On July 1, the most significant change in the Iowa banking legal landscape in a generation occurred when new amendments to Iowa Code Chapter 524 went into effect. Over the next few weeks, Dickinson Law will cover some of the most significant changes and how they affect Iowa banks.
Earlier this year, the Iowa Legislature passed SF 586 to modernize Iowa banking law. The provisions, which went into effect July 1, 2022, have many implications for Iowa banks and the changes surrounding bank mergers and dissolutions are significant.
One of the purposes of the bill was to update the law surrounding interstate banking. The legislature achieved this through changes regarding mergers with out-of-state banks. Section 524 now grants explicit approval for out-of-state banks to participate in Iowa mergers and vice versa. Similarly, the bill now stipulates that out-of-state banks and federally chartered credit unions are among the entities that can transform into a state bank. An additional change is the inclusion of out-of-state banks in the requirement that banks must identify their legal name on customer interfaces. Additionally, the bill removes distinctions between the process of creating a new in-state banking office and that of creating an out-of-state office. By removing some of the previous bureaucracy on mergers with out-of-state banks, the law now more clearly reflects the growing trend of interstate banking.
Another notable change concerns the criteria for approval of bank mergers by the Superintendent of Banks. Section 524.1403 has always required the Superintendent of Banks to consider “the convenience and needs of the area to be primarily served by the resulting state bank”. Today, however, its importance is underscored by the addition of specific criteria, including “the plans of the resulting state bank to accept deposits, lend money and process payments in the area primarily served by the resulting state bank.
Additionally, mergers and voluntary dissolution no longer require publication in newspapers. With this change, the Legislature recognizes the increasingly popular digital presence of banks – in fact, people are now far more likely to find the information online than to read it in a newspaper notice. There are also other instances where the new bill removes the notification requirement entirely or reduces the number of publications required.
The bill also provides that banks no longer need to file their corporate documents with their county recorder. Instead, the only place of filing required is the Iowa Secretary of State. And finally, the process for voluntary dissolution and conversion to a corporation has been clarified to specifically state that a bank must provide the Superintendent of Banks with intent clauses to be subject to Section 490 upon adoption of a plan. for this purpose, and that the entity immediately ceases to be a bank once the Superintendent of Banks files the Articles of Intent.