Oklahoma Government Sites of Interest

Oklahoma Banking Law Changes
On November 1, 2003, the following significant changes go into effect for banks in Oklahoma. Most relate only to state chartered banks, unless otherwise indicated. All references are to Sections of the Oklahoma Banking Code unless otherwise indicated:

Real Estate. Section 414. State Chartered banks must obtain written authorization from the Bank Commissioner before purchasing real estate for expanding the bank and generally other purposes as well. National banks in Oklahoma do not have a similar requirement. The only change is that the written approval that was already required is now clarified to be required "prior" to the purchase. It has been the practice of the Department to give permission after the fact (when permission is warranted), but effective November 1, 2003, they will be required to call such a real estate purchase without prior written permission a violation of law. It is suggested that state chartered banks which have real estate that has been acquired for such purposes should submit a letter to the Commissioner requesting authorization to own/hold the real estate before November 1 to avoid any issues under this statute. In addition, with prior written permission, certain real estate development activities are permitted for state chartered banks under a new subsection added. Restrictions will be imposed and can be crafted for each bank seeking approval to engage in such activities. It is expected such activities will be appropriate to be carried out in or through a Financial Subsidiary.

Loan/Deposit Production Offices. Section 424. This amendment requires all out of state banks to apply to the Commissioner to operate loan/deposit production offices in Oklahoma and also sets forth a more complete statutory description of what constitutes a loan/deposit production office for both Oklahoma and out of state banks. There is authorization for the Commissioner to allow certain limited activities fitting into the statute to be engaged in by both Oklahoma and out of state banks without the necessity of filing an application. The law doesn't state whether the provisions will apply to national banks from out of state, so a national bank located in Texas wanting to establish a loan production office in Oklahoma may need to at least contact the Oklahoma Banking Department on this issue. A state chartered bank from Texas would appear to be required to go through the process.

Mergers. Section 1111. The Banking Board, rather than the Commissioner will have statutory authority to approve mergers of state banks with other entities. It has been the practice of the Commissioner to refer nearly all mergers to the Board anyway, so this simply codifies the Commissioner's long-standing practice of deferring such matters to the Board.

Trust offices. Sections 1701 - 1722. Trust branch and representative office applications to the Commissioner now require a fee similar to that of branch applications ($2000) and loan/deposit production offices ($500). The application of this law to national bank trust offices is an issue that should be addressed with the Oklahoma Banking Department.

Limited Liability Company as a bank. Title 18 Okla. Stat. Section 2002. Banks were previously prohibited from forming as a limited liability company and thus, had to form as a corporation. The restriction is removed and state chartered banks may form as limited liability companies. Limited liability companies can choose to be taxed as a partnership, receiving similar tax treatment for the LLC and its ownership as sub chapter "S" elections for corporations.

Pass-through withholding. As of August 29, 2003, banks and bank holding companies in Oklahoma that have elected Sub S status or subsidiaries/affiliates which are limited liability companies, partnerships or similar pass-through tax entities under federal tax law, have a new law requiring distribution withholdings which would appear to not distinguish between national banks and state chartered banks. The law also applies to all pass-through entities in Oklahoma, such as partnerships, limited liability companies not taxed as a corporation, and trusts. The law requires that any Sub S or other pass-through entity that makes a distribution (e.g., dividend) to a non-resident member MUST deduct and withhold Oklahoma income tax of 5% of the distributed amount from each such distribution. The Oklahoma Tax Commission has posted a helpful explanation at www.oktax.state.ok.us/passwith.html. All banks/holding companies with non-resident recipients of distributions should review this information and contact the Tax Commission or their tax professional if any questions remain.

Banking Department Self Funded. As a result of many years of effort, the Oklahoma Banking Department has finally "won back its freedom." For years, the department has assessed state chartered banks and turned the assessment funds over to the state's general revenue fund, only to have to go to the legislature to have that same money (less whatever share the legislators would keep for other state funding needs) appropriated back to operate the department. This last session, many of you "went to bat" for the department and the result is that the department is now "self-funded," i.e., the department's assessments go to the department and the department works from those funds to regulate the bank's paying the assessment. A small set percentage of those assessments are turned over to the state to pay for the services the department receives from other state agencies, such as the state Treasurer's office, Central Services, employment and retirement services, and the like. Fees for various applications and such also stay with the department. There are very few agencies with this kind of arrangement, so it is significant this was accomplished.

Smoke Free Workplace. On September 1, 2003, the new Oklahoma Smoking in Public Places and Indoor Workplaces Act took effect for all Oklahoma workplaces and includes state and national banks and their branches, loan production offices and other offices. Smoking in an indoor, publicly accessed workplace is prohibited. An indoor workplace includes work areas, employee lounges, restrooms, conference rooms, classrooms, employee cafeterias, hallways, any other spaces used or visited by employees, at any given time, whether or not work is being performed. This would include a bank and any facility used by a bank at which work is done by bank personnel or other workers doing work for the bank to which the public has access. Thus, the lobby, public hallways, restrooms, etc., would be included. The bank must post "smoke free" or "tobacco free" signs at least 4"x2" in size at each public entrance to the facility. Private offices occupied by one or more smokers that are only occasionally visited by the public or non-employees are not included in this law. Office areas only occasionally visited by the public where more than one person works, can only be smoking office areas if the only people who work in the area are smokers. Smoking rooms or areas may be provided under certain very specific restrictions. Any bank with an elevator must prohibit smoking on the elevator and post no smoking signs in accordance with the law. Violating the law is a misdemeanor crime, punishable by a fine. A website address, www.breatheeasyok.com has been set up to provide information, or, you can call CBAO's legal hotline at 405/329-9101 with specific questions as to the posting requirements. Also, your city or county may have adopted certain requirements that must be adhered to as well.