The banking industry came out on top after this year’s legislative session at the State Capitol. The Connecticut Bankers Association, along with the help of its members across the state, managed to wipe out, or at least compromise on, several pieces of legislation that could have been damaging to the banking industry.
“We were pretty pleased with the way the session went,” said CBA Vice President and Treasurer Tom Mongellow.
The most controversial piece of legislation up before the General Assembly earlier this year was an act concerning mutual-to-stock conversions, Mongellow said. Conversions received attention last year when New Haven Savings Bank began the process of converting from a mutual to a stockowner-held bank. Although the bank went through the process of conversion in the same way other banks have done it in the past, a small, vocal group in New Haven protested the law stating that a depositor vote was not needed for the conversion, Mongellow said.
“[New Haven Savings] did everything a converting mutual bank would have done in the past,” he said.
The original version of the bill included certain features, such as the depositor vote mandate, that CBA members say would have been damaging to the banking industry. The mandate was essentially useless because every time bank depositors have voted on their bank’s conversion to a stockowner-held company, the conversion has passed, Mongellow said. Indeed, most of the depositors at New Haven Savings supported its conversion, he said.
“There’s never been a mutual conversion that hasn’t been voted through by depositors,” he said.
The mandate, however, would have given power to the “professional depositors” who would agitate the rest of the depositor base to force a conversion whether it was needed or not, according to Mongellow.
“The original legislative proposal, obviously, was not a good bill, in our opinion,” he said.
The CBA and its members succeeded in having deleted most of the aspects of the bill that were deemed harmful. The resulting bill was a compromise that has much less negative impact on the banking industry than the original bill, Mongellow said.
“[Getting the bill changed] was a lot of work,” Mongellow said. “There were a lot of negotiations, discussions and grassroots lobbying by bankers.”
There are still some negative aspects to the bill, he said. It codifies everything that needs to be done during a conversion, he said.
“Obviously what it’s doing is giving the Department of Banking the ability to codify procedures,” Mongellow said.
The CBA is content with the outcome of the bill, but would have preferred to have no bill at all, he said. Gov. John Rowland signed the bill into law on April 28.
Other Bills
The CBA also helped stall several other bills that the association believes could have been harmful to the banking industry. There were eight different pieces of legislation on outsourcing and call center issues, according to a CBA bulletin outlining the legislation. Most would have “created restrictive regulatory and statutory frameworks under which all companies would have to operate,” according to the bulletin. Some of the bills would have removed state incentives for businesses that employed out-of-state or out-of-country call centers and requirements that the customer service representative notify the caller of where the representative was located.
It wasn’t clear how those bills would impact the Connecticut banking industry or what effect they would have on the economy at large, but the CBA pushed to stall the bills until more analysis on the impact could be done, Mongellow said.
The bills could have hurt business in Connecticut, a state that has been trying to lure companies into its borders for the last 10 or 15 years, Mongellow noted.
“You want to keep that positive atmosphere here,” he said.
He added that the state Legislature also should wait to see if Congress passes any legislation on the subject – a possibility with the publicity that outsourcing has been receiving.
“I think it’s premature to do anything on a state level,” Mongellow said.
But the biggest reason for waiting is because there are no reliable studies to show how those bills would affect Connecticut businesses, he said.
“We’re hopeful there will be a careful analysis of the whole issue,” Mongellow said.
The CBA was also successful in clarifying two issues that came out of last year’s budget bill. The first had to do with ambiguous language about banks’ rights to charge dormancy fees on deposit accounts.
Banks have always been allowed to charge fees for accounts that are inactive for too long, but the language in the budget bill made that unclear.
“[Charging dormancy fees] is a clear ability that we have,” Mongellow said.
The second issue regarded what to do with the contents of safe deposit boxes that have been escheated, or left untouched for a long time. Because of a backlog of about 3,000 boxes, the state treasurer’s office wanted banks to clean out their own safe deposit boxes, auction the contents and turn the money over to the treasurer’s office. The clarification the CBA helped pass allows banks to use a third party to do that and exempts banks from any liability once the transfer of contents takes place, according to the CBA’s bulletin. That bill was signed into law on May 12.
The CBA also helped ensure the passage of a bill that clarifies that certain services between banks, such as coin and vault services, are not taxable. The issue came to light several years ago when the Department of Revenue Services audited a bank. The DRS indicated the bank would have to pay sales tax for services provided by another bank and the audit resulted in two years of discussions, Mongellow said.
“It’s never been taxable in the past,” he said.
Banks, especially those like the Banker’s Bank Northeast in Glastonbury, often provide coin, currency and vault services for another bank and banks haven’t paid taxes on those services because they are a cost of doing business.
The new bill, which was signed into law on May 12, clarifies that those services are not taxable, according to the CBA’s bulletin.
