Memo RM1996-10
To: All State Chartered Banks
From: Sonya Allen, Staff Attorney
Date: August 7, 1996
RE: Changes in Kansas Administrative Regulations
As you know, we have been working for some time on changes to the Kansas Administrative Regulations. Enclosed you will find copies of the final version of the revised regulations. The effective date of the regulations is Friday, August 9. Also, because of the number of inquiries we have received pertaining to K.S.A. 9-1104, I have included a copy of that statute for your information. The changes to K.S.A. 9-1104 took effect July 1. We are working on a new lawbook supplement, which we hope to mail to you by the end of August. Once you receive the new lawbook supplements, you may throw these copies away. If you have any questions, please call the office.
Summary of Changes to Kansas Banking Regulations
Note: This is a summary of the changes. For a full understanding of all changes, you should look at the actual language of the regulations. ,
Article 1. Definitions.
K.A.R. 17-1-1 is a new regulation which defines the term "commissioner" to mean the state bank commissioner. The purpose of the regulation is for simplification of language in all subsequent regulations.
Article 9. Investment Securities
This article is composed of the investment securities regulations that were previously found at K.A.R. 17-11-1 through K.A.R. 17-11-12. Before, Article 11 had contained a mixed group of
subjects. It was decided to move all regulations dealing with investment securities to a new article (Article 9) so that Article 11 could be devoted solely to documentation requirements. Most of the changes in the body of the investment securities regulations are not substantive but rather for clean-up and clarification purposes.
Article 10. Reserves
K.A.R. 17-10-1 was revoked. This regulation formerly provided a method for computing necessary deposit reserves. Since implementation of FRB Regulation D, this state regulation is no longer necessary.
Article 11. Documentation Requirements
K.A.R. 17-11-1 to 17-11-12 were revoked. Most of these were moved to the new Article 9, Investment Securities.
K.A.R. 17-11-13. Stockholder's meetings.
K.A.R. 17-11-15. Liabilities.
The changes in these regulations are basically updating old language. These regulations contain no substantive revisions.
K.A.R. 17-11-16. Bonds; records.
This regulation was updated to reflect current record keeping methods, and also in subsection (b), to specify what the examiners are currently looking for in the bank's file for each bond. These are not new requirements.
K.A.R. 17-11-17. Bank-owned real estate; records.
This regulation was changed to clarify that it pertains to bank-owned real estate only. It also clarifies what kind of appraisals will be acceptable for bank-owned real estate. Specifically, the regulation makes it clear that a bank is not obligated to use a certified or licensed appraiser on bank-owned real estate. Two officers of the bank, or some other qualified individual may do these appraisals and/or appraisal updates.
K.A.R. 17-11-18. Loans; documentation requirements.
The regulation contains nonsubstantive revisions of language, but also contains these substantive revisions:
-complete and current credit information not older than 12
months relaxed to require information not older than 15 months. This change was made to build in a "grace period" of three months for borrowers to compile and prepare the necessary year-end information. It does not relax the amount or types of information that must be obtained.
-the provisions of (a), (b), and (c) were relaxed to apply only to loans in excess of $25,000 (previously the floor was $15,000). This will allow for the type of "low doc" home equity loans that national banks are offering, so long as the loan amount is $25,000 or less.
-subsection (e) reflects the understanding that filing of a financing statement (UCC-1) is not always the way to perfect a security interest in personal property (ex. automobiles)
K.A.R. 17-11-19. Charged-off assets; records.
This regulation previously dealt with two similar but distinct record keeping topics: records for personal property taken in payment of a debt, and records required for personal property
charged off the books of the bank. For clarification, the topics were divided into two regulations, with the requirements for personal property taken in payment of a debt moved to a new regulation, K.A.R. 17-11-23.
K.A.R. 17-11-20. Descriptive matter.
The content of this regulation, dealing with investment securities, was moved to new K.A.R. 17-9-3.
K.A.R. 17-11-21. Appraisals and evaluations.
There are several changes to this regulation. Many changes are intended for clarification, but there are substantive changes as well, so extra time may need to be devoted to thoroughly reviewing it. The floor for evaluations was increased from $15,000 to $25,000. Who can conduct an appraisal, and who can conduct an evaluation was explained in greater detail.
Subsection (a) sets out the general rule that an accurate appraisal of all real estate mortgaged securing principal debt in excess of $25,000 must be performed by a licensed or certified appraiser who is independent of the transaction. Subsection (b) and (c) are exceptions to the general rule in (a). Subsection (b) lists those circumstances where, two officers or directors, or a qualified individual who is independent of the bank or trust company, may complete an evaluation. Those circumstances include:
-real estate mortgaged securing principal debt of $250,000 or less
-business loans of $1 million or less where the source of repayment is not the real estate or rental income from the real estate
-renewals or refinancings of loans in any amount, if certain criteria are met.
Subsection (c) lists those circumstances that are completely exempt from all appraisal and evaluation requirements.
K.A.R. 17-11-23. Other assets; records.
The regulation specifies record keeping requirements for personal property the bank takes in payment of a debt. The language was previously part of K.A.R. 17-11-19, now devoted solely to record keeping for charged-off assets.
Article 12. Transactions (K.A.R. 17-12-1 and 17-12-2)
The language in these two regulations was primarily changed to reflect current record keeping technologies.
Article 16. Charter Applications
In general, substantive changes to this article include the following:
-the number of copies of the application to be filed with the Office was reduced from 13 to nine (K.A.R. 17-16-1)
-time frames were clarified by referring to "calendar days"
-information to be included in a charter application was clarified
-the requirement that a public hearing be held was removed (revocation of K.A.R. 17-16-3, 17-16-5, 17-16-6 and 17-16-7.)
Article 17. Financial Futures Contracts
No substantive changes were made to this article. All changes were for clarification purposes only.
Article 18. Open-End Investment Companies
These regulations were revoked because they are no longer necessary. This subject is addressed by Special Order 1987-1.
Article 21. Bank Holding Companies; Application for the Acquisition of a Kansas Bank or Bank Holding Company
K.A.R. 17-21-1 through 17-21-3.
These regulations provide definitions for terms used in the article, and also set out who can file an application and what information must be included in an application. Geographic
restrictions were removed to comply with the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and the Kansas legislature's implementation of nationwide interstate banking. The definition of "control" was changed, as reflected by subsection (b). Under the new Kansas Bank Holding Company Act, the application is filed with the Commissioner rather than the Banking Board, so the regulation was amended to reduce the number of copies of the application to be filed from 13 to one.
K.A.R. 17-21-4 to 17-21-8.
Changes to these regulations are mainly for clarification purposes. K.A.R. 17-21-4 contains a new requirement that the applicant file a notice of intent to submit an application within 14 days of the date any agreement to purchase a bank or bank holding company is entered into. The amendment is designed to address timing problems that previously existed concerning submission of materials to this office.
