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Bruce Rauner, Governor
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State Banking Board of Illinois



Meeting of Tuesday, December 10, 1996
Office of Banks and Real Estate
Chicago, Illinois

The quarterly meeting of the State Banking Board of Illinois was called to order at 10:30 a.m. by Chairman Jack Schaffer. Roll call was taken and a quorum was present.

Members Present

Jack Schaffer, Chairman
Commissioner, Office of Banks and
Real Estate
Bernard Chauvel
Caisse National de Credit Agricole
Susan J. Dubs
Richmond Bank, Richmond
Robert Field
Bank of Homewood, Homewood
Jack Lageschulte
Public Member, Barrington Hills
Anna Wall Scott
Public Member, Urbana
Charles Waterman
South Holland Trust & Savings Bank, South Holland
Harlan Yates
Cisne State Bank, Cisne

Members Absent

A. Dean Decker
Central Trust and Savings Bank, Geneseo
Donald Gutowski
Public Member, Norridge
Kenneth Stark
Community Bank, Plymouth
Donald Pratt
First Bank, BC, Capron

Staff Present

Arthur J. Appl, Jr., Director, Division of International Bank Supervision
Robert L. Burke, Director, Division of Commercial Bank Supervision - Chicago
Scott D. Clarke, Assistant Commissioner, Bureau of Banks and Trust Companies
Debra J. Rath, Administrative Assistant, Bureau of Banks and Trust Companies
Dale R. Turner, General Counsel


Chairman Schaffer asked if there were any additions or corrections to the September 26, 1996 minutes. There being none, Mr. Waterman moved and Ms. Scott seconded the approval of the September 26, 1996 minutes as presented. The motion carried unanimously.


In response to a concern about check fraud raised at the last meeting, Mr. Clarke contacted the U.S. Secret Service. They have a video available to banks and also come directly to the bank and provide check fraud training to bank personnel at no charge. Anyone interested in receiving more information should contact the nearest district office of the U.S. Secret Service.

Ms. Dubs asked if any research had been conducted on the proposed Section 16.5 of the Illinois Banking Act since the last meeting. Mr. Clarke indicated that federal law requires that banks perform criminal history inquiries on their potential employees. The American Bankers Association has an agreement with the FBI and will provide fingerprint checks for $35 for their members, and most of the local police departments will run criminal history checks for their local bank for any prospective employees. All checks require a signed release from the individual.

The Bureau subscribes to an on-line system which ties directly into the Illinois State Police network. There is a $7.00 charge for each name that is checked. We have also engaged an outside firm to conduct livescan fingerprinting. The charge is $50.00 per person. The information is submitted to the FBI and takes approximately 6-8 weeks to receive the results.

A Section 51 Notice was issued to a southern Illinois institution last week, by the Commissioner. The bank was engaged in unsafe and unsound activities and were given a time frame specified by the Commissioner for which the problems must be corrected. Agency management looks for the problems to be resolved and a merger to take place by the end of 1996.

Interstate Trust Branching - Since federal law currently does not have a provision for interstate trust branching, the Conference of State Bank Supervisors is recommending that all states adopt a provision allowing interstate trust branching, similar to that of interstate bank branching. The Agency's proposed legislation will be shared with the two bank associations and the corporate fiduciary association and their comments will be solicited.

Insurance Powers - Commissioner Schaffer provided the Board with a status report on insurance powers for state-chartered banks and indicated that industry representatives and the trade associations were currently in negotiations. The legislative leaders directed the groups involved to come an agreement or the issue could be put to rest for a couple of years. Commissioner Schaffer felt that some type of an agreement would be reached.

Sale of Annuities - After several discussions, the Commissioner's Office and the Illinois Department of Insurance have come to an agreement on the sale of variable rate annuities by state banks. The Department of Insurance will be issuing a letter of understanding to the Commissioner's Office, indicating that they do not feel a variable annuity is an insurance product and effectively authorizing state banks to get into that business. The issue should be resolved by early January.


Collection of Agency Fees - In an effort to increase efficiency and reduce costs, the Agency is looking to implement the collection of fees by automatic clearinghouse transactions by June 30, 1997. Legislation was initiated last year which specifically authorized the Agency to collect the fees in that manner. Once the electronic procedure has been implemented, banks will continue to receive a remittance advice indicating the amount to be deducted from the bank's account. A procedure for appeal will also be implemented.

Mr. Field moved and Mr. Waterman seconded a motion recommending the Commissioner's Office to implement mandatory bank participation in the collection of the quarterly regulatory fees through automatic clearinghouse transactions. The motion carried unanimously.

Mr. Clarke indicated that modifying the Agency's fee schedule is being considered in order to attract more financial institutions to Illinois and put all of the banks on a more even playing field. Later this month, the proposed schedule will be put into rule form and circulated in the industry for comment.

Federal Savings Bank Conversions - Commissioner Schaffer stated that federal savings bank conversions continue to increase, at a rate of about one every six weeks. Commissioner Schaffer felt confident that as the deadline for the federal thrift charter approaches, a significant number of the federal thrifts will convert to state charters, either commercial bank charters, or savings bank charters. He looks for this activity to continue.

Promotion of the State Charter - The Commissioner's Office is scheduling a meeting in Chicago with all of the major Chicago and Washington-based law firms to discuss the benefits of the state charter.


Commissioner Schaffer indicated that the Agency has an aggressive legislative package for next year. The two most significant changes are (1) acquiring the option to extend the examination period from one year to 18 months which would provide ease in scheduling alternating examinations with the feds; and (2) enhancement of the "wildcard" provision in the Illinois Banking Act.

Mr. Waterman asked if the an alternating program with the feds had been explored for trust examinations. Mr. Clarke said that the Agency currently alternates examinations with the Federal Reserve of Chicago and St. Louis for 1 and 2 rated institutions. The Federal Reserve's report is accepted by the Agency in the alternating year. He indicated that a similar program had not been entered into with the FDIC because their primary focus in on risks to the insurance fund and not in specialized areas. He added that in the year when the FDIC conducts a full scope examination, the Commissioner's office would not go in and would accept the FDIC's report.

Asked about off-site monitoring in the trust area, Mr. Clarke stated that it is difficult to conduct an off-site examination when dealing with wills and other trust related documents.

A brief discussion took place on ATM surcharging and what measures could be taken to avoid exorbitant charges. The continuing evolution of the use of ATMs and safety concerns was suggested as a topic for a future meeting.

In addition to the staff members who regularly attend the meetings, Commissioner Schaffer introduced Tom Schober, who recently joined the Agency in Chicago to oversee the Consumer Services Section, and Mike Herter, who serves as Assistant Director of the Springfield Commercial Banking Division and Edwardsville District Supervisor.

Board member agreed to hold the March meeting in Springfield since the legislature would be in session at that time.


There being no further business before the Board, Mr. Lageschulte moved to adjourn the meeting. Mr. Chauvel seconded. The motion carried unanimously. The meeting adjourned at 11:55 a.m.


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