AN ACT In relation to Banks, Savings Societies, and Trust Companies, and regulating the conduct of their business, and prescribing certain powers and duties for the State Bank Commissioner.
Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:
Section 1. The terms "bank" and "banks" as used in this Act shall be deemed to comprehend every bank and every corporation conducting a banking business of any kind or plan (except banking associations organized under the authority of the United States and commonly known as National Banks) whose principal place of business is in this State; and the terms "National Bank" and "National Banks" as used in this Act shall be deemed to comprehend banking associations organized under the authority of the United States and having a principal place of business in this State; and the terms "trust company" and "trust companies" as used in this Act shall be deemed to comprehend every trust company and every corporation doing a trust company business having a principal place of business in this State.
Section 2. It shall be unlawful to conduct a banking business or the business of a trust company within this State except under a corporate charter valid in this State authorizing the conduct of such business in this State.
Section 3. No bank or trust company not actively engaged in business in this State at the time of the adoption of this Act shall open a place of business in this State without having first secured from the State Bank Commissioner a certificate that it has complied with all the requirements of law and that it is authorized to conduct the business specified therein.
The said Commissioner shall not give any certificate as aforesaid until satisfied by proper evidence that all the requirements of the charter of the corporation applying for such certificate and all the requirements of the laws of this State applicable to such a case have been complied with. Such certificate shall specify the amount of capital actually paid in at the time of the issuance of the certificate.
No certificate shall be issued until the corporation has filed with the Commissioner a duly certified copy of its charter and all amendments thereof, and a copy of its by-laws; and thereafter it shall be the duty of such corporation to file with the Commissioner a duly certified copy of every subsequent amendment of its charter and of every subsequent amendment of its by-laws and a failure to perform such duty within thirty days after any such amendment of its charter or by-laws has been effected, shall render the corporation liable to a penalty of Fifty Dollars to be sued for by the Commissioner in the name of the State of Delaware if he shall consider such failure to have been willful.
A fee of Fifty Dollars for every such certificate shall be required by the Commissioner before issuing the same.
Section 4. No bank or trust company shall open any branch office or place of business in this State unless authorized so to do by the certificate of the State Bank Commissioner. No such certificate shall be issued by the said Commissioner, unless satisfied that the applicant has a paid in capital stock to an amount equivalent to at least twenty-five thousand dollars for each office or place of business then established by said corporation in this State and for the branch sought to be established, and a surplus to an amount equivalent to at least twenty-five thousand dollars for each office or place of business then established by said corporation.
A fee of fifty dollars for every such certificate shall be required by the Commissioner before issuing the same.
Nothing in this section contained shall be deemed to confer on any corporation the power to establish branches not expressly authorized by its charter.
Section 5. Every bank and trust company, shall be subject to the supervision and examination of the State Bank Commissioner, and shall be examined by the said Commissioner at least once in each year, and oftener if the Commissioner shall deem it necessary.
On the occasion of every such examination, the said Commissioner shall in company with one or more of the officers of the corporation visited be given access to every part of the office or place of business visited and to the assets, securities, books and papers of the said corporation.
The examination made by the Commissioner as aforesaid shall be a thorough examination into the affairs of the bank, or trust company visited, its resources and liabilities, the investment of its funds, the mode of conducting its business, and safety and prudence of its management, the acts of its officers, directors, trustees, or managers and its compliance or non-compliance with the provisions of its charter and by-laws and of the statutes of the State of Delaware; and, in connection with such examination, the said Commissioner shall have power to examine, under oath or affirmation, the officers, directors, trustees, or managers, and the employees, of the corporation, relative to its affairs, and, for this purpose, he is hereby authorized to administer oaths or affirmations.
Provided, however, that a bank or trust company which may be a member of the Federal Reserve Bank in the Federal Reserve District embracing the State of Delaware, and which shall be examined by a Federal Reserve Examiner, may be exempted from examination by the said State Bank Commissioner; and the examination by such Federal Reserve Examiner may be accepted by the said Commissioner as a sufficient compliance with the requirements of this Act with respect to examinations ; and a bank or trust company, whether a member of the Federal Reserve Bank or not, which shall be examined by a Certified Public Accountant, may, in like manner, be exempted from examination by the said Commissioner, and an examination by such Certified Public Accountant may be accepted by the said Commissioner as a sufficient compliance with the requirements of this Act with respect to examinations; provided, that, in every case, a certified report of the examination made by a Federal Reserve Examiner; or by a Certified Public Accountant, shall be filed in the office of the said Commissioner.
Any examination as aforesaid may be made by the deputy or the clerk of the State Bank Commissioner or by any persons designated by the Commissioner, and in such case all the powers vested in the said Commissioner by this section shall be deemed to be possessed by the deputy, clerk or other persons making such examination ; provided that when any examination is made without the presence of the Commissioner, he shall give written authority to the person conducting such examination which shall be exhibited to the officers of the bank or trust company visited.
In the case of a National Bank having a trust department in this State such trust department shall be subject to the examination as aforesaid.
That the said State Bank Commissioner shall charge each corporation examined by him, or by his direction, and such corporation shall pay to the said Commissioner, twenty-five dollars on the first twenty-five thousand dollars of its assets, or fraction thereof, and two cents on each one thousand dollars of its assets over twenty-five thousand dollars, for each examination made by said Commissioner, and an additional charge of twenty dollars for the examination of each branch office maintained by such corporation, such charges to be accounted for by said Commissioner as part of the receipts of his office.
Section 6. If the State Bank Commissioner shall, upon examination, have reason to believe that the capital of the bank or trust company examined has, in any way, been impaired, he may require such corporation to make good the deficiency, within sixty days from the date upon which he serves notice to that effect. If said corporation shall fail to comply with said notice within the time prescribed, the said Commissioner may forthwith take possession of the place of business of such corporation, and retain such possession until such corporation shall have made good the deficiency, or has been finally liquidated; or a Receiver shall have been appointed to take charge of its business and affairs. The said Commissioner may cause proceedings to be instituted against such corporation, and it shall be the duty of the Attorney General, upon the request of the Commissioner, to institute such proceedings as the nature of the case may require.
Section 7. Every bank and trust company shall make and transmit to the State Bank Commissioner at least four reports during each year, according to the form which may be prescribed by him, verified by the oaths or affirmations of the president or vice-president, and cashier, or treasurer or secretary of such corporation, and attested by the signatures of at least three directors. Every such report shall exhibit under appropriate heads the resources and liabilities of the corporation at the close of business on any day past specified by the Commissioner, and shall be transmitted to the Commissioner within ten days after the receipt of a request or requisition therefor from him. An abstract or summary of the report in such form as shall be prescribed by the Commissioner shall be published by the corporation at its own expense, within two weeks from the date of its transmission to the Commissioner, in one issue of a newspaper published in the town or city where such corporation has a place of business in this State, or if there be no newspaper published there, then in one published nearest thereto in the same county. Proof of such publication shall be furnished by the corporation as required by the Commissioner. The Commissioner shall also have power to call for special reports whenever in his judgment the same are necessary.
The Commissioner may require a separate report as to each department conducted by any bank or trust company.
Every bank or trust company failing to comply with this section shall be subject to a penalty of twenty-five dollars for each day that it shall continue in such failure; which penalty shall be sued for by the Commissioner in the name of the State of Delaware unless he shall be satisfied that such failure was not willful.
National Banks doing business in this State shall make and transmit to the State Bank Commissioner reports on forms furnished by the Commissioner when he shall call upon such banks for such reports; the object and purpose of such reports being the public good and not the regulation of said banks.
The making of reports to the State Bank Commissioner under this section shall be deemed and taken to be in lieu of the making of reports to any other State official except for the purpose of assessment or taxation.
Section 8. Every director, officer, agent, clerk or employee of any corporation affected by the provisions of Sections 5 and 6 of this Act, who willfully and knowingly subscribes or makes any false statement of facts or false entries in the books of such corporation, or knowingly subscribes or exhibits any false paper, with intent to deceive any person authorized to examine as to the condition of such corporation, or willfully or knowingly subscribes to or makes any false report, shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine or imprisonment, or both, in the discretion of the Court.
Section 9. If the State Bank Commissioner shall deem that the affairs of any bank or trust company are in an unsound condition because of illegal or unsafe investments, or that its liabilities exceed its assets, or that it is transacting business without authority or in violation of law, or that it is unsafe or inexpedient for such corporation to continue business, he shall communicate the facts to the Attorney General whose duty it shall be to file in the Court of Chancery in any County where the said corporation is doing business a bill or petition setting forth the facts and applying for an order requiring such corporation to show cause why its business should not be closed. In a proper case made, the Chancellor shall have power to appoint a Receiver to take charge of, settle and close up the affairs of such corporation under the direction of the said Court, and to enjoin it from doing business, or to make such other order or decree as the circumstances shall warrant and to the Court shall seem proper. The Chancellor is hereby empowered to make such rules and regulations, and such orders and decrees in the premises as he shall deem proper.
If the State Bank Commissioner shall for any of the reasons specified in this section think it necessary for the protection of the depositors, or of the stockholders, or of the public, so to do, he may take possession forthwith of the place of business of any bank or trust company and retain such possession until an order of Court be made in the premises.
Section 10. Every bank and trust company (except savings banks and savings societies) shall at all times have on hand a reserve fund equal to at least ten per centum of' the aggregate of such of its deposits as are payable on demand. The whole of such reserve found may, and at least one-third thereof must, consist either of lawful money of the United States, gold certificates, silver certificates, or notes and bills issued by any lawfully organized national banking association, or Federal Reserve Bank notes; and if less than the whole of the reserve fund shall be made up of the money and securities aforesaid, then the residue thereof must consist of money on deposit subject to call in any bank or trust company in this State having a capital of at least fifty thousand dollars and a surplus of at least fifty thousand dollars and approved by the State Bank Commissioner, or in any bank or trust company, or with any individual banker or firm of bankers, approved by the said State Bank Commissioner, doing business either in the City of Philadelphia, the City of New York, or the City of Baltimore.
The amount to be kept on hand, as provided in this section, shall be called the lawful money reserve.
Every savings bank and savings society in this State, and every bank and trust company in this State conducting a savings department or receiving money on deposit on the condition or with the understanding that the depositor shall not demand or withdraw any money on account of such deposit except after notice given previous to such demand or .withdrawal, shall at all times have on hand a reserve fund equal (a) to at least five per centum of its aggregate deposits, if it be a savings bank or savings society, or (b) to at least five per centum of the aggregate of such of its deposits as were received by it on the condition or with the understanding that the depositor should not demand or withdraw any of his deposit except after notice given previous to such demand or withdrawal, if it be a bank or trust company receiving deposits on such condition or with such understanding; provided that both the lawful money reserve against deposits received on the condition or with the understanding that notice shall be given before demand or withdrawal as aforesaid, and also the lawful money reserve against deposits payable on demand must be maintained by every corporation receiving both classes of deposits, provided that the maximum cash reserve required for Mutual Savings Societies shall not be more than Four Hundred Thousand Dollars ($400,000). The whole of such reserve fund may consist of money on deposit subject to call in any of the depositories hereinbefore specified with regard to the deposit of money reserves, or a part of such fund may consist of money so deposited, and the balance thereof shall then consist either of lawful money of the United States, gold certificates, silver certificates, or notes and bills issued by any lawfully organized national banking association, or Federal Reserve Bank notes.
No money received in a fiduciary character, whether as executor, administrator, guardian or trustee shall be carried or counted as a part of the lawful money reserve.
The State Bank Commissioner may upon application by any bank, trust company, or savings bank or savings society, if he shall deem it advisable so to do give such applicant written permission to make up one-half of its lawful money reserve in bonds or other obligations of the United States owned absolutely by such applicant and unhypothecated and unpledged, counting such bonds or other obligations at ninety per centum of their market value.
If the reserve of any corporation comprehended by this section shall be less than the lawful money reserve prescribed by this section, such corporation shall not make any new loans or discounts, otherwise than by discounting bills of exchange payable on sight, or by declaring or paying any dividends until the full amount of its lawful money reserve has been restored.
Upon failure of any such corporation to make good its lawful money reserve within thirty days after notice from the State Bank Commissioner, the said Commissioner may treat such corporation as in an unsound condition and may proceed against it accordingly.
Section 11. No bank or trust company shall carry on its books any of its assets at a sum in excess of the cost value thereof except by and with the written consent of the State Bank Commissioner.
Section 12. No bank or trust company shall make any loans, directly or indirectly, to any person, firm, association or corporation, aggregating an amount which, (including any extension of credit to such person, firm, association, or corporation, by means of letters of credit or by acceptance of drafts for, or the discount or purchase of the notes, bills of exchange, or other obligations of such person, firm, association or corporation) shall exceed the following percentage of the total capital, surplus and undivided profits of the lender;
(a) Ten per centum, if the loan be without collateral security, except where the total of the capital, surplus and undivided profits of the lender is not more than twenty-five thousand dollars in which case an amount not to exceed twenty per centum of such total may be loaned without collateral security, provided that where such total of the capital, surplus and undivided profits is greater than twenty-five thousand dollars, but does not exceed fifty thousand dollars, a loan or loans not exceeding in the aggregate five thousand dollars to any one person, firm, association, or corporation may be made without collateral security; provided, however, that nothing herein shall prohibit the taking or receiving of any kind, character or amount of security whatsoever, either real or personal, for the protection of any loan made under the provisions of this sub-division, but no such loan or any part thereof shall be considered or construed as a secured loan within the meaning of this sub-division unless the whole thereof has collateral security worth at least fifteen per centum more than the amount of such loan; or
(b) Fifteen per centum, (in addition to the amount that may be loaned under the provisions of sub-division (a) of this section) upon collateral security worth at least fifteen per centum more than the amount of such loan so secured; provided, the aggregate amount which can be loaned under sub-divisions (a) and (b) hereof to any one person, firm, association or corporation shall not exceed twenty-five per centum ; of the total capital, surplus and undivided profits of the lender ; and provided further that no loan which is without collateral security shall be combined or blended with a loan which has collateral security but that the two classes of loans shall be kept separate and independent, and each shall be represented by a separate evidence of indebtedness; or
(c) Twenty-five per centum upon collateral security worth at least fifteen per centum more than the amount of the loans so secured; provided, however, that when loans so secured are made to this amount, then no loans not so secured shall be permitted in addition to such secured loans.
None of the limitations or restrictions contained in the previous sub-divisions of this section shall apply to loans, discounts or other extensions of credit secured by bonds or other obligations of the United States, if the market value of such bonds or other obligations exceeds by ten per centum the amount of any such loan, discount or other extension of credit.
In computing loans to any person under this section, there shall be included all liabilities to the lending corporation of any copartnership or unincorporated association of which the borrower is a member, and also all loans made for his benefit or for the benefit of such copartnership or unincorporated associations; and in computing the loans to any copartnership, or unincorporated association under this section, there shall be included all liabilities of its individual members and all loans made for the benefit of such copartnership, or unincorporated association or any member thereof; and in computing the loans to any corporation under this section there shall be included all loans made for the benefit of the corporation.
Section 13. No bank or trust company shall invest more than twenty-five per centum of its total capital, surplus and undivided profits in the stock, bonds or other obligations of any one corporation or political entity or political division except bonds or other obligations of the United States, of the State of Delaware, or of any county, city, town or school district in this state.
Section 14. After the adoption of this Act, no bank or trust company shall purchase shares of its own capital stock, nor make any loan on the faith or pledge of shares of its own capital stock; but nothing in this section shall inhibit such purchase or loan when necessary to prevent loss on debts created prior to the adoption of this Act, nor shall it affect the holding of stock acquired by any bank or trust company prior to the adoption of this Act.
Section 15. Whenever any bank, trust company, or national bank shall receive any fund in a fiduciary character, whether as executor, administrator, guardian, trustee, or otherwise, it shall deal with such fund as a separate trust and shall preserve the identity thereof.
Section 16. No bank or trust company shall expend more than its paid up capital and surplus on its place of business and the furnishing and equipment thereof, and the vote of two-thirds of its directors shall be necessary to authorize the purchase of land or of a building, or of the construction of a building, for its place of business.
Section 17. No person shall be eligible for election as director of a bank having a capital stock, or of a trust company, unless such person be a shareholder in his own right, or as trustee or guardian of another, of such bank or trust company; and every person elected to be such a director, who, after such election, shall cease to be a shareholder as aforesaid, or who shall hypothecate, or in any way pledge such stock shall immediately become disqualified as such director ; provided that this section shall not be deemed or construed to apply to the State directors of the Farmers' Bank of the State of Delaware, or to the directors of any corporation whose charter is incompatible with the provisions of this section.
Section 18. No bank or trust company shall pledge or hypothecate any of its assets except as follows:
(1) To borrow up to but not exceeding the amount of its capital and surplus actually paid in and undiminished by losses or otherwise ;
(2) To borrow in excess of the limitation of sub-division (1) when the State Bank Commissioner shall have given his written consent;
(3) To borrow, in addition to the amounts aforesaid, any amount for the purpose of buying United States Bonds, United States Treasury Certificates, or notes or obligations of the United States, and in such case the consent of the State Bank Commissioner shall not be required;
(4) To qualify itself to receive deposits of money of the United States.
The rediscounting, with or without guarantee or endorsement, of notes, drafts and bills of exchange is hereby authorized and shall not be limited by the terms of this Act and shall not be deemed as borrowed money within the meaning of this Act.
No loan made in contravention of this section shall be rendered illegal for this cause as against the lender or holder thereof, but the borrowing corporation shall be subject to appropriate proceedings by the State Bank Commissioner for a violation of law.
No bank or trust company shall pledge any of its assets as collateral security for a loan on a basis that would hypothecate more of its assets at the value at which they are carried on the books of such bank or trust company than one hundred and fifty per centum of the loan.
Section 19. This Act shall not be deemed to repeal Chapter 111 of Volume 3'0 of the Laws of Delaware but shall be construed as supplementary thereto and amendatory thereof.
Approved March 31, A. D. 1921.