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1994 SESSION


CHAPTER 7
An Act to amend and reenact §§ 6.1-21, 6.1-32.15, 6.1-67, 6.1-68, 6.1-71, 6.1-78, 6.1-79, 6.1-80, 6.1-111 and 6.1-113 of the Code of Virginia and to repeal § 6.1-32.30 of the Code of Virginia, relating to trust companies.
[H 188]
Approved March 3, 1994

Be it enacted by the General Assembly of Virginia:

1. That §§ 6.1-21, 6.1-32.15, 6.1-67, 6.1-68, 6.1-71, 6.1-78, 6.1-79, 6.1-80, 6.1-111, and 6.1-113 of the Code of Virginia are amended and reenacted as follows:

§ 6.1-21. Deposit or other use of trust funds.

Funds received or held in the trust department of a bank or trust company awaiting investment or distribution shall not be used by the bank or a trust company in the conduct of its business except that such funds may be deposited by a bank, in its commercial or savings department to the credit of its trust department, if the bank first delivers to the trust department, as collateral security therefor securities of any of the following classes:

(1) Bonds, notes, or certificates of indebtedness of the United States; or

(2) Other readily marketable securities of the classes in which fiduciaries are authorized or permitted to invest trust funds, as set forth in § 26-40.01; or

(3) Other readily marketable bonds, notes, or debentures, commonly known as investment securities, meeting the following requirements:

(a) That the issue be of a sufficiently large total to make marketability possible;

(b) Such a public distribution of the securities must have been provided for or made in a manner to protect or insure the marketability of the issue;

(c) That the trust agreement under which the security is issued provides for a trustee independent of the obligor, which trustee must be a bank or trust company.

The securities so deposited as collateral shall be owned by the bank and shall at all times be at least equal in market value to the amount of trust funds so used in the conduct of the business of the bank less such amount thereof as shall be insured by the Federal Deposit Insurance Corporation under existing or future federal law.

In the event of the failure or liquidation of such bank the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart in addition to their claim against the estate of the bank.

§ 6.1-32.15. Minimum capital.

A certificate shall not be issued to an applicant unless it meets the minimum capital stock requirement for a trust company prescribed by § 6.1-32.18.

§ 6.1-67. Bank borrowing money or rediscounting its notes; reports; resolutions.

Any bank or trust company borrowing money or rediscounting any of its notes shall at all times show on its books and accounts and in its reports the amount of such borrowed money or rediscounts. No officer, director or employee of any bank or trust company shall issue the note of such bank or trust company for borrowed money or rediscount any note or pledge any of the assets of such bank or trust company, except when authorized by resolution of the board of directors of such bank or trust company previously made and entered upon the minutes of such bank or trust company, under such rules and regulations and in such form as may be prescribed by the Commission.

§ 6.1-68. Acceptance of drafts or bills of exchange; issuance of letters of credit.

Any bank or trust company doing business in this Commonwealth may, subject to conditions, limitations and restrictions imposed by the State Corporation Commission, accept for payment at a future date drafts or bills of exchange drawn upon it by its customers on time not exceeding six months, and issue letters of credit upon such terms and conditions and of such duration as may be deemed appropriate by such bank or trust company authorizing the holders thereof to draw drafts upon it or its correspondent, which drafts may be payable at sight or may be accepted for payment from the date of presentment on time not exceeding six months. The State Corporation Commission in adopting said conditions, limitations and restrictions with respect to such acceptances or letters of credit shall use as a standard or guide the respective conditions, limitations and restrictions, if any, imposed from time to time by federal statute or by the Federal Reserve Board on its member banks.

§ 6.1-71. Payment of small balance to distributees or other persons.

When the balance in any bank or trust company to the credit of a deceased person, upon whose estate there shall have been no qualification, shall not exceed $5,000, it shall be lawful for such bank or trust company, after sixty days from the death of such person, to pay such balance to his or her spouse, and if none, to the distributees of the decedent or other persons entitled thereto under the laws of this Commonwealth. The receipt therefor shall be a full discharge and acquittance to such bank or trust company to all persons whomsoever on account of such deposit. Such sum, not exceeding the amount given priority by § 64.1-157, after thirty days from the death of such person, at the request of the consort, or if no consort, then the distributees of the decedent or other persons entitled under the laws of this Commonwealth, may be paid to the undertaker or mortuary handling the funeral of such decedent and a receipt of the payee shall be a full and final release of the payor.

§ 6.1-78. Preferences; giving preference by pledging assets.

No bank or trust company shall give preference to any depositor or creditor by pledging the assets of such bank or trust company, except as otherwise authorized in the two succeeding sections, or except to secure deposits of trust funds made pursuant to the provisions of § 6.1-21 or § 6.1-32.8.

§ 6.1-79. Same; exception as to governmental deposits; insolvent national bank funds, proceeds of sale of federal obligations, and bankruptcy funds.

Notwithstanding the provisions of § 6.1-78, any bank or trust company may deposit securities for the purpose of securing deposits of the United States government, and its agencies; the Commonwealth of Virginia, its agencies, and its political subdivisions; insolvent national bank funds as permitted under 12 U.S.C. § 192; proceeds of sale of United States obligations as permitted under 31 U.S.C. § 771; and bankruptcy funds deposited under the provisions of 11 U.S.C. § 15345. Notwithstanding the provisions of § 6.1-78 any bank or trust company may deposit securities for the purpose of securing sureties on surety bonds furnished to secure such deposits, or may, in lieu of depositing such securities to secure deposits of political subdivisions of the Commonwealth, by its board of directors, adopt a resolution before such public funds are deposited therein, to the effect that, in the event of the insolvency or failure of such bank or trust company, such public funds thereafter deposited therein shall, in the distribution of the assets of such bank or trust company, be paid in full before any other depositors shall be paid deposits thereafter made therein. The adoption of such resolution shall be deemed to constitute an obligation binding on such bank or trust company.

§ 6.1-80. Preferences; exceptions for certain borrowings and for repurchase agreements.

Notwithstanding the provisions of § 6.1-78, any bank or trust company is authorized:

1. To pledge its assets as security for amounts of borrowed money which shall not, without the approval of the State Corporation Commission given in advance in writing, exceed in the aggregate the amount of the capital, surplus and undivided profits of such bank or trust company actually paid in or earned and remaining undiminished by losses or otherwise. The amount of assets pledged for the security of such a loan shall not without such approval, so given, exceed 150 percent of the amount borrowed. No loan in excess of the amount so permitted made to any such bank or trust company shall be invalid or illegal as to the lender, even though made without the consent of the Commission. Rediscounting with or without guarantee or indorsement of notes, drafts, bills of exchange or loans is hereby authorized and shall not be limited by the terms of this section, and shall not be considered as borrowed money within the meaning of this section;

2. To borrow from a Federal Reserve Bank or a Federal Home Loan Bank and to rediscount with and sell to a Federal Reserve Bank or a Federal Home Loan Bank any and all notes, drafts, bills of exchange, acceptances and other securities, and to give security for all money so borrowed and for all liabilities incurred by the discount of such notes, drafts, bills of exchange and other securities without restriction in like manner and to the same extent as national banks may lawfully do under the acts of Congress and regulations of the Board of Governors of the Federal Reserve System and the Federal Housing Finance Board; and

3. To pledge its assets in connection with agreements for the sale and repurchase of securities, which transactions shall be governed by this subdivision and not subdivision 1 of this section. The amount of assets pledged for such obligation shall not exceed 150 percent of the amount of the obligations, without the consent of the Commission. At the time any such retail repurchase agreements are sold by a state bank, the market value of the underlying security must be at least equal to the amount of the aggregate purchase price paid by the purchasers of the retail repurchase agreements.

§ 6.1-111. Doing banking or trust business without authority; Commission may examine accounts, etc., of suspected person; penalty.

Every person, association or company who shall trade or deal as a bank or trust company, or carry on banking or do a trust business, without authority of law, and their officers and agents therein, shall be guilty of a Class 6 felony.

The Commission shall have authority to examine the accounts, books and papers of any person, copartnership or corporation who it has reason to suspect is doing a banking business or a trust business, in order to ascertain whether such person, copartnership, or corporation has violated, or is violating, any provision of this title, and the refusal to submit such accounts, books and papers shall be prima facie evidence of such violation.

§ 6.1-113. Penalty for violation of § 6.1-39.3 or § 6.1-41.

Any bank or trust company violating the provisions of § 6.1-39.3 or § 6.1-41 shall be fined up to $2,000 to be imposed and judgment entered therefor by the Commission, and enforced by its process.

2. That § 6.1-32.30 of the Code of Virginia is repealed.