A.R.S. tit. 6 ch. 2 — Arizona Revised Statutes Title 6 Chapter 2 — Bank Organization And Regulation

6-181. Declaration of purposes The purposes of this chapter, which shall govern judicial and administrative interpretation and application of the provisions of this chapter, are to provide for: 1. Safe and sound conduct of banks. 2. Conservation of bank assets. 3. Maintenance of public confidence in banks. 4. Protection of the interests of depositors and fiduciary beneficiaries and of the interest of the public in the soundness and preservation of the banking system. 5. Opportunity for banks to remain competitive with each other, with financial institutions existing under other laws of this state and with banking and financial institutions existing under the laws of other states, the United States and foreign countries. 6. Opportunity for banks to serve effectively the convenience and needs of their depositors, borrowers and other customers, to participate in and promote the economic progress of this state and the United States and to improve and expand their services and facilities for those purposes. 7. Opportunity for management of banks to exercise business judgment in conducting banking affairs subject to this chapter. 8. Simplification and modernization of the law governing banking and governing the exercise of fiduciary and other representative powers by banks. 9. Implementation and execution of this chapter by the full utilization of the rulemaking and administrative discretions of the deputy director. 6-182. Transition All banks shall be operated in accordance with the provisions of this chapter, except that transactions validly entered into before the effective date of this chapter and the rights, duties and interests flowing from them remain valid thereafter and may be terminated, completed, consummated or enforced as required or permitted by any statute amended or repealed by the law by which this chapter was enacted as though such amendment or repeal had not occurred. 6-183. Rights, powers and privileges of national banks Except as prohibited by federal law, a national bank with a banking office in this state shall have all the rights, powers and privileges and shall be entitled to the same exemptions and immunities as banks holding banking permits under this chapter. 6-184. General corporate and banking powers; incidental powers; deposit insurance; federal reserve and home loan bank membership; agency relationship A. A corporation holding a banking permit under this chapter may: 1. Except as prohibited by law, exercise the powers derived from its existence as an Arizona corporation. 2. Except as prohibited by law, exercise any power and engage in any activity which it could exercise or engage in if it were a national banking association with a banking office in this state. 3. Directly or through a bank subsidiary engage in any lawful activity that is reasonably related or incidental to banking. All activities in which any bank was lawfully engaged directly or through a subsidiary on December 31, 1971 are declared to be incidental and related to banking for the purposes of this paragraph. 4. Do the acts necessary to obtain and maintain insurance of its deposits by the federal deposit insurance corporation. 5. Do the acts necessary to acquire and hold membership in the federal reserve system or the federal home loan bank. 6. Except as prohibited by law, directly or through a bank subsidiary, make any loan or investment, offer accounts or engage in any business activity authorized for national banking associations, federal savings banks, or state or federally chartered or licensed savings and loan associations doing business in this state. This paragraph is subject to section 33-1571. 7. Except as prohibited by law and subject to such rules as the deputy director may adopt, through a bank subsidiary, invest in real estate in the state or interests therein, including corporations, partnerships, and joint ventures that acquire, develop, improve, hold, lease, operate and sell real estate. This paragraph is subject to section 33-1571. B. An in-state financial institution or an out-of-state financial institution may act as an agent of any other in-state financial institution or out-of-state financial institution that is a subsidiary of the same holding company for purposes of conducting the activities authorized by this subsection. This subsection applies regardless of whether the affiliated entities share the same home state. An in-state financial institution or an out-of-state financial institution entering into an agency relationship shall notify the deputy director of that agency relationship at least ten days before the effective date of that agency relationship. Agency relationships among affiliates shall be consistent with safe and sound business practices and shall comply with all applicable laws and rules. An in-state financial institution or an out-of-state financial institution acting as an agent is not deemed to be a branch of the affiliate solely because of activities lawfully conducted pursuant to this subsection. An in-state financial institution or an out-of-state financial institution that is acting as an agent for an affiliated entity may do any of the following: 1. Receive deposits. 2. Renew time deposits. 3. Service loans. 4. Receive payments on loans and other obligations. 5. Perform other customary banking services with the prior approval of the deputy director. C. An in-state financial institution or an out-of-state financial institution acting as an agent as prescribed by subsection B of this section on behalf of an affiliated financial institution may not do any of the following: 1. Open demand, savings or time accounts. 2. Evaluate or approve loans. 3. Disburse loan monies. 4. Conduct any activity as an agent that it is prohibited from conducting as a principal under any applicable law or rule. D. An in-state financial institution or an out-of-state financial institution that is acting as a principal as prescribed by subsection B of this section may not have its affiliated entity act as an agent on its behalf in conducting any of the following: 1. Any activity that is prohibited to the principal. 2. Any activity that is prohibited to the agent. 6-185. Board of directors' meetings; review; report of failure of quorum to meet A meeting of the board of directors of a bank shall be called each month or each quarter. The deputy director shall designate for each bank whether the board shall meet monthly or quarterly. The deputy director may change the designation at any time without providing the bank advance notice. At the meetings, the board shall review the loans and investments and other material activities of the bank or review a report thereof prepared under the direction of the board as a regular item of business. The board shall keep minutes of all meetings including a record of attendance. If at any required meeting a majority of the members are not present, the bank shall notify the deputy director in writing of that fact. 6-186. Annual audit and report A. An audit of the affairs of the bank including an out-of-state bank shall be made annually as of the end of its fiscal year by or under the direction of the board of directors. The deputy director may prescribe certain minimum requirements of the audit and shall require the filing of a copy of the report covering the audit with the deputy director. The audit shall be filed with the deputy director not more than one hundred twenty days after the end of the bank's or out-of-state bank's fiscal year, unless the deputy director extends the time period for good cause shown. The audit is not a substitute for or in lieu of the examination by the deputy director required by section 6-122. B. An out-of-state bank may satisfy an audit requirement by filing with the deputy director a copy of the audit report that is required by its home state regulator within fifteen days after filing that report with the home state. 6-187. Authority to declare dividends; limitation The board of directors of a bank may declare dividends as allowed by the general laws governing Arizona corporations, except that dividends payable other than in the bank's own stock may be paid out of capital surplus only with the approval of the deputy director. 6-188. Bonds and insurance; coverage The board of directors shall require protection and indemnity for the bank against defalcation, forgery, theft and other similar insurable losses, with corporate insurance or surety companies authorized to do business in this state. Coverage against defalcation shall include all active officers and employees of the bank whether or not they draw salary or compensation. 6-189. Capital obligations; approval; convertibility A. A capital obligation is an unsecured indebtedness of the bank subordinate to the claims of depositors and all other creditors of the bank regardless of whether the claims arose before or after the issuance of the note or debenture representing the capital obligation. In the event of liquidation all depositors and other creditors of the bank are to be paid in full before any payment of principal or interest is made on capital obligations. B. No capital obligations shall be incurred without the prior order of approval of the deputy director. Capital obligations authorized by such order may be retired in accordance with the mandatory payment provisions of the obligation without further authorization. No payment shall be made under an optional right of payment reserved to the bank without the separate authorization of the deputy director, which may be granted in the deputy director's initial order of approval or by subsequent order. C. Capital obligations may be convertible into shares of any class of stock in accordance with their terms approved by the deputy director. No shareholder has any preemptive right to purchase capital obligations or to purchase stock issued upon conversion of capital obligations unless provided by the articles of incorporation or specified in the corporate authority to incur the obligation. 6-190. Bank offices; standards and term of approval; closing; automated teller machines A. A bank may establish banking offices anywhere in the world with the authorization of the deputy director and on such conditions as the deputy director may prescribe. An application for a banking office shall be in writing in such form as the deputy director prescribes supported by such information, data and records as the deputy director may require to make the findings necessary for approval. B. In granting the application for a banking office, the deputy director shall be guided by the standards prescribed for the issuance of a banking permit insofar as such standards are reasonably applicable. C. The failure of a bank to open and operate a banking office within one year after the deputy director approves the application shall automatically terminate the approval, except that the deputy director, for good cause shown in writing made before the expiration of the one-year period, may extend for additional periods not in excess of six months each the time in which the banking office may be opened. D. A bank may permanently close less than all of its banking offices on compliance with such requirements of notice as have been prescribed by the deputy director and such closing shall terminate the authority to maintain the office which is closed. E. A bank may establish or maintain an automated teller machine at locations other than its places of business. The bank must send a notification letter to the deputy director at least thirty days before the automated teller machine is established pursuant to this subsection. F. A bank may, without the approval of the deputy director and through contractual agreement with one or more other banks or automated teller machine providers, join in the operation of automated teller machine networks. 6-191. Foreign banking offices; additional powers; separate accounts; additional offices; definition A. In addition to its other powers, a bank may through any foreign banking office act as fiscal agent of the United States and, except as prohibited or limited by regulations of the deputy director, exercise such powers as are usual in connection with the business of banking in the places where such foreign banking office transacts its business. B. The accounts of each foreign banking office shall be maintained independently of the accounts of all other banking offices and the profit or loss of the office for each fiscal year shall be recorded as a separate item in the general ledger of the bank. C. A bank having a foreign banking office, on thirty days' notice to the deputy director, or such shorter notice as may be approved by the deputy director in individual cases, may establish such additional banking office or offices as specified in the notice in the same country without filing an application for approval, unless otherwise ordered by the deputy director. D. For the purposes of this section, the term "foreign banking office" means a banking office in a foreign country or in a dependency or insular possession of the United States. 6-192. Investments in international and foreign banking and financing corporations; limitation; consent; exceptions A. No bank, without the consent of the deputy director, may invest in stock or other evidence of ownership in any of the following: 1. Corporations organized under the laws of the United States or any state and principally engaged in international or foreign banking or in other international or foreign financial operations, or in banking or other financial operations in a dependency or insular possession of the United States, either directly or through the agency, ownership or control of local institutions in foreign countries, or in such dependencies or insular possessions. 2. Banks organized under the laws of a foreign country or a dependency or insular possession of the United States. No investment shall be made in a foreign bank if it is engaged directly or indirectly in any activity in the United States unless the activity is in the judgment of the deputy director, incidental to the international or foreign business of such bank. B. The aggregate amount invested in all banks and corporations described in subsection A of this section shall not exceed, at the time any such investment is made, twenty-five percent of the capital account of the bank as defined in section 6-351. C. The consent of the deputy director for any investment under subsection A of this section shall be subject to such conditions as the deputy director prescribes in the deputy director's order of approval, and the investment shall be subject to his regulations. D. The provisions of subsections A and B of this section shall not apply to shares or evidences of ownership acquired by a bank in the regular course of securing or collecting a debt contracted in good faith but shares or evidence of ownership acquired in collecting a debt shall be disposed of within a reasonable time unless otherwise lawfully held under subsections A and B of this section. 6-193. Bank and holding company subsidiaries; powers A subsidiary of a bank or a nonbank subsidiary of a holding company may: 1. Deal in and underwrite all obligations issued or guaranteed by or on behalf of a state or a political subdivision of a state or an agency or instrumentality of either a state or political subdivision. 2. Organize, sponsor, operate and control an investment company, as defined in section 3 of the investment company act of 1940 (15 United States Code section 80a-3), and underwrite, deal in, sell and distribute, as principal or agent, or both, the securities of such an investment company. 3. Deal in and underwrite: (a) Promissory notes secured by real estate mortgages. (b) Credit obligations secured by real or personal property or manufactured housing. (c) Participation interests in such notes and credit obligations. (d) Mortgage related payment bonds secured by such notes or participation interests. 4. Underwrite, deal in, sell and distribute, as principal or agent, or both, commercial paper issued by any entity. 6-201. Authority to engage in banking business; exception A. No person, except a national banking association with its home office in this state or bank authorized to do business in this state pursuant to section 6-217 or section 6-322, subsection A, shall engage in the banking business in this state without a banking permit. B. For the purposes of this section, a person engaged in the business of receiving money on deposit subject to payment by check or any other form of order or request or on presentation of a certificate of deposit or any other evidence of debt is engaged in the banking business. C. Nothing in this section shall prohibit a savings and loan association qualified to do business in this state from performing any acts authorized by chapter 3 of this title, a credit union qualified to do business in this state from performing any act authorized by chapter 4 of this title, a licensee or authorized delegate under chapter 12 of this title from performing any act regulated by that chapter or a trust company qualified to do business in this state that maintains savings accounts or time deposits pursuant to section 6-882 from performing any act authorized by chapter 8 of this title. 6-202. Existing banks The authority under which an existing bank is engaged in the banking business or the banking and trust business under the laws of this state before August 8, 1973 shall continue in full force and effect. The deputy director, may, and shall on request, issue a banking permit to such bank to evidence such authority without any further act on the part of the bank or the payment of any fee. 6-203. Application for banking permit; organizational application; final application A. Except as otherwise provided in this section, an application for a banking permit or amendment to a banking permit shall be in writing, in such form as the deputy director may prescribe, and shall be supported by such information, data and records as the deputy director may require to make the findings necessary for the issuance or amendment of the permit. B. The deputy director shall establish an organizational application process and a final application process for new banking permit applications. The organizational application must include: 1. The historical description of the organizing group. 2. The proposed type of regulatory filing for the bank. 3. The proposed committee structure and its membership. 4. The completed biographical and financial report for each organizer. 5. The completed background permission form for each organizer. 6. The business plan summary. 7. The financial plan reflecting both the objectives of the strategic plan and the bank's capital adequacy under the current capital guidelines. 8. The projected organizational budget for the project. 9. The articles of incorporation and the bylaws of the organizing corporation. 10. The proposed offering circular, escrow account information and stock certificate. C. The department may accept an organizational application for a new banking permit without simultaneously filing with the federal deposit insurance corporation. D. The final application for a new banking permit may begin at any time during the organizational phase. The required capital must be raised during the final application process. 6-204. Issuance of banking permit; trust business; conditional approval; hearing; banker's bank; definitions A. On the filing of an application for a banking permit, the deputy director shall make or cause to be made an investigation and examination of the facts concerning the applicant. Except as provided in subsection F of this section, the deputy director shall issue the permit if, but only if, the deputy director finds: 1. The applicant is a corporation organized under the laws of this state having powers and purposes to engage in the banking business. 2. The deposits of the bank will be insured by the federal deposit insurance corporation when the bank commences business. 3. The ability of the persons involved in the organization and management of the proposed bank is such as to demonstrate that it will be operated in a sound and lawful manner. 4. The applicant has paid in capital that is adequate for its prospective business. 5. The need for the bank in the community or area where the bank will be located is such as to demonstrate the favorable prospect for a sound banking operation. B. An application that is not denied or approved by the deputy director within ninety days after the application is filed with the deputy director is deemed to be approved by the deputy director as of the first day after the period. C. A banking permit may initially or by amendment include the authority of a bank to engage in the trust business. D. The deputy director may approve the application conditioned on specific requirements being met, but a permit shall not be issued unless such conditions have been met within the time specified in the order or any extension. E. The permit may be granted or denied without a hearing, but the deputy director may, and shall at the request of the applicant, fix a date for a hearing on the application. At the hearing any person may be heard with reference to the facts to be investigated. F. The deputy director shall not issue a banking permit pursuant to subsection A of this section for a banker's bank unless all of the following apply: 1. The stock of the applicant is owned exclusively by one or more state or nationally chartered banks or, if the stock is owned by a holding company, the holding company's stock is owned exclusively by one or more state or nationally chartered banks. 2. The applicant engages in or will engage exclusively in providing banking services to or for other depository institutions or their holding companies and the directors, officers or employees of the depository institutions. 3. The applicant offers or will offer correspondent banking services for other depository institutions or their holding companies. 4. The applicant is fully insured by the federal deposit insurance corporation. 5. No single entity acquires or retains at any time ownership, control or power to vote more than ten percent of any class of voting securities of the banker's bank. G. For purposes of this section: 1. "Banker's bank" means an entity that is owned exclusively by one or more state or nationally chartered banks or bank holding companies and that exclusively provides banking services to or for other depository institutions and their holding companies. 2. "Nationally chartered bank" means a bank or savings bank chartered by the office of the comptroller of the currency or the office of thrift supervision. 6-205. Term of permit; surrender; revocation A. A banking permit shall be valid until surrendered to the deputy director or revoked by the deputy director. B. A banking permit may not be surrendered to the deputy director until such time as the deputy director finds that all of the deposit liabilities of the bank have been satisfied in full or assumed by another bank. C. A banking permit expires automatically when a bank is placed in receivership. 6-211. Definitions In this article, unless the context otherwise requires: 1. "Converting bank" means a bank converting from a national to a state bank, or the reverse. 2. "In-state financial institution" means a state or national bank or savings and loan association with its home office in this state, or holding company with its home office in this state. 3. "Merger" includes consolidation. 4. "National bank" means a national banking association located in this state. 5. "Out-of-state financial institution" means a state or national bank or savings and loan association with its home office in a state other than this state, or holding company with its home office in a state other than this state. 6. "Resulting bank" means the bank resulting from a merger or conversion. 7. "State bank" means a corporation holding a banking permit under the laws of this state. 6-212. Resulting national bank Nothing in the law of this state shall restrict the right of a state bank to merge with or convert into a national bank. The action to be taken by such merging or converting state bank and its rights and liabilities and those of its stockholders shall be as prescribed at the time of the action by the law of the United States, but the state bank shall give notice to the deputy director of the adoption by its board of directors of any plan of merger or conversion. 6-215. Retention of nonconforming assets; permission; maximum value If a merging or converting bank has assets that do not conform to the requirements of law for a state bank or if assets acquired by a state bank in the transaction of its assuming deposit liabilities of another bank do not conform to such legal requirements, the deputy director may allow the resulting bank to retain such assets for a reasonable time, but shall fix the maximum value at which the assets may be carried by the resulting or assuming bank. 6-216. Continuation of business and corporate entity A resulting state bank shall be considered the same business and corporate entity as each merging bank or converting bank. All rights of property, franchises and interests of each merging bank or the converting bank shall be transferred to and vested in the resulting state bank by virtue of such merger or conversion without any deed or other transfer. The resulting state bank, without any order or other action on the part of any court, shall hold and enjoy all rights of property, franchises and interests, including appointments, designations and nominations, and all other rights and interests as trustee, executor, administrator, conservator, guardian, registrar of stocks and bonds, assignee, receiver and in every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises and interests were held or enjoyed by any one of the merging banks or the converting bank at the time of the merger or conversion. Any reference to the merging bank or converting bank in any contract, will or other document, whether executed or effective before or after the merger or conversion, shall be a reference to the resulting bank. 6-217. Emergency acquisition of in-state financial institution A. Notwithstanding any other provisions of law, an in-state financial institution or out-of-state financial institution may acquire an in-state financial institution if the deputy director determines that both of the following exist: 1. The in-state financial institution proposed to be acquired is in danger of being placed in receivership by the deputy director or the relevant federal agency. 2. The acquisition is necessary to protect the financial interests of the in-state financial institution's depositors and creditors. B. The deputy director shall make the deputy director's final determination under this section in writing. 6-231. Deposit accounts A bank may maintain all types of deposit accounts and prescribe such terms and conditions relating to the accounts as are permissible for the bank to maintain the insurance on its deposits by the federal deposit insurance corporation. 6-232. Powers of attorney; notice of revocation; payment after notice A. A bank may continue to recognize any act of a depositor's agent as authorized by the depositor in writing to the bank until the bank receives a written notice of revocation signed by the individual depositor who granted the authority or, in the case of a corporation, partnership or association, evidence satisfactory to the bank of such revocation. B. Notwithstanding that a bank has received written notice of revocation of the authority of such agent, it may, until ten days after receipt of such notice, pay any item made, drawn, accepted or indorsed by such agent prior to such revocation, provided that such item is otherwise properly payable. 6-233. Adverse claim to bank deposit; court order required; definitions A. Notice to a bank of an adverse claim is not sufficient to require the bank to refuse to honor the order of any person to whose credit the account stands or who has prior authority on the books of the bank to operate the account, nor is such notice sufficient to require the bank to recognize the adverse claimant in any respect, unless the bank is directed to do so by a lawful order of a court in the United States. In the absence of such court order the bank may refuse to honor the order on the account by any person. B. For the purposes of this section: 1. "Adverse claim" means a claim by any person who asserts the right to all or part of a deposit account to the exclusion of anyone to whose credit the account stands on the records of the bank. "Adverse claim" also includes conflicting claims of any persons to the right to operate an account. 2. "Adverse claimant" means any person asserting an adverse claim. 6-234. Deposit of minor; school saving plan A. A bank may operate a deposit account in the name of a minor or in the name of two or more persons, one or more of whom are minors, and all rights and liabilities of the bank and any depositor arising out of such account and any act of the parties in relation thereto shall be of the same legal effect as if the minor is of full legal age. B. Subject to such regulations as the deputy director may prescribe for the protection of depositors, a bank may contract with the proper authorities of any elementary or secondary school, or of any institution caring for minors, for the participation by the bank in any school or institutional thrift or savings plan, and it may accept deposits at such a school or institution, either by its own collector or by any representative of the school or institution who becomes the agent of the bank for such purpose. 6-235. Bank deposits in two or more names; payment to survivor Bank deposits may be made in the name of two or more persons, including minors, payable to either or any of them, or payable to either or any of the survivors or the sole survivor, and the deposits or any part thereof and any interest thereon, may be paid to or on order of any of the persons whether the other or others are living or not. The receipt, order or acquittance of the persons so paid is a valid and sufficient release and discharge to the bank for any payments so made. 6-236. Payment of deposits in trust Bank deposits may be made in the name of one or more persons as trustees for one or more persons designated as beneficiaries. The account and any balance thereof which exists from time to time shall be held as a trust account and unless otherwise agreed between the trustees and the bank: 1. Any such trustee during the trustee's lifetime may change any of the designated beneficiaries by a written direction accepted by the bank. 2. The deposit or any part thereof with interest may be paid to or on the order of any trustee whether any other trustee or beneficiary is living or not. Any such payment shall constitute a lawful revocation of the trust as to the amount withdrawn and the receipt order or acquittance of the person so paid is a valid and sufficient release and discharge of the bank as to the amount so paid. 3. Upon the death of the last surviving trustee the deposit or any part thereof with interest may be paid to or on order of any of the persons designated as beneficiaries who are living at the death of the last surviving trustee and the receipt order or acquittance of the person so paid is a valid and sufficient release and discharge of the bank as to the amount so paid. 6-237. Payment of deposit to foreign personal representative If the deposit account is with one person and if within sixty days from the date of death of such depositor, no personal representative of such decedent, qualified in this state, has delivered a certified copy of letters testamentary or letters of administration to the bank, the bank may pay the balance of the account of the deceased depositor to the depositor's domiciliary personal representative qualified in another state upon the presentation of letters testamentary or letters of administration certified by the appointing court. 6-241. Banking days; notice; closing A. A bank is authorized to fix from time to time the days and hours when each of its banking offices that are located in this state will be open to the public for its banking business. The days and hours need not be the same for each office. The bank shall notify the deputy director of the days and hours of each banking office and of any change in the scheduled days and hours of each office. The bank shall give further notice by whatever means it selects as best calculated to advise the public of any change. B. In an emergency or threat of an emergency or other circumstances beyond the control of the bank that would imperil persons or property or impede normal operations, all or any of its banking offices that are located in this state may be or remain closed. Notice of the closing shall be given to the deputy director as promptly as conditions will allow. The deputy director may order the reopening of any office on the deputy director's finding that conditions justifying the closing under this subsection do not then exist. C. Any day on which a bank shall pursuant to this section be or remain closed shall with respect to the bank be deemed a legal holiday. D. Any office of a bank may be closed under subsection A or B of this section, even though other offices of the bank are open, but any day of such closing shall not be a legal holiday in respect to any acts to be performed by or at the bank on such day unless the act is to be performed only by or at the office which is closed. E. Where pursuant to agreement or law any act is to be performed by or at a bank on any day when such bank shall pursuant to this section be or remain closed, the act may be performed on the next succeeding banking day with the effect as though performed on the appointed day. F. Nothing in any law of this state shall in any manner whatsoever affect the validity of or render void or voidable the payment, satisfaction or acceptance of any check or other negotiable instrument or any other transaction by a bank because done or performed on any holiday or partial holiday or during any time other than regular banking hours, but this subsection does not compel a bank to perform any of the acts or transactions aforesaid except at its own option. G. This section applies to out-of-state banks. 6-242. Preservation of bank records; regulations; disposal A. Every bank shall retain its corporate and business records in accordance with regulations of the deputy director. The regulations shall classify the records, establish allowable methods for effective and economical preservation of information contained in the records if the originals are destroyed pursuant to regulation, and prescribe the minimum periods of time each record or allowed substitute shall be preserved. B. In issuing the regulations under subsection A of this section, the deputy director shall consider: 1. Actions at law and administrative proceedings in which the production of bank records might be necessary or desirable. 2. Statutes of limitation applicable to such action or proceedings. 3. The availability of information contained in bank records from other sources. 4. Such other matters as the deputy director deems pertinent in order that the deputy director's regulations will require banks to retain records for as short a period of time as is commensurate with the interests of bank customers and shareholders and of the people of this state in having bank records available. C. A bank may dispose of any record or allowed substitute that has been retained for the applicable record prescribed in accordance with the terms of this section, and shall thereafter be under no duty to produce such a record in any action or proceeding. 6-243. Acquisition of property to satisfy or protect loans Except as specifically prohibited by law, a bank may take property of any kind to secure or satisfy or partially secure or partially satisfy an obligation to the bank. 6-244. Borrowing by bank; treatment as capital A bank may borrow money and issue evidence of indebtedness, but no borrowings shall be treated as capital except in compliance with section 6-189. 6-245. Pledge of assets; rediscount; exception to requirement of security A. A bank may pledge, mortgage or otherwise hypothecate its assets: 1. To qualify the bank to act as a fiscal agent for any governmental entity. 2. To secure deposits which are required by law to be secured. 3. To secure borrowings from one business day to the next from another bank. 4. To secure borrowings from a federal reserve bank or any federal agency. 5. To secure other obligations, exclusive of deposits, provided the aggregate value of the assets as carried on the books of the bank encumbered for purposes other than those specified in paragraphs 1 through 4 of this subsection shall not exceed the capital account of the bank except with the approval of the deputy director. B. Subsection A of this section does not prohibit or limit the sale or rediscount of commercial paper or securities with endorsement, guarantee or agreement to repurchase. C. If, by the law of this state, a bank is required to provide security for deposits in the form of collateral, surety bond or any other form, such security is not required to the extent such deposits are insured by the federal deposit insurance corporation. For the purposes of this subsection, acceptable security for deposits includes: 1. Certificates of deposit insured by an agent or instrumentality of the United States. 2. Interest bearing savings deposits in banks and savings and loan associations doing business in this state whose accounts are federally insured. 3. United States government obligations. 4. Municipal bonds and bonds issued by a state, county or school district. 5. Obligations for which the payment of principal and interest is guaranteed by the United States or by an agency or instrumentality of the United States. 6. Registered warrants if offered as security for monies of the county by which they are issued. 7. First mortgages and trust deeds together with the promissory notes or other evidences of indebtedness described in the instruments on improved, otherwise unencumbered real estate located in this state if no single mortgage or trust deed represents more than ten percent of the total collateral security and the promissory note or other evidence of indebtedness secured by the mortgage or trust deed has been in existence for at least three years and no default with respect to the promissory note or other evidence of indebtedness has occurred during its existence. 6-246. Permitted investments; limitations A. In addition to other investments authorized by law, a bank or trust company that is acting as a fiduciary may invest and reinvest in the securities of an open-end or closed-end management investment company or investment trust that is registered under the investment company act of 1940 (15 United States Code section 80a-1), as amended, if the portfolios of that investment company or investment trust consist of investments permitted by the applicable fiduciary instrument. A bank or trust company may invest in these securities notwithstanding that the bank or trust company, or an affiliate of the bank or trust company, provides services to the investment company or investment trust as an investment adviser, custodian, transfer agent, registrar, sponsor, distributor, administrator, manager or otherwise and receives reasonable remuneration for those services. B. A bank or trust company that invests and reinvests in the securities of an open-end or closed-end management investment company or investment trust authorized under subsection A of this section shall disclose in the statement of the fiduciary account to all persons whose funds are invested in the investment company or investment trust that the bank or trust company provides services for and receives fees from the open-end or closed-end management company or investment trust. A person who complies with the requirements of section 14-10802, subsection F satisfies the disclosure requirements of this subsection. C. A bank may purchase for its own account any class of equity securities issued by a banker's bank, as defined in section 6-204, if the aggregate investment does not exceed ten per cent of the bank's capital. 6-251. Short title This article may be cited as the uniform special deposits act. 6-252. Definitions In this article, unless the context otherwise requires: 1. "Account agreement" means an agreement that: (a) Is in a record between a bank and one or more depositors; (b) May have one or more beneficiaries as additional parties; and (c) States the intention of the parties to establish a special deposit as governed by this article. 2. "Bank" means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, trust company and a bank as defined in section 6-101. Each branch or separate office of a bank is a separate bank for the purpose of this article. 3. "Beneficiary" means a person that: (a) Is identified as a beneficiary in an account agreement; or (b) If not identified as a beneficiary in an account agreement, may be entitled to payment from a special deposit: (i) Under the account agreement; or (ii) On termination of the special deposit. 4. "Contingency" means an event or circumstance stated in an account agreement that is not certain to occur but must occur before a bank is obligated to pay a beneficiary. 5. "Creditor process" means attachment, garnishment, levy, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant. 6. "Depositor" means a person that establishes or funds a special deposit. 7. "Good faith" means honesty in fact and observance of reasonable commercial standards of fair dealing. 8. "Knowledge" of fact means: (a) With respect to a beneficiary, actual knowledge of the fact; or (b) With respect to a bank holding a special deposit: (i) If the bank has established a reasonable routine for communicating material information to an individual to whom the bank has assigned responsibility for the special deposit and maintains reasonable compliance with the routine, actual knowledge of the fact by the individual; or (ii) If the bank has not established and maintained reasonable compliance with a routine described in item (i) of this subdivision or otherwise exercised due diligence, implied knowledge of the fact that would have come to the attention of an individual to whom the bank has assigned responsibility for the special deposit. 9. "Obligated to pay a beneficiary" or "obligation to pay a beneficiary" means a beneficiary is entitled under the account agreement to receive from the bank a payment when: (a) A contingency has occurred; and (b) The bank has knowledge the contingency has occurred. 10. "Permissible purpose" means a governmental, regulatory, commercial, charitable, or testamentary objective of the parties stated in an account agreement. The terms includes an objective to: (a) Hold funds: (i) In escrow, including for a purchase and sale, lease, buyback, or other transaction; (ii) As a security deposit of a tenant. (iii) That may be distributed to a person as remuneration, retirement or other benefit, or compensation under a judgment, consent decree, court order, or other decision of a tribunal; or (iv) For distribution to a defined class of persons after identification of the class members and their interest in the funds; (b) Provide assurance with respect to an obligation created by a contract, such as earnest money to ensure a transaction closes; (c) Settle an obligation that arises in the operation of a payment system, securities settlement system, or other financial market infrastructure. (d) Provide assurance with respect to an obligation that arises in the operation of a payment system, securities settlement system, or other financial market infrastructure; or (e) Hold margin, other cash collateral, or funds that support the orderly functioning of financial market infrastructure or the performance of an obligation with respect to the infrastructure. 11. "Person" means an individual, estate, business or nonprofit entity, government or governmental subdivision, agency, or instrumentality, or other legal entity. The term includes a protected series, however denominated, of an entity if the protected series is established under law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. 12. "Record" means information: (a) Inscribed on a tangible medium; or (b) Stores in an electronic or other medium and retrievable in perceivable form. 13. "Special deposit" means a deposit that satisfies section 6-255. 14. "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any other territory or possession subject to the jurisdiction of the United States. The term includes an agency or instrumentality of the state. 6-253. Scope; choice of law; forum A. This article applies to a special deposit under an account agreement that states the intention of the parties to establish a special deposit governed by this article, regardless of whether a party to the account agreement or a transaction related to the special deposit, or the special deposit itself, has a reasonable relation to this state. B. The parties to an account agreement may choose a forum in this state for settling a dispute arising out of the special deposit, regardless of whether a party to the account agreement or a transaction related to the special deposit, or the special deposit itself, has a reasonable relation to this state. C. This article does not affect: 1. A right or obligation relating to a deposit other than a special deposit under this article; or 2. The voidability of a deposit or transfer that is fraudulent or voidable under other law. 6-254. Variation by agreement or amendment A. The effect of this section and sections 6-252, 6-253, 6-255, 6-256, 6-258, 6-259, 6-260, 6-261 and 6-264 may not be varied by agreement, except as provided in those sections. Subject to subsection B of this section, the effect of sections 6-257, 6-262 and 6-263 may be varied by agreement. B. A provision in an account agreement or other record that substantially excuses liability or substantially limits remedies for failure to perform an obligation under this article is not sufficient to vary the effect of this article. C. If a beneficiary is a party to an account agreement, the bank and the depositor may amend the agreement without the consent of the beneficiary only if the agreement expressly permits the amendment. D. If a beneficiary is not a party to an account agreement and the bank and the depositor know the beneficiary has knowledge of the agreement's terms, the bank and the depositor may amend the agreement without the consent of the beneficiary only if the amendment does not adversely and materially affect a payment right of the beneficiary. E. If a beneficiary is not a party to an account agreement and the bank and the depositor do not know whether the beneficiary has knowledge of the agreement's terms, the bank and the depositor may amend the agreement without the consent of the beneficiary only if the amendment is made in good faith. 6-255. Requirements for special deposits A deposit is a special deposit if it is: 1. A deposit of funds in a bank under an account agreement. 2. For the benefit of at least two beneficiaries, one or more of which may be a depositor. 3. Denominated in a medium of exchange that is currently authorized or adopted by a domestic or foreign government. 4. For a permissible purpose as stated in the account agreement; and 5. Subject to a contingency. 6-256. Permissible purpose A. A special deposit must serve at least one permissible purpose stated in the account agreement from the time the special deposit is created in the account agreement until termination of the special deposit. B. If, before termination of the special deposit, the bank or a court determines the special deposit no longer satisfies subsection A of this section, sections 6-258, 6-259, 6-260 and 6-261 cease to apply to any funds deposited in the special deposit after the special deposit ceases to satisfy subsection A of this section. C. If, before termination of a special deposit, a bank determines the special deposit no longer satisfies subsection A of this section, the bank may take action it believes is necessary under the circumstances, including terminating the special deposit. 6-257. Payment to beneficiary by bank A. Unless the account agreement states otherwise, the bank is obligated to pay a beneficiary if there are sufficient actually and finally collected funds in the balance of the special deposit. B. Except as provided in subsection C of this section, the obligation to pay the beneficiary is excused if the funds available in the special deposit are insufficient to cover such payments. C. Unless the account agreement provides otherwise, if the funds available in the special deposit are insufficient to cover an obligation to pay a beneficiary, a beneficiary may elect to be paid the funds that are available or, if there is more than one beneficiary, a pro rata share of the funds available. Payment to the beneficiary making the election under this subsection discharges the bank's obligation to pay a beneficiary and does not constitute an accord and satisfaction with respect to another person obligated to the beneficiary. D. Unless the account agreement provides otherwise, the obligation of the bank obligated to pay a beneficiary is immediately due and payable. E. The bank may discharge its obligation under this section by: 1. Crediting another transaction account of the beneficiary; or 2. Taking other action that: (a) Is permitted under the account agreement for the bank to obtain a discharge; or (b) Otherwise would constitute a discharge under law. F. If the bank obligated to pay a beneficiary has incurred an obligation to discharge the obligation of another person, the obligation of the other person is discharged if action by the bank under subsection E of this section would constitute a discharge of the obligation of the other person under law that determines whether an obligation is satisfied. 6-258. Property interest of depositor or beneficiary A. Neither a depositor nor a beneficiary has a property interest in a special deposit. B. Any property interest with respect to a special deposit is only in the right to receive payment if the bank is obligated to pay a beneficiary and not in the special deposit itself. Any property interest under this subsection is determined under other law. 6-259. When creditor process enforceable against bank A. Subject to subsection B of this section, creditor process with respect to a special deposit is not enforceable against the bank holding the special deposit. B. Creditor process is enforceable against a bank Holding a special deposit with respect to an amount the bank is obligated to pay a beneficiary or a depositor if the process: 1. Is served on the bank; 2. Provides sufficient information to permit the bank to identify the depositor or the beneficiary from the bank's books and records; and 3. Gives the bank a reasonable opportunity to act on the process. C. Creditor process served on a bank before it is enforceable against the bank under subsection B of this section does not create a right of the creditor against the bank or a duty of the bank to the creditor. Other law determines whether creditor process creates a lien enforceable against the beneficiary on a contingent interest of a beneficiary, including a depositor as a beneficiary, even if not enforceable against the bank. 6-260. Injunction or similar relief A court may enjoin, or grant similar relief that would have the effect of enjoining, a bank from paying a depositor or beneficiary only if payment would constitute a material fraud or facilitate a material fraud with respect to a special deposit. 6-261. Recoupment or setoff A. Except as provided in subsection B or C of this section, a bank may not exercise a right of recoupment or setoff against a special deposit. B. An account agreement may authorize a bank to debit the special deposit: 1. When the bank becomes obligated to pay a beneficiary, in an amount that does not exceed the amount necessary to discharge the obligation; 2. For a fee assessed by the bank that relates to an overdraft in the special deposit account; 3. For costs incurred by the bank that relate directly to the special deposit; or 4. To reverse an earlier credit posted by the bank to the balance of the special deposit account, if the reversal occurs under an event or circumstance warranted under other law of this state governing mistake and restitution. C. The bank holding a special deposit may exercise a right of recoupment or setoff against an obligation to pay a beneficiary, even if the bank funds payment from the special deposit. 6-262. Duties and liability of bank A. A bank does not have a fiduciary duty to any person with respect to a special deposit. B. When a bank holding a special deposit becomes obligated to pay a beneficiary, a debtor-creditor relationship arises between the bank and beneficiary. C. A bank holding a special deposit has a duty to a beneficiary to comply with the account agreement and this article. D. If the bank holding a special deposit does not comply with the account agreement or this article, the bank is liable to a depositor or beneficiary only for damages proximately caused by the noncompliance. Except as provided by other law of this state, the bank is not liable for consequential, special, or punitive damages. E. The bank holding a special deposit may rely on records presented in compliance with the account agreement to determine whether the bank is obligated to pay a beneficiary. F. If the account agreement requires payment on presentation of a record, the bank shall determine within a reasonable time whether the record is sufficient to require payment. If the agreement requires action by the bank on presentation of a record, the bank is not liable for relying in good faith on the genuineness of the record if the record appears on its face to be genuine. G. Unless the account agreement provides otherwise, the bank is not required to determine whether a permissible purpose stated in the agreement continues to exist. 6-263. Term and termination A. Unless otherwise provided in an account agreement, a special deposit terminates five years after the date the special deposit was first funded. B. Unless otherwise provided in the account agreement, if the bank cannot identify or locate a beneficiary entitled to payment when the special deposit is terminated, and a balance remains in the special deposit, the bank shall pay the balance to the depositor or depositors as a beneficiary or beneficiaries. C. A bank that pays the remaining balance as provided under subsection B of this section has no further obligation to the special deposit. 6-264. Principles of law and equity Title 47, consumer protection law, law governing deposits generally, law related to escheat and abandoned or unclaimed property, and the principles of law and equity, including law related to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, and bankruptcy, supplement this article except to the extent inconsistent with this article. 6-265. Uniformity of application and construction In applying and construing this article, a court shall consider the promotion of uniformity of the law among jurisdictions that enact it. 6-266. Transitional provision This article applies to: 1. A special deposit made under an account agreement executed on or after September 26, 2025; and 2. A deposit made under an agreement executed before September 26, 2025, if: (a) All parties entitled to amend the agreement agree to make the deposit a special deposit governed by this article; and (b) The special deposit referenced in the amended agreement satisfies section 6-255. 6-267. Severability If a provision of this article or its application to a person or circumstance is held invalid, the invalidity does not affect another provision or application that can be given effect without the invalid provision. 6-271. Reserves against deposits; rule; limitations Banks that are not members of the federal reserve system shall maintain such legal reserves as are from time to time fixed by rule of the deputy director, not to exceed fourteen percent of demand deposits or seven percent of time and savings deposits. 6-272. Deposits exempt from reserve requirement In determining the legal reserves required by this article a bank may deduct from its gross deposits such deposits as are lawfully secured and each deposit balance due to another bank to the extent of a reciprocal deposit due from such other bank. 6-273. Form of reserves; limitations Legal reserves shall consist of: 1. Cash. 2. Cash items in the process of collection payable immediately on presentation in the United States. 3. Unpledged obligations of the United States maturing not more than six months after the date the obligation is used for reserve purposes at par. 4. Net deposit balances with each reserve depository in this state, exclusive of deposits not payable on demand unless evidenced by a negotiable certificate of deposit maturing not more than six months from the date the certificate is used for reserve purposes. 5. Net deposit balances with each out-of-state reserve depository, exclusive of deposits not payable on demand unless evidenced by a negotiable certificate of deposit maturing not more than six months after the date the certificate is used for reserve purposes, in an amount either approved by the deputy director in writing or not more than the amount fully insured by the federal deposit insurance corporation or the national credit union administration or any successor agency. 6-275. Computation of reserves Compliance with reserve requirements shall be determined as of the close of business on the first Thursday following the effective date of this chapter and every alternate Thursday thereafter on the basis of the average daily reserves maintained during the fourteen day period ending on such Thursday and the average daily net deposit balances for the fourteen day period ending on the Tuesday previous to such Thursday. 6-321. Definitions In this article, unless the context otherwise requires: 1. "Acquire" as applied to an in-state financial institution means any of the following actions or transactions: (a) The merger or consolidation of an in-state financial institution with an out-of-state financial institution. (b) The acquisition by an out-of-state financial institution of the direct or indirect ownership or control of voting shares of an in-state financial institution if, after the acquisition, the out-of-state financial institution