SB-0750, As Passed House, May 18, 2016

SUBSTITUTE FOR

SENATE BILL NO. 750

     A bill to amend 1999 PA 276, entitled

"Banking code of 1999,"

by amending section 4301 (MCL 487.14301).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 4301. (1) A bank may purchase, sell, underwrite, and hold

investment securities that are obligations in the form of bonds,

notes, or debentures of a type and to the extent permitted by this

act.

     (2) A bank may hold, without limit, any of the following:

     (a) Obligations of the United States, or obligations that are

guaranteed fully as to principal and interest by the United States,

or any general obligations of any state or of any political

subdivision of a state.

     (b) Obligations issued under authority of the farm credit act

of 1971, Public Law 92-181, 85 Stat. 583.by an entity of the

federally chartered Farm Credit System.

     (c) Obligations issued by banks for cooperatives.

     (d) Obligations issued by the federal home loan banks.

     (e) Obligations insured by the secretary under title IX of the

national housing act, chapter 847, 65 Stat. 295, 12 U.S.C. 1750,

1750b to 1750c, and 1750e 12 USC 1750 to 1750g.

     (f) Obligations insured by the secretary under section 207 of

title II of the national housing act, chapter 847, 48 Stat. 1252,

12 U.S.C. 12 USC 1713, if the debentures to be issued in payment of

the insured obligations are guaranteed as to principal and interest

by the United States.

     (g) Obligations, participations, or other instruments of or

issued by the federal national mortgage association Federal

National Mortgage Association or the government national mortgage

association.Government National Mortgage Association.

     (h) Mortgages, obligations, or other securities that are or

ever have been sold by the federal home loan mortgage corporation

Federal Home Loan Mortgage Corporation under 12 U.S.C. USC 1454 or

1455.

     (i) Obligations of a public housing agency, as defined in

section 1437a of the United States housing act of 1937, chapter

896, 88 Stat. 654, 42 U.S.C. 42 USC 1437a.

     (j) Obligations of a local public agency, as defined in former

42 U.S.C. USC 1460(h), secured by a loan agreement between the

local public agency and the secretary of the United States

department of housing and urban development.Department of Housing

and Urban Development.

     (k) Any other investment security authorized by order or

declaratory ruling of the commissioner.director.

     (3) Subject to the exercise of prudent banking judgment, a

bank may engage in the underwriting of any of the following

investment securities:

     (a) Obligations of the United States or any political

subdivision of the United States.

     (b) Obligations of any state or any a political subdivision

thereof.of any state.

     (c) Obligations of the international bank for reconstruction

and development.International Bank for Reconstruction and

Development.

     (d) Obligations of the inter-American development bank.Inter-

American Development Bank.

     (e) Obligations of the Asian development bank.Development

Bank.

     (f) Obligations of the Tennessee valley authority.Valley

Authority.

     (g) Obligations issued by any state or political subdivision

or agency of a state or political subdivision for housing,

university, or dormitory purposes.

     (h) Obligations of the African development bank.Development

Bank.

     (i) Obligations of the international finance

corporation.International Finance Corporation.

     (j) Other obligations listed in subsection (2).

     (k) Other obligations authorized by order or declaratory

ruling of the commissioner.director.

     (4) A bank may purchase for its own account other investment

securities, but the total amount of investment securities of any 1

obligor or maker, held by a bank under this subsection, shall not

exceed at any time 25% of its capital and surplus.

     (5) The statutory limitation on the amount of investment

securities of any 1 obligor or maker that may be held by a bank

shall be is determined on the basis of the par or face value of the

securities.generally accepted accounting principles unless

otherwise directed or permitted in writing by the director for

safety and soundness reasons.

     (6) A bank shall not purchase investment securities

convertible into stock at the option of the issuer.

     (7) The restrictions and limitations of this section with

respect to a bank acquiring and holding securities for its own

account do not apply to securities acquired through foreclosure on

collateral, or acquired in good faith by way of compromise of a

doubtful claim or to avoid a loss in connection with a debt

previously contracted. This section does not limit the investment

authority of a bank granted by any other section of this act.

     (8) If a bank invests funds in a security, obligation, or

other instrument that at the time is permitted under this part, the

investment subsequently becomes impermissible because of a change

in circumstances or law, and the director finds that continuing to

hold the investment will have an adverse effect on the safety and

soundness of the bank, the director may require that the bank

develop a reasonable plan for the divestiture of the investment.

     Enacting section 1. This amendatory act takes effect 90 days

after the date it is enacted into law.

     Enacting section 2. This amendatory act does not take effect

unless all of the following bills of the 98th Legislature are

enacted into law:

     (a) Senate Bill No. 748.

     (b) Senate Bill No. 749.