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Committee hears Senate amendments to H137 that clarify governance rules for mutual savings banks
Summary
Senate amendments to H137 would tighten statutory governance for mutual savings banks’ corporators, requiring a majority of corporators be depositors, two-thirds be independent, and stating corporators’ fiduciary duties; Vermont Bankers Association and DFR told the committee they support the clarifying language.
The Vermont House Committee on Commerce and Economic Development on May 6 took up the portion of H137 that amends corporate-governance rules for mutual savings banks, a type of bank owned by depositors. The Senate-passed amendments would clarify who may serve as corporators, define independence requirements and state fiduciary duties for corporators.
Chris Delia, president of the Vermont Bankers Association, told the committee the proposal was developed with bank legal counsel and the Department of Financial Regulation (DFR) after a mutual savings bank preparing a holding-company conversion sought clearer statutory guidance. "The FDIC in looking at our statute said it could be more clear as to how corporators are dealt with in Vermont statute and protection for the depositors," Delia said, describing the rationale for the changes.
What the amendments would do
Royal summarized the proposed changes: more than 50 percent of all corporators would have to be depositors of the institution; at least two-thirds of corporators must be independent, which the draft defines as individuals who are not employees, directors or officers of the institution or its affiliates; and the statute would state corporators are fiduciaries of depositors and must exercise duties of loyalty and care while considering depositors, borrowers, local communities and the institution’s safety and soundness.
DFR support and federal review
Aaron Ference, deputy commissioner at DFR, told the committee regulators had worked on the language and that DFR supports it because it strengthens corporate governance for the state’s two mutual savings banks. "All it does in our perspective is strengthen the corporate governance of these institutions in Vermont," Ference said. He added the language was proposed to address questions raised by federal regulators and to clarify statutory expectations ahead of any federal application to convert to a holding company.
No committee vote recorded
Delia and Ference said the second mutual savings bank contacted by DFR had no objection to the language. The committee did not take a formal vote during the session; members asked clarifying questions about how the changes differ from current practice and whether state approval would be required in conversion applications. DFR said the agency would sign off on applicable state regulatory matters related to a holding-company application but that the federal regulator (the FDIC or Federal Reserve) would have final authority over conversion approvals.
Ending
Committee members signaled a willingness to accept language that clarifies corporator composition and fiduciary duties but asked for further briefings on how the language would operate in practice. No formal committee action was recorded during the hearing.
