Blog Series: Regulatory Relief is Provided for Iowa Banks

On July 1, the most significant change to the legal landscape for Iowa banks in a generation occurred when new amendments to Iowa Code Chapter 524 became effective. For the next several weeks, Dickinson Law will cover some of the most significant changes and how they affect Iowa banks.

In the 2022 Iowa legislative session, Senate File 586 was passed that provides a comprehensive review and modernization of the Iowa Banking Act (the “Act”), Iowa Code chapter 524. The provisions of the bill became effective on July 1, 2022.

This blog serves as part of a continuing series of blog posts by our firm that will dive deeper into some of the notable changes to the Act. This series correlates with the Iowa Division of Banking’s (“IDOB”) letter sent to interested parties highlighting some of the key changes.

The Act contains many substantive revisions, including changes that reduce the regulatory burden on Iowa banks. With good fortune, the amendment discussed in this blog will not only make the lives of Iowa bankers a little easier, but will contribute to the continued success of Iowa’s banking industry.

AMENDMENTS PROVIDING REGULATORY RELIEF

The Act has always included various regulatory reporting obligations for Iowa banks, but under the revised Act, the regulatory burden on banks should now be reduced.

For example, state banks are now only required to submit a call report to federal regulators and will only be required to provide a separate call report to the IDOB or to complete the IDOB call report signature page upon request. Due to this change, the Superintendent may rely on a statement of condition a state bank submits to the FDIC or the Federal Reserve System.

In furtherance of providing regulatory relief, the requirement for state banks to deliver to the Superintendent a summary of the significant audit findings after the state bank conducts their annual internal audit has been abolished. The requirement for banks to complete and retain this audit still remains and banks should be prepared to provide the report to IDOB examiners if the examiners determine it is necessary to do so.

Iowa banks may now enter into contracts or arrangements with shareholders or any other affiliate to pay for management or financial services without prior approval from the Superintendent. However, the Act inserts a new provision that specifies the fees paid to the shareholder or affiliates must comply with Section 23A and 23B of the Federal Reserve Act, which imposes restrictions on a bank’s loans to, purchases of assets from, and certain other transaction with, affiliates. The Superintendent still has the authority to review fees paid to bank affiliates to determine if the fees are reasonable.

Some of the regulatory burdens on a bank’s operations are now reduced as well. The enacted legislation reflects the modern ability for bank officers to effectively oversee offices remotely by removing the requirement that a bank officer or office manager be physically present at each bank office during a majority of its business hours. Due to modern technology and changes in data processing and recordkeeping, the Act also removes the requirement that the central executive and official business and principal recordkeeping functions be exercised only at the state bank’s principal place of business or at another bank office as authorized by the Superintendent. You should anticipate further guidance in the area of remote work in the future.

The bill also removes the requirement to have a state bank’s principal place of business within a municipal corporation due to the understanding of and encouragement of banks seeking to maintain a physical presence in Iowa’s small towns and rural communities. In a related change, a state bank no longer has to publish notice of the proposed change of location of the principal place of business and the Superintendent now has a shortened time period from 180 days to 90 days to approve or disapprove the application to move the location.

Overall, these revisions are intended to modernize the Iowa Banking Act, which had not gone through a comprehensive review since the mid-1990s. In the next installment of the blog series, our firm will discuss a few key changes to the IDOB’s regulatory authority.
 

Looking for a "Window of Opportunity"?

The attorneys at Dickinson Law are creating some great presentations on the issues that banks are facing for the 2022 Banking Law Seminar on September 8th. An agenda has just been released -- check out this year's session topics and register here.