STATE BANKING BOARD OF ILLINOIS

Meeting of Wednesday, October 7, 1998

Chicago, Illinois

I.     CALL TO ORDER

The meeting of the State Banking Board of Illinois was called to order at 10:07 a.m. by Chairman Jack Schaffer. Roll call was taken and a quorum was present.

Members Present

Joy French Becker, Chairman
The Farmers State Bank and Trust Company, Jacksonville, Illinois

Thomas Bugielski, President and CEO
Founders Bank, Worth, Illinois

Craig S. Burkhardt
Public Member, Springfield, Illinois

Susan J. Dubs, President
State Financial Bank, Richmond, Illinois

John G. Eck, Senior Vice President
ABN AMRO Bank, N.V., Chicago, Illinois

Gary N. Edwards, Chairman
Wemple State Bank, Waverly, Illinois

Mark G. Field, Chairman, President and CEO
The Farmers Bank of Liberty, Liberty, Illinois

Donald Gutowski
Public Member, Norridge, Illinois

Jack Schaffer, Chairman
Office of Banks and Real Estate

Members Absent

A. Dean Decker, President and CEO
Central Trust and Savings Bank, Geneseo, Illinois

Sondra Healy
Public Member, Winnetka, Illinois

Dennis B. Long, Chairman and CEO
Bank of Rantoul, Rantoul, Illinois

Paul V. Reagan, Senior Vice President and U.S. General Counsel
Harris Trust and Savings Bank, Chicago, Illinois

Judith Quesenberry, CEO and Vice President
The First State Bank, Grand Chain, Illinois

Charles Waterman, Chairman and CEO
South Holland Trust & Savings Bank, South Holland, Illinois

Staff Present

Arthur J. Appl, Jr., Director, Division of International Bank Supervision
Patrick A. Brady, Deputy Commissioner
Jerry D. Cavanaugh, Assistant General Counsel
Scott D. Clarke, Assistant Commissioner, Bureau of Banks and Trust Companies
Russell E. Curry, Director, Division of Commercial Bank Supervision-Springfield
Kathy Glynn, Administrative Assistant, Bureau of Banks and Trust Companies
Dina Mansour, Senior Corporate Attorney, Corporate Activities Section
Wesley Maynard, Assistant Director, Division of Commercial Bank Supervision-Chicago
Dale Turner, General Counsel

II.     APPROVAL OF MARCH 19, 1998 MINUTES

Chairman Schaffer requested additions or corrections to the March 19, 1998 minutes. There being none, Mr. Eck moved to approve and Ms. Dubs seconded. The motion carried unanimously.

III.     DIVISION REPORTS

Mr. Art Appl, Director of International Bank Supervision, provided an overview of the division’s responsibilities and briefly explained the numerical rating system used by the division.

He noted the effects of the European Union are beginning to show up as potential mergers of European banks which could have an affect on local revenues.

Mr. Appl explained the new FBO Desktop information system being implemented which will allow the agency to receive and transmit reports and input data into the national database.

Mr. Russ Curry, Director of Commercial Bank Supervision, Springfield, provided an explanation of the division’s function and responsibilities and discussed the bank rating system in detail.

Mr. Wesley Maynard, Assistant Director of Commercial Bank Supervision, Chicago, provided a report on the activities of the division and gave an overview of the status of banks under their supervision. He briefly discussed the ELVIS examination documentation system and noted the name would be changing soon.

Ms. Dina Mansour, Senior Corporate Attorney, Corporate Activities Section, reported seeing high activity in the area of de novo banks. She stated six permits have been issued for new charters and several applications are pending. She is also seeing increased interest in branches, interstate activity, and insurance subsidiaries.

IV.     BUREAU OF BANKS AND TRUST COMPANIES UPDATE

Mr. Scott Clarke, Assistant Commissioner, Bureau of Banks and Trust Companies, updated the Board on recent activities.

The Bureau of Banks and Trust Companies is planning two Day with the Commissioner programs in October for officers and directors of banks and trust companies. All Board members are invited to attend.

Also in October, a two-day training session for all bank examiners within the Bureau of Banks and Trust Companies is planned. This is an opportunity to have all examiners from all the divisions together for updates similar to those presented at the Day with the Commissioner programs, and also provides and opportunity for recognition of outstanding performance and accomplishments throughout the year.

The agency has three examiners participating with the International Monetary Fund (IMF) in the Ukraine. There are several Illinois companies that, to different extents, have trading activities in the Ukraine. Our focus is to determine if our Illinois companies have stable financial institutions with which to deal.

The agency’s web site continues to expand. A handout sampling the different types of information available was distributed. The agency will add our own web server within the next week that adds an additional firewall protection.

For the fourth year in a row we were pleased to be able to give a rebate to our banks at the end of the fiscal year. This year’s revenues were higher than expenses, which allowed us to rebate banks in proportion to the amount they paid in for quarterly assessments, application fees, and various other fees for service.

Mr. Clarke reported on behalf of the Specialized Activities Division who was unable to attend due to Y2K training. The division is seeing additional activity in the formation of trust companies. There are currently 34 independent trust companies and 250 departments of banks, savings and loans, and savings banks with trust assets exceeding $1.6 trillion supervised by the agency.

A current version of the Illinois Banking Act and Related Laws publication is now available. Every bank will receive two complimentary copies which contain all the new banking laws and the agency’s administrative rules.

Commissioner Schaffer will host a meeting of the District II Midwest Banking Commissioners in October. In addition to discussing Y2K efforts, they will also work on developing individual agreements with other banking departments to help enhance supervision of each state’s institutions.

There is a potential need to restructure the agency’s fee schedule. The agency is putting in a considerable amount of extra time and effort to ensure banks are Y2K compliant. Some fees that have never been increased may need to be and there is the possibility of establishing a minimum fee for each institution. Fees are set by Administrative Rule. By the end of this calendar year we hope to have the Administrative Rule amended and out for Public Comment. Mr. Clarke encouraged the Board’s input and wanted to alert them of the possible restructuring prior to publishing the issue for public comment. The consensus of the board was they did not want to see a decrease of training provided to examiners or not providing examiners with equipment to do their jobs. The board indicated that a modest increase in fees along with restructuring the fee schedule would be appropriate.

V.     LEGISLATIVE, RULEMAKING AND INTERPRETIVE LETTER UPDATE

They agency’s major piece of legislation this year was the expansion of the wild card provision covered in the Illinois Banking Act. The wild card provision states a state chartered bank has the ability to do anything a national bank can, not withstanding the provisions outlined in the Illinois Banking Act, which gave them a competitive edge. With support of the agency and trade associations, the governor signed into law a bill which modified the wild card to provide that not withstanding the provisions of any state law, a state chartered bank can provide any product or service an insured savings association could do as well. Clarifications in the bill do not allow for real estate brokerage activity or expand or restrict branching activities.

Mr. Jerry Cavanaugh, Assistant General Counsel, provided an update on additional legislation and overviewed the interpretive letters covered in the handout provided in the meeting package.

VI.     YEAR 2000 UPDATE

Mr. Clarke briefly outlined the issues related to Year 2000 (Y2K) readiness and stated our examiners, along with all the federal regulators, have been examining banks specifically to determine Y2K readiness. Every bank has been examined for Phase I of Y2K readiness which covers awareness and planning issues. By March 31, 1999 every bank in the state will receive an on-site Phase II exam conducted by either the Office of Banks & Real Estate or one of the federal agencies.

Our general estimate is that most banks are well underway with their Y2K preparedness and we do not anticipating many problems.

VII.     ROLE OF THE STATE BANKING BOARD WITH RESPECT TO ORDERS OF REMOVAL AND PROHIBITION  

Mr. Cavanaugh distributed a handout addressing issues raised covering the role of the State Banking Board in relation to Orders of Removal and Orders of Prohibition in addition to procedures to be followed in such an event. He invited the board members to review the memoranda and contact him with questions.

VIII.     1999 LEGISLATIVE PROPOSALS

Commissioner Schaffer noted this had been a relatively quiet year for legislation. Mr. Clarke referred to a handout outlining the 1999 legislative proposals in detail. He noted the bills are still in the draft stage and invited board members to review and provide any thoughts or comments they may have.

IX.     OPEN DISCUSSION FOR BOARD MEMBERS

There were no additional items for discussion.

X.    ADJOURNMENT

There being no further business before the board, Mr. Eck moved to adjourn the meeting. Ms. Becker seconded. The motion carried unanimously. The meeting adjourned at 12:02 p.m.