State of Kansas
State Bank Commissioner
Special Order 2000-1
This Order is hereby issued this 19th day of April, 2000 by the Kansas State Bank Commissioner (Commissioner) pursuant to K.S.A. 9-1715, as amended.
Part I - Definitions
For purposes of this order, the following definitions shall apply:
"Control" means:
(A) directly or indirectly owning, controlling or having power to vote 25% or more of any class of voting shares of a financial subsidiary;
(B) controlling in any manner the election of a majority of the directors or trustees of the financial subsidiary; or
(C) otherwise directly or indirectly exercising a controlling influence over the management or policies of the financial subsidiary, as determined by the Commissioner.
"Financial subsidiary" means:
a subsidiary corporation which is controlled by one or more depository institutions, and whose activities are authorized by the Gramm-Leach-Bliley Act, Public Law 106-102.
Part II - National Bank Authority and Competitive Disadvantage
Whereas, pursuant to Section 5136A of the Revised Statutes of the United States, 12 U.S.C. §24a, a national bank is permitted to control or hold an interest in a financial subsidiary; and
Whereas, pursuant to Section 5136A of the Revised Statutes of the United States, such financial subsidiaries are authorized to engage in certain specified activities; and
Whereas, no Kansas law expressly allows a Kansas state bank to control or hold an interest in a financial subsidiary; and
Whereas, K.S.A. 9-1715, as amended, grants to the Commissioner "...the power to authorize any or all state banks to engage in any activity in which such banks could engage were they operating as national banks at the time such authority is granted..."; and
Whereas, the Commissioner deems the issuance of this special order to be reasonably required to preserve the welfare of Kansas state banks and to promote competitive equality between Kansas state banks and Kansas national banks;
Part III - Grant of Authority to Kansas State Banks
It is therefore ordered, that a Kansas state bank may control or hold an interest in a financial subsidiary to engage in any one or more of the following activities, subject to the notification and prior approval provisions of Part IV of this Special Order:
(a) Lending, exchanging, transferring, investing for others, or safeguarding money or securities;
(b) Acting as agent or broker for purposes of insuring, guaranteeing, or indemifying against loss, harm, damage, illness, disability, death, or providing annuities as agent or broker, subject to the requirements of Chapter 40 of the Kansas statutes and authority of the insurance commissioner;
(c) Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly;
(d) Operating a travel agency;
(e) Engaging in any activity that the Board of Governors of the Federal Reserve System has determined, by order or regulation in effect on November 12, 1999, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto; and
(f) Engaging in any other activities that are permissible for the bank to conduct directly.
It is further ordered, that notwithstanding the grant of authority in the previous paragraph, a Kansas state bank is prohibited from holding an interest in or controlling a financial subsidiary that engages as principal in any of the following activities:
1. Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability or death, or providing or issuing annuities the income of which is subject to tax treatment under section 72 of the Internal Revenue Code, 26 U.S.C. §72;
2. Real estate development or real estate investment, except as otherwise expressly authorized by Kansas law;
3. Any activity permitted for financial holding companies by section 4(k)(4)(H) or (I) of the Bank Holding Company Act, 12 U.S.C. §1843 (k)(4)(H) and (I).
Part IV - Prior Approval and Notification Procedures
It is further ordered, that a Kansas state bank may control or hold an interest in a financial subsidiary that engages in any of the activities in Part III above, or engage in any of those activities in an existing subsidiary, by giving prior written notice to the Commissioner. Such notice shall include the following information, at a minimum:
1. A description of the transactions through which the bank proposes to acquire control of or an interest in the financial subsidiary;
2. The name and head office address of the subsidiary;
3. A description of the current and proposed activities of the financial subsidiary;
4. If the proposal relates to an initial affiliation with a company engaged in insurance activities, a description of the type of insurance activities the company is engaged in or plans to conduct and identification of each state where the company holds an insurance license and the state insurance regulatory authority that issued the license.
It is further ordered, that a notice filed with the Commissioner will be deemed approved on the 15th calendar day after receipt of a complete notice unless prior to that time the Commissioner notifies the bank that the notice is approved, that the notice will require additional review, or that the bank is not approved to engage in the proposed activity.
It is further ordered, that the aggregated consolidated total assets of all financial subsidiaries of a Kansas state bank shall not exceed 45% of the consolidated total assets of the parent bank.
It is further ordered, that if the Commissioner finds that any financial subsidiary is being operated in an illegal or unsafe and unsound manner, the Commissioner is authorized to order the Kansas state bank to take appropriate remedial action, or divest itself of the financial subsidiary.
It is further ordered, that the powers and procedures established pursuant to this Order are in addition to the existing authority of Kansas state banks to establish operating subsidiaries that engage in activities that the parent bank could engage in directly, and are also in addition to the existing authority of Kansas state banks to establish or own an interest in other subsidiaries which are specifically authorized by other statutes, regulations, rules or special orders.
Pursuant to K.S.A. 9-1715(b), as amended, the terms of this special order shall become effective the 19th day of April, 2000, and shall remain in full force and effect until amended or revoked by the Commissioner.
It is so ordered.
State Bank Commissioner
Franklin W. Nelson
