Colorado Legislative Council Staff

STATE

CONDITIONAL FISCAL IMPACT

TITLE:            CONCERNING THE STRENGTHENING OF THE SUPERVISORY POWERS OF THE DIVISION OF FINANCIAL SERVICES IN THE DEPARTMENT OF REGULATORY AGENCIES.

Summary of Legislation

            The bill strengthens the supervisory powers of the Commissioner of Financial Services, Division of Financial Services, Department of Regulatory Agencies, by allowing the commissioner to appoint himself or herself or a third party as conservator of any state chartered credit union or savings and loan association and immediately take possession and control of the business and assets upon determination by the commissioner that:

            •   such action is necessary to conserve the assets of the credit union or to protect the interests of its members from acts or omissions of its existing management;

            •   the credit union, by a resolution of its board of directors, consents to such action;

            •   there is a willful violation of a cease and desist order that results in the credit union being operated in an unsafe or unsound manner; or

            •   the credit union is significantly undercapitalized and has no reasonable prospect of becoming adequately capitalized.

            In addition, the bill exempts, in extraordinary circumstances, any hearings arising from the above actions from any provision of the law requiring that proceedings of the board be conducted publically. The bill specifies that such extraordinary circumstances occur when specific concern arises about prompt withdrawal of moneys from the credit union.

            The bill makes other changes including allowing the commissioner to take control of a savings and loan association with the written consent of the board, rather than the written consent of the Governor. It also allows the division to assess civil monetary penalties against the institutions themselves, rather than only against their management and employees, when the violations are institutional in nature. In addition, the bill allows the commissioner to assess civil monetary penalties in a lump-sum.

State Expenditures

            This bill provides the commissioner with the authority to rehabilitate a troubled financial institution rather than just close it. Under current law, the commissioner has the authority to issue cease and desist orders, suspend officers of troubled institutions, and order liquidation of the institution’s assets. These powers are not used frequently: currently, the division supervises four savings and loan associations and 79 credit unions, and over the past five years has issued slightly more than one cease and desist order per year. The provision of this additional authority is not expected to impact the workload of the division. The authority to assess civil penalties against the institutions themselves, and in a lump sum, are not anticipated to change the number of penalties assessed or the amount of revenues generated. However in the event that a significant of resistance were offered by an institution, there could be increased legal costs requiring future appropriations. Therefore, this bill is assessed as having a conditional fiscal impact.

State Appropriations

            This fiscal note implies that the Department of Regulatory Agencies would not require any additional appropriation to implement this bill in FY 1999/00.

Departments Contacted 

            Regulatory Agencies