OLYMPIA – The Washington State Department of Financial Institutions (DFI) is pleased to announce the signing of two bills by Governor Gregoire — EHB 2831 regarding the regulation of Washington State chartered banks and EHB 2830 regarding Washington State chartered credit unions.
“This legislation updates our existing laws and allows us to more effectively fulfill our mission as regulators,” Scott Jarvis, Director of DFI explained. “In these times — more so than in just about any outside the Great Depression — effective financial regulatory oversight is crucial to maintaining sound financial services.”
The signing of these bills provides Washington’s financial industry regulators additional tools necessary to support the financial health and stability of our state’s financial institutions.
“The banking bill addresses some shortcomings in Washington’s banking statutes and enhances DFI’s enforcement powers to include bank holding companies,” Brad Williamson, Director of DFI’s Division of Banks explained. “Under the existing statutes, DFI has the authority to examine holding companies but not to take any enforcement actions. Since at least some of the recent bank closures have been affected in part by problems at the holding company level, it is important for DFI to have the authority to effect change at that level.”
Banks (EHB 2831)
- This bill gives DFI enforcement powers over bank holding companies. Previously, DFI could examine holding companies but could not act to address problems.
- The enforcement authority of the Division of Banks is improved with regard to institutions that are less than well capitalized.
- DFI’s enforcement authority is brought into line with federal standards for prompt corrective action for institutions that are less than well capitalized.
- The factors used by the Division in closing a bank that is in an unsafe and unsound condition are clarified.
“While DFI has not had to close a credit union yet during the existing financial crisis, the credit union bill addresses some potential shortcomings in Washington’s Credit Union Act,” Linda Jekel, Director of DFI’s Credit Union Division said. “The credit union bill provides DFI with an improved regulatory toolbox in order protect consumers’ financial interests.”
Credit Unions (EHB 2830)
- The bill adds tools to permit stronger regulatory oversight and earlier enforcement of troubled credit unions.
- It also updates and streamlines early regulatory action for troubled credit unions by providing for early regulatory intervention when a credit union becomes undercapitalized.
- The fiduciary duties of board members are strengthened.
- DFI is given the authority to suspend credit union directors for harmful activities.
- DFI is authorized to fine credit unions for material violations of credit union act or rules.
- DFI’s conservatorship and receivership provisions for credit unions are modernized.
“We are pleased to have these additional regulatory tools in our state’s regulatory toolbox,” Director Jarvis said. “These laws will help DFI make Washington financial institutions even more safe and sound businesses and stronger pillars for the communities they serve.”