in this State."

Section 27. Amend §1662(b) of Title 5 of the Delaware Code by deleting existing subparagraph (5) thereof in its entirety, and by redesignating existing subparagraph (6) as new subparagraph (5).

Section 28. Amend §2102(a)(1) of Title 5 of the Delaware Code by inserting the words and punctuation "out-of-state state or national bank," after the words and punctuation "banking organization," and before the words "state or federal savings bank".

Section 29. Amend §2901(4) of Title 5 of the Delaware Code by inserting the words and punctuation ", if any," after the words "finance charge" and before the words "shall together" in the last sentence thereof.

Section 30. Amend §2901 of Title 5 of the Delaware Code by redesignating existing subsection (13) as new subsection (14) thereof, and by inserting a new subsection (13), as follows:

"(13) 'Licensee' means a holder of a license issued by the State Bank Commissioner pursuant to this chapter."

Section 31. Amend §2902 of Title 5 of the Delaware Code by adding thereto a new subsection (g), as follows:

"(g) Upon written request, the Commissioner may in the Commissioner's discretion grant conditional approval for an acquired licensee to conduct its business under its existing license for a period not to exceed 60 days in cases where the control of the licensee changes and where a new application for licensure has been filed in accordance with this section."

Section 32. Amend §2911(b) of Title 5 of the Delaware Code by deleting the reference therein to "§2906 or 2907" and inserting in lieu thereof a reference to "§§2907, 2908 or 2909".

Section 33. Amend Chapter 29 of Title 5 of the Delaware Code by adding thereto a new §2914, as follows:

"§2914 Surety Bonds and Irrevocable Letters of Credit.

(a) Surety Bonds.

(1) Every licensee shall file with the Commissioner, in a form satisfactory to the Commissioner, an original corporate surety bond, with surety provided by a corporation authorized to transact business in this State, in the principal sum of $25,000.

(0) No bond shall be accepted unless the following requirements are satisfied:

(i) The term of the bond shall be commensurate with the license period or continuous;

() The expiration date of the bond shall not be earlier than midnight of the date on which the license expires; and

(iii) The bond shall run to the State, for the benefit of the Office of the State Bank Commissioner and for the benefit of all consumers injured by any wrongful act, omission, default, fraud or misrepresentation by a licensee in the course of its activity as a licensee. Compensation under the bond shall be for amounts which represent actual losses and shall not be payable for claims made by business creditors, third-party service providers, agents or persons otherwise in the employ of the licensee. Surety claims shall be paid to the Office of the State Bank Commissioner by the insurer not later than 90 days after receipt of a claim. Claims paid after 90 days shall be subject to daily interest at the legal rate. The aggregate liability of the surety on the bond, exclusive of any interest which accrues for payments made after 90 days, shall in no event exceed the amount of such bond.

(3) If the licensee changes its surety company or the bond is otherwise amended, the licensee shall immediately provide the Commissioner with the amended original copy of the surety bond. No cancellation of an existing bond by a surety shall be effective unless written notice of its intention to cancel is filed with the Commissioner at least thirty (30) days before the date upon which cancellation shall take effect.

(4) The Commissioner may require potential claimants to provide such documentation and affirmations as the Commissioner shall determine to be necessary and appropriate. In the event the Commissioner determines that multiple consumers have been injured by a licensee, the Commissioner shall cause a notice to be published for the purpose of identifying all relevant claims.

(0) When a surety company receives a claim against the bond of a licensee, it shall immediately notify the Commissioner and shall not pay any claim unless and until it receives notice to do so from the Commissioner.

(1) The Commissioner shall have a period of two calendar years after the effective date of cancellation or termination of the surety bond by the insurer to submit claims to the insurer.

(b) Irrevocable Letters of Credit.

In lieu of requiring the filing of a surety bond, the Commissioner may, at the Commissioner's discretion, accept from a licensee an irrevocable letter of credit.

(1) Such irrevocable letter of credit shall be provided by an insured depository institution (as defined in the Federal Deposit Insurance Act at 12 U.S.C. §1813(c)) acceptable to the Commissioner, in a form satisfactory to the Commissioner in the principal sum of $25,000.

(0) No irrevocable letter of credit shall be accepted unless the following requirements are satisfied:

(i) The irrevocable letter of credit shall run to the State, for the benefit of the Office of the State Bank Commissioner and for the benefit of all consumers injured by the wrongful act, omission, default, fraud or misrepresentation by a licensee in the course of its activity as a licensee. Compensation under the irrevocable letter of credit shall be for amounts which represent actual losses and shall not be payable for claims made by business creditors, third-party service providers, agents or persons otherwise in the employ of the licensee. The aggregate liability of the insured depository institution issuing the irrevocable letter of credit shall in no event exceed the amount of such irrevocable letter of credit; and

(ii) Draws upon such irrevocable letter of credit shall be available by sight drafts thereunder, in amounts determined by the Commissioner, up to the aggregate amount of the irrevocable letter of credit. Such drafts shall be paid in accordance with §5-112(1) of Title 6 of the Delaware Code.

(3) The Commissioner may require potential claimants to provide such documentation and affirmations as the Commissioner shall determine to be necessary and appropriate. In the event the Commissioner determines that multiple consumers have been injured by a licensee, the Commissioner shall cause a notice to be published for the purpose of identifying all relevant claims.

(4) The Commissioner may refuse release of an irrevocable letter of credit, following the surrender of a license, up to two (2) years after the effective date of such termination of licensure."

Section 34. Delete §2303 of Title 6 of the Delaware Code.

Section 35. Amend §379(a) of Title 8 of the Delaware Code by inserting the words and number "or in Chapter 14" after the words and numbers "except as otherwise provided in subchapter VII of Chapter 7" and before the words and number "of Title 5."

Section 36. Amend §3573 of Title 12 of the Delaware Code by deleting existing subsection (2) thereof in its entirety and by redesignating existing subsection (3) thereof as new subsection (2).

Section 37. Section 36 of this Act shall apply to trust instruments becoming irrevocable on or after July 9, 1997.

Section 38. If any provision of this Act or the application of any section or part thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Act that can be given effect without the invalid provision or application.

Section 39. The sections, other than section 36, of this Act shall be effective upon its enactment into law.

Approved March 30, 1998