Committee Advances Bill Letting Mutual Banks Choose North Dakota State Charter

Corey Krebs, assistant commissioner at the North Dakota Department of Financial Institutions, told the Industry and Business Committee that House Bill 1507 would create a state charter for cooperative financial institutions and update Title 6 of the North Dakota Century Code to allow state regulation where appropriate.

"This bill creates a type of charter," Corey Krebs said, describing a structure aimed at giving mutually owned banks a state-charter choice last available in North Dakota before 2007. Krebs said the change is intended to preserve dual state-federal chartering options and "create an element of competition" between state and federal regulators.

Rick Kleberg, president and CEO of the North Dakota Bankers Association, said bankers approached Representative Volmer to reinstate a charter option that federal regulators and industry developments have made more relevant. "We approached Representative Volmer about introducing this bill," Kleberg said, adding that the bill mirrors a prior North Dakota statute and that the association supports giving mutual institutions a state option.

The bill amends multiple sections of Title 6 to align cooperative institutions with existing law governing community banks where appropriate, and it creates one new section tailored to governance, capitalization and conversion processes unique to cooperative financial institutions. Krebs said fees for organizers, branches and conversions would be set comparable to community-bank rates and that the department does not expect immediate conversions to the new charter.

Jeff Olson of the Dakota Credit Union Association testified that credit unions are cooperatives that currently rely on a not-for-profit federal structure and that switching to a state cooperative charter would have important tax and capital implications for credit unions. Mike Monroe from the Secretary of State's office told the committee the state's business-filing system would need programming updates (estimated at $47,000 if added immediately or $6,000 if added to a later upgrade).

After public testimony, Senator Klein moved a "do pass" motion on engrossed House Bill 1507; Senator Castle seconded. The clerk recorded a 5-0 committee vote in favor of a do-pass recommendation, and the measure was re-referred to the Appropriations Committee.

Ending: The committee recommended House Bill 1507 for passage to the next stage; department witnesses said no immediate conversions are expected and fiscal impacts to the department will depend on whether and when an institution chooses to convert.