Memo RM1996-5
To: All Kansas State Chartered Banks
From: Commissioner W. Newton Male
Date: April 11, 1996
Enclosed please find the following information:
1) Attorney General's Opinion 96-28; Special Order 1995-6; Investment Subsidiary Pledging
On October 2, 1995, this department issued Special Order 1995-6. The special order provided Kansas state banks the authority to own a wholly-owned subsidiary established for owning, holding and managing the bank's securities portfolio. Since implementation of that order, there has been uncertainty as to the subsidiary's ability to pledge securities to collateralize bank-held municipal deposits.
We are now forwarding to you a copy of an opinion recently issued by Kansas Attorney General Carla Stovall. According to the opinion, if the subsidiary is pledging securities for the benefit of the municipal depositor as agent for the bank, the provisions of K.S.A. 9-1402 are satisfied. Therefore, for examination purposes, pledging to municipal deposits by either the bank or a wholly-owned subsidiary will be considered acceptable.
Note: The issuance of Special Order 1995-6, or any communications by this agency regarding investment subsidiaries should not be construed as a determination by this department of the ultimate tax benefits or effects for all Kansas state-chartered banks. No bank should establish such a subsidiary or engage in any related transactions without full consultation with the bank's accountant about the implications of the activity in light of the bank's specific situation.
2) Investment Policy Guidelines
Updated investment policy guidelines are included with this mailing. Just as banks are encouraged to review and update their bank policies periodically, the department also needs to update their guidance to banks on a periodic basis to ensure current topics are covered, i.e., treatment of securities available for sale. These newly revised guidelines will be utilized by the examining staff of this agency when reviewing the adequacy of a bank's investment policy. Recognizing the fact the majority of banks review and approve their policies on an annual basis, most generally in January of each year, any criticisms of a bank's investment policy will be based on the current guidelines for the next ten months. We do expect all banks to have reviewed and updated their investment policy in conformance with these new guidelines by the beginning of March of 1997. In the meantime, examiners may provide you with feedback as to where your policy does not meet the new guidelines, but no criticism will be noted in the report.
3) Special Order 1996-2
Prior to the issuance of this special order, state banks and trust companies were required to hold their annual meetings within the first 120 days of the calendar year. The purpose of the special order is to provide added flexibility by allowing the bank or trust company to specify in their bylaws any date during the calendar year as the date for the annual meeting.
4) Loan and Deposit Production Activities (Removed on 7-28-99)
