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Substitute House Bill No. 5409

PUBLIC ACT NO. 96-44

AN ACT CONCERNING BANK INVESTMENTS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (a) At least once a year, the governing board of each Connecticut bank shall adopt an investment policy governing investments made pursuant to part III of chapter 665 of the general statutes. No Connecticut bank shall make any investment pursuant to said part unless the purchase and holding of such investment is consistent with the Connecticut bank's investment policy. The policy shall establish standards for the making of prudent investments, which standards shall include, but not be limited to, (1) the rating of individual investments by rating services recognized by the commissioner, if any, and (2) standards for diversification of the Connecticut bank's investment portfolio among industry categories. The policy shall provide for frequent and periodic review by the Connecticut bank of investments made pursuant to this policy, and shall provide for the reasonable and expeditious divestiture of investments which the bank, upon its review, no longer deems prudent or consistent with the Connecticut bank's investment policy. The investment policy and any investment made pursuant to the policy shall be subject to the supervision of the commissioner concerning safe and sound banking practices.

(b) At least semiannually, the governing board of each Connecticut bank shall review investments made by the Connecticut bank pursuant to part III of chapter 665 of the general statutes. The minutes of the meetings of such governing board shall recite the results of each such review. The governing board shall cause the Connecticut bank to use reasonable efforts to divest as expeditiously as possible any investment which the governing board, upon its semiannual review, no longer deems prudent or consistent with the Connecticut bank's investment policy.

Sec. 2. Section 36a-250 of the general statutes, as amended by section 20 of public act 95-155, is repealed and the following is substituted in lieu thereof:

(a) Except as otherwise provided in subsections (b) and (c) of this section, a Connecticut bank may: (1) Transact a general banking business and exercise by its governing board or duly authorized officers or agents, subject to applicable law, all such incidental powers as are necessary thereto. The express powers authorized for a Connecticut bank under subdivisions (2) to (37), inclusive, of this subsection do not preclude the existence of additional powers deemed to be incidental to the transaction of a general banking business pursuant to this subdivision; (2) (A) Receive deposits as authorized by and subject to the provisions of sections 36a-290 to 36a-305, inclusive, AS AMENDED section 36a-307, sections 36a-315 to 36a-323, inclusive, and sections 36a-330 to 36a-338, inclusive, AS AMENDED including: (i) Savings deposits; (ii) time deposits; (iii) demand deposits; (iv) public funds or money held in a fiduciary capacity; (v) school savings funds; and (vi) club deposits; and (B) pay interest or dividends thereon; (3) Act as a depository of court and trust funds; (4) Receive for safekeeping or otherwise all kinds of personal property, including papers, documents and evidences of indebtedness; (5) Conduct a safe deposit business on its banking premises [or invest not more than fifteen per cent of its equity capital and reserves for loan and lease losses to purchase the stock of a Connecticut corporation organized to conduct a safe deposit business on the banking premises;] (6) Act (A) as guardian or conservator of the estate of any person, but not of the person, (B) as a trustee, receiver, executor or administrator, or (C) in any other fiduciary capacity, all without bond unless a bond is ordered by the court; (7) Act as agent or attorney in fact for the holders of securities or the owners of real estate; (8) Act as transfer agent or registrar of stocks and bonds; (9) Execute and deliver signature guaranties as may be incidental or usual in the transfer of investment securities; (10) Act as agent, fiscal agent or trustee for any corporation or for holders of bonds, notes or other securities, and pledge assets to secure deposits in its banking department when (A) made by it as trustee under a trust indenture for the holders of revenue bonds issued by this state, any municipality, district, municipal corporation or authority or political subdivision thereof, and the express provisions of the authority or its political subdivision, and the express provisions of the trust indenture require the deposit to be so secured, (B) made by it as fiscal agent for a housing authority in connection with a federally-assisted housing project and federal regulations or other requirements call for the deposits to be so secured or (C) made by it to secure deposits in individual retirement accounts and qualified retirement plan accounts, established in accordance with the applicable provisions of the Internal Revenue Code of 1986, or any prior or subsequent corresponding internal revenue code of the United States, as from time to time amended, where such deposits exceed the maximum of federal deposit insurance available for such accounts; (11) Act as fiscal agent for this state or any of its political subdivisions when authorized by the executive head of this state or of the political subdivision; (12) Act as agent (A) in the collection of taxes for any qualified treasurer of any taxing district or qualified collector of taxes or (B) for any electric, gas, water or telephone company operating within this state in receiving moneys due that company for utility services furnished by it; (13) Act as agent for the sale, issue and redemption of obligations of the United States and pledge assets to the United States or to the proper federal reserve bank for its obligations as that agent; (14) (A) Act as agent for an insured depository institution affiliate in receiving deposits, renewing time deposits, closing loans, servicing loans and receiving payments on loans and other obligations, and in so doing shall not be considered to be a branch of such affiliate; (B) A Connecticut bank may not conduct any activity as an agent under subparagraph (A) of this subdivision which such bank is prohibited from conducting as a principal; (15) Act as treasurer of any organization exempt from federal income taxation under Section 501 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; (16) Establish a charitable fund, either in the form of a charitable trust or a nonprofit corporation to assist in making charitable contributions, provided (A) the trust or nonprofit corporation is exempt from federal income taxation and may accept charitable contributions under Section 501 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, (B) the trust or nonprofit corporation's operations shall be disclosed fully to the commissioner upon request, and (C) the trust department of the bank or one or more directors or officers of the bank act as trustees or directors of the fund; (17) In the discretion of a majority of its governing board, make contributions or gifts to or for the use of any corporation, trust or community chest, fund or foundation created or organized under the laws of the United States or of this state and organized and operated exclusively for charitable, educational or public welfare purposes, or of any hospital which is located in this state and which is exempt from federal income taxes and to which contributions are deductible under Section 501(c) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; (18) Discount, purchase and sell accounts receivable, negotiable and nonnegotiable promissory notes, drafts, bills of exchange and other forms of indebtedness; (19) (A) Accept for payment at future dates drafts drawn upon it, and (B) except as provided in section 36a-299, AS AMENDED sell or issue without charge negotiable checks or drafts drawn by or on the bank. Negotiable checks or drafts drawn, sold or issued by a bank may be drawn on that bank or be payable by or through another bank or out-of-state bank; (20) Make secured and unsecured loans and issue letters of credit as authorized by and subject to section 36a-260; (21) (A) Issue credit cards and debit cards and enter into card agreements with the bank's card holders and with other card issuers, (B) lend money to individuals, honor drafts and similar orders drawn or accepted, whether by written instrument or electronic transmission, and pay and agree to pay obligations incurred in connection with those agreements, (C) become [a shareholder or member of, or become otherwise] affiliated with [,] any credit card corporation or association, and (D) subject to sections 36a-155 to 36a-159, inclusive, AS AMENDED where applicable, provide electronic fund transfer facilities and services and enter into agreements with customers and other persons regarding the provision of such facilities; (22) Provide home banking services to customers as provided in section 36a-170; (23) Contract for and pay the premiums upon life insurance in the amount of the unpaid balance due on loans; (24) Borrow money and pledge assets therefor, and pledge assets to secure trust funds on deposit awaiting investment; (25) Enter into leases of personal property acquired upon the specific request of and for the use of a prospective lessee; (26) [Invest in bonds, notes, debentures, preferred stock, common stock and other investment securities as authorized] MAKE INVESTMENTS AS AUTHORIZED BY THIS TITLE; (27) Sell to any person, including any state or federal agency or instrumentality, any loan or group of loans legally owned by the bank, repurchase any such loan or group of loans, and act as collecting, remitting and servicing agent in connection with any such loans and charge for its acts as agent. Any such bank is authorized to purchase the minimum amount of capital stock of the applicable agency or instrumentality if required by that entity to be purchased in connection with the assignment of loans to that entity and to hold and dispose of that stock; (28) With the approval of the commissioner, deal in [,] AND underwrite [and purchase for its own account,] to the same extent as is permitted to a national banking association, obligations of: (A) The United States or any of its agencies; (B) any state or any political subdivision or instrumentality of the state or (C) Canada, any province of Canada or any political subdivision of Canada; (29) Issue and sell securities which (A) are guaranteed by the Federal National Mortgage Association or any other agency or instrumentality authorized by state or federal law to create a secondary market with respect to loans of the type originated by the bank, or (B) subject to the approval of the commissioner, relate to loans originated by the bank and are guaranteed or insured by a financial guaranty insurance company or comparable private entity; (30) Subject to the approval of the commissioner, authorize the issuance and sale of evidences of indebtedness, including debentures, debt instruments of all maturities and capital notes, at such times, in such amount and upon such terms as are determined by the governing board, provided the issuance of such evidences of indebtedness which are payable on demand or mature within five years of their issuance or which are effected in the ordinary course of business do not require the approval of the commissioner. The proceeds of such evidences of indebtedness which mature after five years of their issuance which are subordinate to the claims of depositors upon liquidation of the bank shall be considered part of its capital for the purpose of computing any loan, deposit or investment limitation under this title; (31) With the approval of and upon such conditions and under such regulations as may be prescribed or adopted by the commissioner, establish and maintain one or more mutual funds and offer to the public shares or participations therein; (32) With the written approval of the commissioner: (A) Acquire, alter or improve real estate for present or future use in the business of the bank, except that approval of the commissioner is not necessary in case of the alteration or improvement of real estate already owned by the bank or a corporation controlled by it as provided in SUBSECTION (d) OF section [36a-251]36a-27 AS AMENDED BY SECTION 5 OF THIS ACT, if the expenditure for such purposes does not in any one calendar year exceed five per cent of the bank's equity capital and reserves for loan and lease losses or five hundred thousand dollars, whichever is less; (B) purchase real estate adjoining any parcel of real estate then owned by it and acquired in the usual course of business, provided the aggregate of all investments and loans authorized in subparagraphs (A) and (B) of this subdivision and in the equipment used by such bank in its operations, together with the amount of any indebtedness incurred by any corporation holding real estate of the bank and such bank's proportionate share, computed according to stock ownership, of any indebtedness incurred by any service corporation, does not exceed fifty per cent of the equity capital and reserves for loan and lease losses of the bank, unless the commissioner finds that the rental income from any part of the premises not occupied by the bank will be sufficient to warrant larger investment; (33) Convey any real estate owned by it at the price and upon such terms of payment as its governing board or an authorized committee thereof determines and sets forth in the bank's records. If any such sale is wholly or partly for credit, a note secured by a first mortgage on the real estate may evidence that credit. With the written approval of the commissioner, the bank may accept other real estate in whole or in part for any such conveyance; (34) Establish and maintain an international banking facility, as defined in regulations adopted by the Board of Governors of the Federal Reserve System, subject to such regulations as the commissioner may adopt, in accordance with chapter 54, to specify, and impose restrictions upon, the types of activities in which the international banking facility may engage; (35) Join the Federal Reserve System [and subscribe to the stock of the federal reserve bank for the district in which the bank is situated;] (36) With the approval of the commissioner, join the Federal Home Loan Bank System [and purchase stock of the federal home loan bank established for the district in which this state is located] and borrow funds as provided under federal law; (37) Even if not expressly authorized to exercise fiduciary powers, act as trustee or custodian of a plan which qualifies as part of a retirement plan for self-employed individuals or an individual retirement account under the provisions of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, if the governing instrument limits the investment of the funds held pursuant to such plan to the following investments: (1) Savings deposits and time deposits; and (2) with respect to retirement plans for self-employed individuals, notes of members in such plans which evidence the indebtedness of such members for funds borrowed from the plans. Funds held pursuant to any plan which so qualifies may be deposited in any Connecticut bank without regard to any statutory limit on the amount which such bank may have on deposit from one depositor.

(b) Except as is permitted to savings banks under section 36a-285, no Connecticut bank shall engage in the business of marine, fire or life insurance, or fidelity, surety, accident, health, liability, credit, title or other form of casualty insurance. This subsection shall not apply to any corporation actually engaged on January 1, 1907, in the business of a title insurance and guarantee company, so far as the right of such company to continue the business of title insurance and guarantee is concerned.

(c )A Connecticut bank which is organized to function solely in a fiduciary capacity shall not be authorized to exercise any of the powers enumerated in this section to the extent that such exercise would cause it to function otherwise than in a fiduciary capacity, including, but not limited to, receiving or holding deposits of any kind, other than in a fiduciary capacity, or making loans or otherwise extending credit, other than in a fiduciary capacity.

(d)A Connecticut bank which is authorized to exercise fiduciary powers pursuant to subsection (a) of this section shall exercise such powers in compliance with the provisions of sections 36a-350 to 36a-353, inclusive, 36a-365 to 36a-372, inclusive, 36a-380 to 36a-386, inclusive, AS AMENDED and 36a-395 to 36a-399, inclusive. Sec. 3. Section 36a-261 of the general statutes, as amended by section 2 of public act 95-70 and section 1 of public act 95-250, is repealed and the following is substituted in lieu thereof: (a) As used in this section, the term "mortgage loan" means a loan, line of credit or letter of credit secured wholly or substantially by a lien on or interest in real estate, including a leasehold interest, for which the lien or interest is central to the extension of credit, but does not include the following loan transactions: (1) Loans that are to be sold by the Connecticut bank promptly after origination by such bank, without extended recourse for payment default, to a financially responsible third party, provided such loans shall be considered mortgage loans for purposes of purchases and participation by a Connecticut bank if such loans otherwise qualify as mortgage loans under this subsection. (2) Loans for which a lien on or interest in real estate is taken as additional collateral through an abundance of caution by the Connecticut bank, including loans pursuant to which the bank takes a blanket lien on all or substantially all of the assets of the borrower, and the value of the real estate is low relative to the aggregate value of all collateral. (3) Loans made to manufacturing, industrial or commercial borrowers with a lien or interest in real estate taken as all or a portion of the collateral to directly or indirectly secure such loans, when the bank looks for repayment out of the operations of the borrower's business, relying on the borrower's general credit standing and the borrower's forecast of operations. (b) (1) The assets of Connecticut banks may be invested in mortgage loans, subject to the general limitations set forth in this section. (2) Any such mortgage loan shall be secured either by (A) a first mortgage which is a first lien or (B) a mortgage which is subordinate to another mortgage or other mortgages, provided, in the case of a loan secured by a mortgage which is subordinate to another mortgage or other mortgages, which other mortgage or mortgages are held by a person other than the Connecticut bank, the real estate securing such loan is (i) residential real estate, or (ii) nonresidential real estate provided the loan does not exceed, at the time of origination, a loan-to-value ratio of fifty per cent, or (iii) nonresidential real estate in a loan transaction which, at the time of origination, exceeds a loan-to-value ratio of fifty per cent, provided the aggregate amount of all such loans made pursuant to this subparagraph (B)(iii) does not exceed, at the time of origination, twenty-five per cent of the equity capital and reserves for loan and lease losses of the Connecticut bank. A loan which was included within the aggregate limit of subparagraph (B)(iii) of this subdivision subsequently may be excluded if the loan is repaid or if the applicable loan-to-value ratio is reduced to fifty per cent or below because of a reduction in principal or senior liens, additional contributions of real estate collateral, or an increase in equity value substantiated by a current suitable appraisal or evaluation. (c) "Real estate", as used in this section, includes refrigerating equipment, dish washing equipment, stoves and clothes washing machines, hereinafter called "household equipment", used on the premises at the time of execution of the mortgage or substituted after the mortgage is executed if such equipment is specifically declared in the mortgage deed to be used as a part of the mortgaged realty, and if such mortgage declares that household equipment substituted for the original household equipment mentioned in such mortgage shall be part of the mortgaged realty. (d) The real estate shall be unencumbered, except to the extent that prior mortgages are permitted by subdivision (2) of subsection (b) of this section. A satisfactory certificate of title or other suitable form of title review issued by a suitable person approved by such Connecticut bank, or a satisfactory policy of title insurance, shall be filed with the lending bank until the loan is paid or until the loan is sold. The following are not encumbrances within the meaning of this section: (1) Reservations to the United States of America of fissionable materials, (2) leases, provided the impact of the lease is adequately reflected in the appraisal or evaluation required by subsection (e) of this section, and (3) easements, restrictions, interests and other rights (A) which do not materially adversely affect the marketability of the real estate, (B) which are otherwise adequately reflected in the appraisal or evaluation required by subsection (e) of this section, (C) where the attendant risks are satisfactorily insured under an acceptable policy of title insurance, or (D) which the bank otherwise reasonably determines do not present a material adverse risk after consideration of the relevant underwriting risks for the loan or class of loans. Connecticut banks shall adopt and implement a real estate lending policy which reflects, in accordance with safe and sound banking principles, consideration of acceptable standards for title review and title insurance.

(e) The real estate shall be appraised or otherwise suitably evaluated, before any loan is made on its security, by one or more suitable persons who are familiar with real estate values in the community where the real estate is located. Such persons shall be approved by the governing board of the Connecticut bank making the loan, or by a management committee, board committee or agent appropriately designated by such governing board in accordance with the appraisal policy required by this subsection, provided, if the loan under consideration is a loan to be insured or guaranteed by a governmental agency, the appraiser may be one who appraised the property for the governmental agency. Such appraisal or evaluation shall be in writing, shall state the amount at which the property has been appraised or evaluated and shall be filed with the Connecticut bank until the loan is paid or until the loan is sold. Connecticut banks shall adopt and implement an appraisal policy which reflects, in accordance with safe and sound banking principles, consideration of appraiser qualifications, procedures for the approval and selection of appraisers, appraisal and evaluation standards, and the bank's administration of the appraisal and evaluation process.

(f) Notwithstanding the provisions of subdivision (2) of subsection (h) of this section, the Connecticut bank, in its discretion and for such a period as it deems advisable, may excuse the borrower on a mortgage loan from amortization of the principal of such loan.

(g) Loans not exceeding fifty per cent of the value of the real estate may be made without further restriction than is set forth in subsections (a) to (f), inclusive, of this section. The requirements of this section relating to the relationship between the loan amount and the value of the real estate shall be calculated on the basis of the aggregate amount of such loan plus the unpaid amount of any obligation secured by any prior mortgages or liens and the amount of any advancements permissible under any loan secured by such prior mortgage or mortgages in relation to the value of the real estate interest.

(h) Loans not exceeding ninety per cent of the value of the real estate may be made subject to the following additional limitations set forth in subdivisions (1) and (2) [, inclusive,] of this subsection. (1) No loan shall be made until the person or persons liable on the note have filed with the bank a satisfactory financial statement which shall be kept on file. (2) All such loans shall require repayment of principal and payment of interest in at least consecutive semiannual installments of principal and interest, such payments to be sufficient to pay the loan in full not later than forty-two years from the date of the first payment and the first payment to be made within twenty-four months of the date of the note. The requirements for semiannual principal payments pursuant to this subdivision are not applicable to: (A) Consumer revolving loan agreements made pursuant to subsection (c) of section 49-2, (B) alternative mortgage loans made pursuant to section 36a-265, (C) loans which may be demanded at any time and which are secured by residential real estate and (D) any other loan or class of loans determined by the commissioner not to be subject to such requirements.

(i) The following mortgage loans may be made without regard to the ninety per cent loan-to-value limit set forth in subsection (h) of this section: (1) Loans guaranteed or insured by the United States government or its agencies, provided the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit. (2) Loans backed by the full faith and credit of a state government, provided the amount of the assurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit. (3) Loans guaranteed or insured by a state, municipal or local government, or its agency, provided (A) the amount of the guaranty or insurance is at least equal to the portion of the loan that exceeds the applicable loan-to-value limit and (B) the bank has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement. (4) Loans that are renewed, refinanced, or restructured without the advancement of new funds or an increase in a line of credit, except for reasonable closing costs. (5) Loans that are renewed, refinanced, or restructured in connection with a workout situation, either with or without the advancement of new funds, where such action is consistent with safe and sound banking practices and is a part of a clearly defined and well documented program to achieve orderly liquidation of the debt, reduce risk of loss or maximize recovery of the loan. (6) Loans that facilitate the sale of real estate acquired by the Connecticut bank in the ordinary course of collecting a debt previously contracted in good faith. (7) Loans where the Connecticut bank does not rely principally on the real estate as security. (8) Loans where all or part of such loan is made in primary reliance upon the mortgage insurance policy of a private mortgage guaranty company, licensed by the Insurance Commissioner to do business in this state and approved by the commissioner. (9) Loans or loan programs which are determined by the governing board of the Connecticut bank, or by a management committee or board committee appropriately designated by such governing board, to be prudent under the circumstances after consideration of the relevant underwriting risks, provided (A) the aggregate amount of all such loans, calculated at the time of origination of each such loan, does not exceed one hundred per cent of the bank's equity capital and reserves for loan and lease losses, (B) the aggregate amount of all such loans, calculated at the time of origination of each such loan, other than loans secured by one-to-four-family residential property, does not exceed thirty per cent of the bank's equity capital and reserves for loan and lease losses, (C) the aggregate amount of all such loans is included [as an investment under section 36a-279] IN THE PERCENTAGE OF ASSETS LIMITATION SPECIFIED IN SUBSECTION (s) OF THIS SECTION and (D) the bank makes a notation of such determination and the reasons therefor in the applicable loan file. A loan which is included within the aggregate limits of this subsection may subsequently be excluded if the applicable loan-to-value limit is satisfied because of a reduction in principal or senior liens, additional contribution of real estate collateral or increases in equity value substantiated by a current suitable appraisal or evaluation.

(j) Loans made under this section may be for the purpose of building upon or improving the property of the borrower, and may be made in installments advanced at the discretion of the lending institution as the work progresses; provided at no time shall the ratio of the amount loaned to the then total value exceed fifty per cent or the ratio the final loan is to bear to the value of the completed property, whichever is the greater. Loans made to finance the construction of buildings and having a maturity of not more than twenty-four months or having a maturity of not more than thirty-six months if approved by the commissioner are not subject to the limitations imposed by this subsection.

(k) Connecticut banks are authorized to make and invest in any mortgage loan, including construction and improvement loans, insured by the Federal Housing Administrator without regard to the limitations and restrictions of this section, except that such loans are subject to the following limitations: (1) In the case of loans secured by a first mortgage on real estate, the contract of insurance shall contain a provision that the debentures to be issued by the Federal Housing Administrator in settlement of such insurance, in the event of the foreclosure or default of any such loan or mortgage, shall be fully guaranteed as to payment of principal and interest by the government of the United States, (2) if the bank has a commitment for such insurance, issued by the Federal Housing Administration, it may grant a loan to a borrower for the purpose of building upon or improving the property of the borrower, the money so borrowed to be advanced at the discretion of the bank in installments as the work progresses, provided the total of all advances made does not exceed eighty per cent of the value of the property on the date of each advance or the proportion that the final loan is to bear to the final estimated value of the property, whichever is greater, except that the final advance may be in such an amount that the total of all advances made may equal but not exceed the amount of such commitment. The final advance shall not be made until the buildings or improvements have been inspected and approved by the Federal Housing Administration for an insured loan.

(l) Subject to such regulations and restrictions as the commissioner finds necessary and proper, and subject to the limitations, restrictions and privileges contained in this subsection, Connecticut banks are authorized to make and invest in any loan which the Administrator of Veterans' Affairs guarantees, makes a commitment to guarantee, or insures pursuant to Title III of an Act of Congress entitled "Servicemen's Readjustment Act of 1944", as amended, without regard to the limitations and restrictions of this title. (1) Each such loan shall be subject to the provisions of this title prescribing the maximum limits, in amount, of: (A) A loan or loans to or total liability of any one individual, and (B) a loan upon the security of real estate, with relation to the appraised value of such real estate. (2) Each such loan shall be secured by a mortgage on real estate, except that a loan pursuant to Section 501, 502 or 503 of the Servicemen's Readjustment Act of 1944, as amended, for the purpose of repairing, altering or improving a building or buildings, and a loan pursuant to Section 505(a) of said act, need not be secured by a lien on real property.

(m) (1) Additional sums, as evidenced by a note or notes signed by the then owner of record of the mortgaged premises, may be advanced by a Connecticut bank to such owner and shall be a part of the mortgage debt due the mortgagee, provided (A) such advancements shall not exceed the difference between the indebtedness at the time of the advance and the original mortgage debt, (B) the original mortgage deed shall have been recorded after October 1, 1951, and shall contain specific provisions granting this right, and (C) the terms of repayment of such advancements shall not extend the time of repayment beyond the maturity of the original mortgage debt. If the then owner of record is other than the original mortgagor, neither the original mortgagor nor any other former owner of the mortgaged premises is liable on such advancements. (2) Advancements may also be made by writing open-end mortgages in accordance with the provisions of section 49-2.

(n) (1) Connecticut banks may participate with other lenders, which may be corporations, business trusts, pension trusts, governments or government agencies, in mortgage loans which Connecticut banks are permitted to invest in under this section, but the amount of the participating interest of any Connecticut bank in any one such loan shall not exceed the amount which such bank would be permitted to invest individually in any one loan of the same class under this section, and the amount of the participating interests shall be included in determining whether or not such bank is exceeding its loan limits. (2) Connecticut banks may participate in mortgage loans only pursuant to a written agreement between all the participating lenders and the servicing agent for such loan and the servicing agent may impose a service charge therefor.

(o) Any Connecticut bank may grant a loan secured by a first mortgage on property of the borrower without regard to the limitations and restrictions on loans imposed by this section, if the borrower has an agreement with a housing authority created under section 8-40, secured by a commitment of the United States Department of Housing and Urban Development, pursuant to which the borrower is to construct housing upon the property and the housing authority is to purchase the property upon completion of construction, the money so borrowed to be advanced at the discretion of the bank as construction progresses, provided the ratio of the total of all advances made to the amount of the agreed purchase price at no time exceeds ninety per cent of the ratio of the value of the property to the expected value of the property upon completion of construction.

(p) If a loan made under this section is secured by a mortgage on income-producing real estate and if the Connecticut bank relies upon such real estate or income production as primary security for the loan, the bank need not require that any person be personally liable on the note, in which case the bank shall retain in its files, in lieu of the financial statements required by subdivision (1) of subsection (h) of this section, such income projection statements, tenants' financial statements and other credit information as the bank deems necessary.

(q) Subject to such regulations as the commissioner may adopt, Connecticut banks may make mortgage loans secured by leasehold interests, provided the leasehold estate securing such mortgage loan has a remaining term at the time such mortgage loan is originated by the bank which does not expire prior to the maturity of the mortgage loan obligation. The term of the leasehold estate shall not include any period for which the lease may grant an option of renewal.

(r )Any Connecticut bank may, in connection with any mortgage loan made by it, contract with the mortgagor for interest to be paid currently or to accrue, and, if such interest is to accrue, for the interest to be added to the mortgage debt on which interest may be charged and collected. Accrued interest which is added to the mortgage debt shall be secured by the mortgage to the same extent as the principal of the mortgage debt.

(s) The assets of a Connecticut bank may be invested in mortgage loans which do not conform to the requirements of this section, provided the governing board of the Connecticut bank, or a management committee or board committee appropriately designated by such governing board, has reviewed the non-conforming aspects of the particular mortgage loan or mortgage loan program and has determined such mortgage loan or mortgage loan program to be prudent under the circumstances and all such mortgage loans outstanding at the time of origination when combined with the [investments] LOANS made pursuant to [section 36a-279] SUBDIVISION (9) OF SUBSECTION (i) OF THIS SECTION do not exceed [the applicable percentage of assets specified in said section] EIGHT PER CENT OF THE ASSETS OF THE BANK. The bank shall make a notation of the prudence determination and the reasons for such determination in the applicable loan file. A loan which was included within the percentage of assets limitation of this subsection [and section 36a-279] subsequently may be excluded if the loan is repaid or if the non-conforming aspects are eliminated or otherwise cease to exist.

Sec. 4. Section 36a-275 of the general statutes, as amended by section 3 of public act 95-70, is repealed and the following is substituted in lieu thereof:

(a) As used in this section, the term "debt securities" means (1) ANY marketable [obligations] OBLIGATION evidencing indebtedness of any person in the form of direct, assumed or guaranteed bonds, notes or debentures commonly known as investment securities; OR (2) ANY [obligations] OBLIGATION identified by certificates of participation in investments described in subdivision (1) of subsection (a) of this section IN which a Connecticut bank could invest directly [; and (3) certificates of participation in open end] AND THE TERM "DEBT MUTUAL FUND" MEANS A PARTNERSHIP INTEREST IN, SHARES OF STOCK OF, UNITS OF BENEFICIAL INTEREST IN OR OTHER OWNERSHIP INTEREST IN ANY ONE investment [companies] COMPANY registered [with the Securities and Exchange Commission pursuant to] UNDER the Investment Company Act of 1940 [and Securities Act of 1933] AS FROM TIME TO TIME AMENDED, commonly [referred to] DESCRIBED as mutual funds, money market funds, investment trusts or business trusts, provided the portfolios of such investment companies consist solely of investments described in subdivision (1) of subsection (a) of this section.

(b) [Any] IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY Connecticut bank may purchase or hold for its own account debt securities AND DEBT MUTUAL FUNDS without regard to any other liability to the Connecticut bank of the maker, obligor, [or] guarantor OR ISSUER of [any] SUCH debt securities AND DEBT MUTUAL FUNDS, provided: (1) The debt securities AND DEBT MUTUAL FUNDS are [(A)] rated in the three highest rating categories by a rating service of such securities recognized by the commissioner or [(B),] if not so rated [pursuant to subparagraph (A) of this subdivision,] determined by the bank's governing board to be a prudent investment; [(2) the purchase or holding of any debt securities shall be consistent with the bank's investment policy, which policy shall be duly adopted by the bank's governing board annually and which shall address, among other investment criteria, diversification of the bank's investment portfolio among industry categories; (3)] (2) unless the bank obtains the prior approval of the commissioner, the total amount of the debt securities AND DEBT MUTUAL FUNDS of any one maker [or] obligor OR ISSUER PURCHASED OR held by a Connecticut bank or for a Connecticut bank's account may not exceed, at any time, [fifteen] TWENTY-FIVE per cent of its total equity capital and reserves for loan and lease losses; and [(4) unless the bank obtains the prior approval of the commissioner,] (3) the total amount of any debt securities AND DEBT MUTUAL FUNDS purchased or held by a Connecticut bank or for a Connecticut bank's account pursuant to this subsection may not exceed at any time [fifteen] TWENTY-FIVE per cent of its assets.

(c) [(1) The rating and other investment restrictions on debt securities described in subsection (b) of this section shall not apply to] IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY CONNECTICUT BANK MAY PURCHASE OR HOLD FOR ITS OWN ACCOUNT THE FOLLOWING DEBT SECURITIES AND DEBT MUTUAL FUNDS WITHOUT REGARD TO ANY OTHER LIABILITY TO THE CONNECTICUT BANK OF THE MAKER, OBLIGOR, GUARANTOR OR ISSUER OF SUCH DEBT SECURITIES AND DEBT MUTUAL FUNDS, PROVIDED THE DEBT SECURITIES AND DEBT MUTUAL FUNDS ARE RATED IN THE THREE HIGHEST RATING CATEGORIES BY A RATING SERVICE RECOGNIZED BY THE COMMISSIONER OR, IF NOT SO RATED, DETERMINED BY THE BANK'S GOVERNING BOARD TO BE A PRUDENT INVESTMENT: [(A)] (1) The general obligations of the United States or this state; [(B)] (2) Securities which are guaranteed fully as to principal and interest by the United States or this state or for which the full faith and credit of the United States or this state is pledged for the payment of principal and interest; [or] [(C)] (3) Securities, [which are prerefunded with their proceeds invested in] INCLUDING REPURCHASE AGREEMENTS, THE PRINCIPAL AND INTEREST OF WHICH ARE IRREVOCABLY SECURED BY securities [as] described in [subparagraphs (A) and (B)] SUBDIVISIONS (1) AND (2) of this [subdivision] SUBSECTION; [(2) The investment restrictions on debt securities described in subdivisions (1), (3) and (4) of subsection (b) of this section shall not apply to the general] (4) GENERAL obligations of [the federal Farm Credit Bank, the federal Home Loan Bank, the federal Home Loan Mortgage Corporation, the federal National Mortgage Association, the Government National Mortgage Corporation, the Student Loan Marketing Association or] any agency of the United States, INCLUDING GOVERNMENT SPONSORED ENTERPRISES, which are not guaranteed fully as to principal and interest by the United States or for which the full faith and credit of the United States is not pledged for the payment of principal and interest; [, provided the debt securities are (A) rated in the three highest rating categories by a rating service of such securities recognized by the commissioner, and (B) the total amount of such securities does not exceed, at any time, fifteen per cent of the assets of the bank making the investment;] AND (5) DEBT MUTUAL FUNDS, PROVIDED THE PORTFOLIOS OF THE INVESTMENT COMPANIES CONSIST SOLELY OF INVESTMENTS DESCRIBED IN SUBDIVISIONS (1) TO (4), INCLUSIVE, OF THIS SUBSECTION. [(3) The investment restrictions on debt securities described in subdivisions (1), (2) and (4) of subsection (b) of this section shall not apply to the debt obligations of depository institutions which (A) are deposits, (B) result from the temporary transfer between depository institutions of their balances in federal reserve banks or federal home loan banks or of correspondent balances, or (C) mature in one week or less. Any investment made under the provisions of this subdivision shall be in the opinion of the bank making the investment as entered on its records prudent for it to make and shall be subject to the supervision of the commissioner concerning safe and sound banking practices. For the purposes of this subdivision, "depository institution" means a person that accepts deposits and is subject to examination by officials of the government of any state, as defined in subsection (v) of section 33-284.

(d) At least semiannually, the governing board of each Connecticut bank shall review such bank's investments which were made under this section. The minutes of the meetings of such governing board shall recite the result of each such review. Any such investments which, upon the governing board's semiannual review, no longer meet the criteria described in subdivision (1) of subsection (b) of this section may be retained only as long as such retention is prudent in the opinion of the governing board. If retention of an investment not meeting the criteria of subdivision (1) of subsection (b) of this section is not prudent or if any individual debt security or the debt security portfolio held by a Connecticut bank ceases to meet the investment restrictions on debt securities described in subdivisions (2), (3) and (4) of subsection (b) of this section or subparagraphs (A) and (B) of subdivision (2) of subsection (c) of this section, the Connecticut bank shall use reasonable efforts to divest itself as expeditiously as possible of the particular debt security or securities necessary to bring such bank into compliance with subsection (b) and subdivision (2) of subsection (c) of this section.]

Sec. 5. Section 36a-276 of the general statutes, as amended by section 4 of public act 95-70 and section 21 of public act 95-155, is repealed and the following is substituted in lieu thereof:

(a) [The assets of a Connecticut bank may be invested, in addition to other investments authorized by law, as provided in this section] AS USED IN THIS SECTION: (1) "EQUITY SECURITY" MEANS ANY STOCK OR SIMILAR SECURITY, CERTIFICATE OF INTEREST OR PARTICIPATION IN ANY PROFIT SHARING AGREEMENT, PREORGANIZATION CERTIFICATE OR SUBSCRIPTION, TRANSFERABLE SHARE, VOTING TRUST CERTIFICATE OR CERTIFICATE OF DEPOSIT FOR AN EQUITY SECURITY, LIMITED PARTNERSHIP INTEREST, INTEREST IN A JOINT VENTURE, OR CERTIFICATE OF INTEREST IN A BUSINESS TRUST; OR ANY SECURITY CONVERTIBLE, WITH OR WITHOUT CONSIDERATION, INTO SUCH A SECURITY, OR CARRYING ANY WARRANT OR RIGHT TO SUBSCRIBE TO OR PURCHASE SUCH A SECURITY; OR ANY SUCH WARRANT OR RIGHT; OR ANY PUT, CALL, STRADDLE, OR OTHER OPTION OR PRIVILEGE OF BUYING SUCH A SECURITY FROM OR SELLING SUCH A SECURITY TO ANOTHER WITHOUT BEING BOUND TO DO SO, BUT EXCLUDES A DEBT MUTUAL FUND, AS DEFINED IN SECTION 36a-275, AS AMENDED BY SECTION 4 OF THIS ACT, AND AN EQUITY MUTUAL FUND; AND (2) "EQUITY MUTUAL FUND" MEANS A PARTNERSHIP INTEREST IN, SHARES OF STOCK OF, UNITS OF BENEFICIAL INTEREST IN OR OTHER OWNERSHIP INTEREST IN ANY ONE INVESTMENT COMPANY WHICH IS REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS FROM TIME TO TIME AMENDED, COMMONLY DESCRIBED AS MUTUAL FUNDS, MONEY MARKET FUNDS, INVESTMENT TRUSTS OR BUSINESS TRUSTS, BUT EXCLUDES A DEBT MUTUAL FUND, AS DEFINED IN SECTION 36a-275, AS AMENDED BY SECTION 4 OF THIS ACT.

(b) [A Connecticut bank may invest its assets in:] IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY CONNECTICUT BANK MAY PURCHASE OR HOLD FOR ITS OWN ACCOUNT EQUITY SECURITIES AND EQUITY MUTUAL FUNDS, WITHOUT REGARD TO ANY OTHER LIABILITY TO THE CONNECTICUT BANK OF THE ISSUER OF SUCH EQUITY SECURITIES AND EQUITY MUTUAL FUNDS, PROVIDED: (1) THE TOTAL AMOUNT OF EQUITY SECURITIES AND EQUITY MUTUAL FUNDS OF ANY ONE ISSUER PURCHASED OR HELD BY A CONNECTICUT BANK OR FOR A CONNECTICUT BANK'S ACCOUNT MAY NOT EXCEED, AT ANY TIME, TWENTY-FIVE PER CENT OF ITS TOTAL EQUITY CAPITAL AND RESERVES FOR LOAN AND LEASE LOSSES; AND (2) THE TOTAL AMOUNT OF ANY EQUITY SECURITIES AND EQUITY MUTUAL FUNDS PURCHASED OR HELD BY A CONNECTICUT BANK OR FOR A CONNECTICUT BANK'S ACCOUNT PURSUANT TO THIS SUBSECTION MAY NOT EXCEED, AT ANY TIME, TWENTY-FIVE PER CENT OF ITS ASSETS.

(c) IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY CONNECTICUT BANK MAY PURCHASE OR HOLD FOR ITS OWN ACCOUNT, WITHOUT REGARD TO ANY OTHER LIABILITY TO THE CONNECTICUT BANK OF THE ISSUER, TEN PER CENT OR MORE OF THE EQUITY SECURITIES, INCLUDING CONVERTIBLE SECURITIES, OF A BANK, OUT-OF-STATE BANK, OR HOLDING COMPANY IN ACCORDANCE WITH LAW.

(d) IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY CONNECTICUT BANK, WITH THE APPROVAL OF THE COMMISSIONER, MAY PURCHASE OR HOLD FOR ITS OWN ACCOUNT, WITHOUT REGARD TO ANY OTHER LIABILITY TO THE CONNECTICUT BANK OF THE ISSUER, A CONTROLLING INTEREST IN A CORPORATION OR OTHER ENTITY, THE FUNCTIONS OF WHICH ARE LIMITED TO ONE OR MORE OF THE FUNCTIONS WHICH THE BANK MAY CARRY ON DIRECTLY IN THE EXERCISE OF ITS EXPRESS OR INCIDENTAL POWERS. FOR PURPOSES OF THIS SUBSECTION, A "CONTROLLING INTEREST" MEANS AT LEAST FIFTY-ONE PER CENT OF THE EQUITY SECURITIES ISSUED BY THE CORPORATION OR OTHER ENTITY, UNLESS THE COMMISSIONER DETERMINES THAT UNDER THE CIRCUMSTANCES, A LESSER PERCENTAGE CONSTITUTES EFFECTIVE WORKING CONTROL OF THE CORPORATION OR OTHER ENTITY. [(1) The equity securities, including convertible securities, of (i) any bank or out-of-state bank, (ii) any holding company, and (iii) other corporations when and only to the extent that such securities have been received in exchange for securities which immediately prior to such exchange were authorized investments under the provisions of subparagraph (i) or (ii) of this subdivision. Such investments shall be subject to the following limitations: (A) The total investment, under this subsection, of any Connecticut bank in the equity securities of such banks, out-of-state banks, holding companies or corporations shall not exceed six per cent of its assets, and its investment in the stock of any one such bank, out-of-state bank, holding company or corporation shall not exceed one-tenth of such limitation; and (B) the equity securities of any such bank, out-of-state bank, holding company or corporation held as investment and as security for loans shall be less than ten per cent of the total equity securities of such bank, out-of-state bank, holding company or corporation. For the purpose of computing the percentage limitations prescribed in this subdivision, securities held as investment shall be figured at the value at which they are held less any specific reserve applicable thereto and securities held as security for loans shall be figured at the amount loaned thereon; and (2) Ten per cent or more of the equity securities, including convertible securities, of a bank, provided such bank has been in existence and continuously operating for at least five years, unless the commissioner waives this requirement, out-of-state bank, in accordance with the provisions of sections 36a-180 to 36a-191, inclusive, and section 36a-412, or holding company in accordance with law. (c) A Connecticut bank may invest not more than fifteen per cent of its assets in the equity securities of corporations incorporated and doing a major portion of their business in the United States, provided such equity investments are subject, if applicable, to the limitations specified in subsection (b) of this section.] (e) The bank shall notify the commissioner, in writing, twenty-four hours prior to making any investment under [this subsection] SUBSECTIONS (b) AND (c) OF THIS SECTION which would result in such bank having invested in the aggregate in twenty-five per cent or more of the equity securities of a corporation. [(d) A Connecticut bank may invest its assets in the partnership interest in, shares of stock of, or units of beneficial interest in any one investment company which is registered under the "Investment Company Act of 1940", as from time to time amended, provided: (1) At least eighty per cent of the investment portfolio, or series portfolio, of such investment company shall be invested in the same types of securities in which a Connecticut bank may otherwise invest; (2) the amount invested in any one such investment company shall not exceed fifteen per cent of the equity capital and reserves for loan and lease losses of the Connecticut bank; and (3) the securities are determined by the bank's governing board to be a prudent investment.

(e) (1) No Connecticut bank shall invest in any equity security authorized under subdivision (1) of subsection (b) and subsection (c) of this section unless such investment security is within the top three rating categories in any rating service recognized by the commissioner, or is determined by the bank's governing board to be a prudent investment. (2) No Connecticut bank shall invest in any equity security authorized under this section unless the purchase or holding of such equity security is consistent with the bank's investment policy. Such policy shall be duly adopted by the bank's governing board annually and shall address, among other criteria, diversification of the bank's investment portfolio among industry categories.

(f) At least semiannually, the governing board of each Connecticut bank shall review such bank's investments which were made under this section. The minutes of the meetings of such governing board shall recite the result of each such review. Any such investment which, upon the governing board's semiannual review, no longer meets the criteria described in subdivision (3) of subsection (d) and subdivision (1) of subsection (e) of this section may be retained only as long as such retention is prudent in the opinion of the governing board. If retention is not prudent or if any individual equity security or the equity security portfolio held by a Connecticut bank ceases to meet the investment restrictions described in subsection (b), (c) or (d), or subdivision (2) of subsection (e) of this section, the Connecticut bank shall use reasonable efforts to divest itself as expeditiously as possible of the particular security or securities necessary to bring it into compliance under the applicable subsection.]

Sec. 6. Section 36a-277 of the general statutes, as amended by section 5 of public act 95-70, is repealed and the following is substituted in lieu thereof:

[A Connecticut bank may invest up to five per cent of its equity capital and reserves for loan and lease losses, in the aggregate, in the following investments] IN ADDITION TO OTHER INVESTMENTS AUTHORIZED BY THIS PART, ANY CONNECTICUT BANK MAY PURCHASE OR HOLD FOR ITS OWN ACCOUNT THE FOLLOWING SECURITIES, WITHOUT REGARD TO ANY OTHER LIABILITY TO THE CONNECTICUT BANK OF THE OBLIGOR, MAKER, GUARANTOR OR ISSUER OF SUCH SECURITIES, PROVIDED THE TOTAL AMOUNT OF THE SECURITIES OF ANY ONE MAKER, OBLIGOR OR ISSUER HELD BY A CONNECTICUT BANK OR FOR A CONNECTICUT BANK'S ACCOUNT MAY NOT EXCEED, AT ANY TIME, TEN PER CENT OF ITS EQUITY CAPITAL AND RESERVES FOR LOAN AND LEASE LOSSES: (1) Shares of stock and debt securities of companies licensed as "Small Business Investment Companies", under the federal Small Business Investment Act of 1958, 15 USC Section 661 et seq., as from time to time amended, and which qualify as companies financing disadvantaged persons under 15 USC Section 681(d), as from time to time amended; (2) SHARES OF STOCK AND DEBT SECURITIES OF COMPANIES LICENSED AS "SMALL BUSINESS INVESTMENT COMPANIES", UNDER THE FEDERAL SMALL BUSINESS INVESTMENT ACT OF 1958, 15 USC SECTION 661 ET SEQ., AS FROM TIME TO TIME AMENDED; [(2)] (3) Debt securities issued by corporations certified by the commissioner to be organized and operated solely for the purpose of providing assistance which will contribute to the public welfare by facilitating the acquisition and maintenance of ownership of homes by individuals whose ability to own their own homes is hampered because of social or economic disadvantages, which debt securities are backed by mortgage loans made by the issuing corporations; [(3)] (4) Shares of stock and debt securities issued by the National Corporation for Housing Partnerships or by any other corporation created pursuant to Title IX of the Housing and Urban Development Act of 1968; limited partnership interests in The National Housing Partnership or in any other limited partnership formed pursuant to Section 907(a) of that act; and any partnership, limited partnership, or joint venture formed pursuant to Section 907(c) of that act; [(4)] (5) Shares of stock and debt securities of corporations, and equity interests in and debt securities of, partnerships and limited partnerships, engaged solely in acquiring and rehabilitating housing; [in cities having a population of not less than one hundred thousand according to the most recent federal census;] [(5)] (6) Debt SECURITIES or equity securities of a corporation, all the equity securities of which corporation are to be owned by one or more Connecticut banks and which corporation is organized and operated for the purpose of developing, and stimulating and assisting the development of, by any means and in any capacity, by itself or jointly with others, low and moderate income housing in this state; [(6)] (7)Shares of stock of corporations qualified under the laws of the United States as "small business investment companies"; [(7)] (8) [Closed-end] DEBT SECURITIES OR EQUITY SECURITIES OF CLOSED-END investment companies which provide capital to racial or ethnic minority-owned businesses and institutions; [(8)](9) [Development] DEBT SECURITIES OR EQUITY SECURITIES OF DEVELOPMENT corporations or similar organizations organized to promote the business prosperity and economic welfare of this state and to encourage the location and development of new business, industry and commerce at least in part within the municipality where the main office or a branch of such bank is located; and [(9)] (10) [Any] DEBT SECURITIES OR EQUITY SECURITIES THAT ARE social purpose investments, provided before making any such investment, the bank shall obtain the certification of the commissioner that the investment is a social purpose investment. For purposes of this section, a "social purpose investment" means an investment which contributes to the public welfare by facilitating the provision of a service or facility needed by residents of the area in which an office of the bank making the investment is located.

Sec. 7. Section 36a-452 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) [The governing board shall establish a written investment policy and review it at least annually.] AT LEAST ONCE A YEAR, THE GOVERNING BOARD OF EACH CONNECTICUT CREDIT UNION SHALL ADOPT AN INVESTMENT POLICY GOVERNING INVESTMENTS MADE PURSUANT TO THIS SECTION. NO CONNECTICUT CREDIT UNION SHALL MAKE ANY INVESTMENT PURSUANT TO THIS SECTION UNLESS THE PURCHASE AND HOLDING OF SUCH INVESTMENT IS CONSISTENT WITH THE CONNECTICUT CREDIT UNION'S INVESTMENT POLICY. THE POLICY SHALL ESTABLISH STANDARDS FOR THE MAKING OF PRUDENT INVESTMENTS, WHICH STANDARDS SHALL INCLUDE, BUT NOT BE LIMITED TO, (1) THE RATING OF INDIVIDUAL INVESTMENTS BY NATIONALLY RECOGNIZED RATING SERVICES, IF ANY, AND (2) STANDARDS FOR DIVERSIFICATION OF THE CONNECTICUT CREDIT UNION'S INVESTMENT PORTFOLIO AMONG INDUSTRY CATEGORIES. THE POLICY SHALL PROVIDE FOR THE FREQUENT AND PERIODIC REVIEW BY THE CONNECTICUT CREDIT UNION OF INVESTMENTS MADE PURSUANT TO THIS POLICY AND SHALL PROVIDE FOR THE REASONABLE AND EXPEDITIOUS DIVESTITURE OF INVESTMENTS WHICH THE GOVERNING BOARD, UPON ITS REVIEW, NO LONGER DEEMS PRUDENT OR CONSISTENT WITH THE CONNECTICUT CREDIT UNION'S INVESTMENT POLICY. THE INVESTMENT POLICY AND ANY INVESTMENT MADE PURSUANT TO THE POLICY SHALL BE SUBJECT TO THE SUPERVISION OF THE COMMISSIONER CONCERNING SAFE AND SOUND BANKING PRACTICES.

(b) The investment officer or investment committee shall act for the governing board between meetings of the governing board in all matters involving the deposit or investment of funds of the Connecticut credit union, except in the matter of loans to members. The investment officer or investment committee shall report to the governing board at each regular meeting of the governing board. AT EACH REGULAR MEETING OF THE GOVERNING BOARD, THE GOVERNING BOARD OF EACH CONNECTICUT CREDIT UNION SHALL REVIEW INVESTMENTS MADE BY THE CONNECTICUT CREDIT UNION PURSUANT TO THIS SECTION. THE MINUTES OF THE MEETINGS OF SUCH GOVERNING BOARD SHALL RECITE THE RESULTS OF EACH SUCH REVIEW. THE GOVERNING BOARD SHALL CAUSE THE CONNECTICUT CREDIT UNION TO USE REASONABLE EFFORTS TO DIVEST AS EXPEDITIOUSLY AS POSSIBLE ANY INVESTMENT WHICH THE GOVERNING BOARD, UPON ITS REVIEW, NO LONGER DEEMS PRUDENT OR CONSISTENT WITH THE CONNECTICUT CREDIT UNION'S INVESTMENT POLICY.

(c) A Connecticut credit union may invest its funds: (1) In bonds [legal as investments for Connecticut banks under the provisions of subparagraph (A) of subdivision (1) of subsection (b), subdivision (3) of subsection (b) and subsection (d) of section 36a-275, except that any such bond that ceases to meet the rating and other investment restrictions described in subparagraph (A) of subdivision (1) of subsection (b) and subdivision (3) of subsection (b) of section 36a-275 shall be disposed of by the Connecticut credit union as soon as is reasonable under the circumstances] WHICH ARE A DIRECT OBLIGATION OF THE UNITED STATES, ANY STATE OR TERRITORY OF THE UNITED STATES, OR ANY INSTRUMENTALITY OF THE UNITED STATES OR OF ANY STATE OR TERRITORY OF THE UNITED STATES, PROVIDED SUCH BONDS ARE RATED IN THE THREE HIGHEST RATING CATEGORIES BY EACH NATIONALLY RECOGNIZED RATING SERVICE THAT RATES SUCH BONDS; (2) in bank accounts which are insured by or under a program operated by an agency or instrumentality of the United States; (3) in out-of-state bank accounts which are insured by or under a program operated by an agency or instrumentality of the United States, but only to the extent such accounts are insured; (4) subject to the commissioner's approval, in stock, bonds, debentures or other investments in one or more organizations which provide or will provide a service necessary to or in the conduct of the business of the Connecticut credit union, provided written notice of the investment shall be given to the commissioner within ten days of such investment; (5) in a central credit union organized under sections 36a-435 to 36a-474, inclusive AS AMENDED; (6) in the notes or share accounts of any Connecticut credit union or federal credit union, except that the Connecticut credit union receiving the investment shall not accept from any Connecticut credit union or federal credit union an amount greater than the maximum amount to which the share account may be insured, or five per cent of the investing Connecticut credit union or federal credit union's assets, whichever is higher; (7) with the prior written approval of the commissioner, in the shares of, or loans to cooperatives, except that no Connecticut credit union may invest more than five per cent of its paid-in and unimpaired capital and surplus; (8) in a participating interest in any part or all of the outstanding loans of any other Connecticut credit union or federal credit union; (9) in debt obligations of banks, which obligations have original maturities of one week or less, provided no Connecticut credit union may invest more than five per cent of its paid-in and unimpaired capital and surplus; (10) in debt obligations, other than bonds, issued or fully guaranteed as to principal and interest by the United States or any of its agencies or instrumentalities; and (11) subject to the prior written approval of and any limitations imposed by the commissioner, in any other investments the commissioner deems appropriate in light of such factors as the financial condition and needs of the Connecticut credit union and the degree of risk inherent in the investment.

Sec. 8. Section 36a-3 of the general statutes, as amended by section 1 of public act 95-49, section 1 of public act 95-129, section 3 of public act 95-155 and section 11 of public act 95-253, is repealed and the following is substituted in lieu thereof:

Other definitions applying to this title or to specified parts thereof and the sections in which they appear are:

"Account". Sections 36a-155 AS AMENDED and 36a-365.

"Advance fee". Sections 36a-510, 36a-485 and 36a-615.

"Agency bank". Section 36a-285.

"Alternative mortgage loan". Section 36a-265.

"Amount financed". Section 36a-690.

"Annual percentage rate". Section 36a-690.

"Annual percentage yield". Section 36a-316.

"Applicant". Section 36a-736.

"Associate". Section 36a-184.

"Bank". Section 36a-30 AS AMENDED.

"Bankers' bank". Section 36a-70 AS AMENDED.

"Banking business". Section 36a-425.

"Billing cycle". Section 36a-565 AS AMENDED.

"Bona fide nonprofit organization". Section

36a-655 AS AMENDED.

"Branch". Sections 36a-145AS AMENDED

and 36a-410 AS AMENDED.

"Broker". Section 36a-510.

"Business and Industrial Development

Corporation". Section 36a-626.

"Cash advance". Section 36a-564.

"Cash price". Section 36a-770.

"Certificate of organization". Section 36a-435.

"Collective managing agency account". Section 36a-365.

"Commercial vehicle". Section 36a-770.

"Connecticut holding company". Section 36a-410 AS AMENDED.

"Consumer". Sections 36a-155, AS AMENDED 36a-676 and 36a-695.

"Consumer Credit Protection Act". Section 36a-676.

"Consumer debtor" and "debtor". Sections 36a-645 and 36a-800.

"Consumer collection agency". Section 36a-800.

"CONTROLLING INTEREST". SECTION 36a-276, AS

AMENDED BY SECTION 5 OF THIS ACT.

"Credit". Sections 36a-645 and 36a-676.

"Creditor". Sections 36a-676, 36a-695 and 36a-800.

"Credit card", "cardholder" and "card issuer". Section 36a-676.

"Credit clinic". Section 36a-695.

"Credit rating agency". Section 36a-695.

"Credit report". Section 36a-695.

"Credit sale". Section 36a-676.

"De novo branch". Section 36a-410 AS AMENDED.

"Debt". Section 36a-645.

"Debt adjustment". Section 36a-655 AS AMENDED.

"DEBT MUTUAL FUND". SECTION 36a-275, AS AMENDED BY SECTION 4 OF THIS ACT.

"Debt securities". Section 36a-275 AS AMENDED BY SECTION 4 OF THIS ACT.

"Deliver". Section 36a-316.

"Deposit". Section 36a-316.

"Deposit account". Section 36a-316.

"Deposit account charge". Section 36a-316.

"Deposit account disclosures". Section 36a-316.

"Deposit contract". Section 36a-316.

"Deposit services". Section 36a-425.

"Depositor". Section 36a-316.

"Earning period". Section 36a-316.

"Eligible account holder". Section 36a-136.

"Eligible collateral". Section 36a-330 AS AMENDED.

"EQUITY MUTUAL FUND". SECTION 36a-276, AS

AMENDED BY SECTION 5 OF THIS ACT.

"Federal Home Mortgage Disclosure Act". Section 36a-736.

"Fiduciary". Section 36a-365.

"Filing fee". Section 36a-770.

"Finance charge". Sections 36a-690 and 36a-770.

"Financial institution". Sections 36a-41,

36a-155, AS AMENDED 36a-330, AS AMENDED and 36a-736.

"Financial records". Section 36a-41.

"First mortgage loan". Sections 36a-485, 36a-705 and 36a-715.

"Fiscal year". Section 36a-435.

"Foreign banking corporation". Section 36a-425.

"General facility". Section 36a-580 AS AMENDED.

"Goods". Sections 36a-535 and 36a-770.

"Graduated payment mortgage loan". Section 36a-265.

"Groups having a common bond of occupation or

association". Section 36a-435.

"Guardian". Section 36a-365.

"Holder". Section 36a-596.

"Home banking services". Section 36a-170.

"Home banking terminal". Section 36a-170.

"Home improvement loan". Section 36a-736.

"Home purchase loan". Section 36a-736.

"Home state". Section 36a-410 AS AMENDED.

"Immediate family". Section 36a-435.

"Installment loan contract". Sections 36a-535 and 36a-770.

"Instrument". Section 36a-596.

"Insurance bank". Section 36a-285.

"Insurance department". Section 36a-285.

"Interest". Section 36a-316.

"Interest rate". Section 36a-316.

"Lender". Sections 36a-510 and 36a-770.

"Lessor". Section 36a-676.

"License". Section 36a-626.

"Licensee". Sections 36a-510, 36a-596 and 36a-626.

"Limited branch". Section 36a-145 AS AMENDED.

"Limited facility". Section 36a-580 AS AMENDED.

"Loan broker". Section 36a-615.

"Loss". Section 36a-330AS AMENDED.

"Made in this state". Section 36a-770.

"Managing agent". Section 36a-365.

"Member". Section 36a-435.

"Membership share". Section 36a-435.

"Money order". Section 36a-596.

"Mortgage broker". Section 36a-485.

"Mortgage insurance". Section 36a-725.

"Mortgage lender". Sections 36a-485 and 36a-705.

"Mortgage loan". Sections 36a-261 AS AMENDED and 36a-265.

"Mortgage rate lock-in". Section 36a-705.

"Mortgage servicing company". Section 36a-715.

"Mortgagor". Section 36a-715.

"Motor vehicle". Section 36a-770.

"Municipality". Section 36a-800.

"Net worth". Section 36a-596.

"Network". Section 36a-155 AS AMENDED.

"Note account". Sections 36a-301 and 36a-445.

"Office". Section 36a-316.

"Open-end credit plan". Section 36a-676.

"Open-end loan". Section 36a-565 AS AMENDED.

"Organization". Section 36a-800.

"Out-of-state holding company". Section 36a-410AS AMENDED.

"Outstanding". Section 36a-596.

"Passbook savings account". Section 36a-316.

"Periodic statement". Section 36a-316.

"Permissible investment". Section 36a-596.

"Person". Section 36a-184.

"Post". Section 36a-316.

"Prime quality". Section 36a-596.

"Principal amount of the loan". Section 36a-510.

"Principal officer". Section 36a-485.

"Processor". Section 36a-155 AS AMENDED.

"Public deposit". Section 36a-330 AS AMENDED.

"Purchaser". Section 36a-596.

"Qualified public depository" and

"depository". Section 36a-330 AS AMENDED.

"Records". Section 36a-17.

"Relocate". Section 36a-145 AS AMENDED.

"Residential property". Section 36a-485.

"Retail buyer". Sections 36a-535 and 36a-770.

"Retail credit transaction". Section 42-100b.

"Retail installment contract". Sections 36a-535 and 36a-770.

"Retail installment sale". Sections 36a-535 and 36a-770.

"Retail seller". Sections 36a-535 and 36a-770.

"Reverse annuity mortgage loan". Section 36a-265.

"Sales finance company". Sections 36a-535 and 36a-770.

"Savings department". Section 36a-285.

"Savings deposit". Section 36a-316.

"Secondary mortgage loan". Section 36a-510.

"Security convertible into a voting

security". Section 36a-184.

"Share". Section 36a-435.

"Social purpose investment". Section 36a-277 AS AMENDED.

"Standard mortgage loan". Section 36a-265.

"Tax and loan account". Sections 36a-301 and 36a-445.

"The Savings Bank Life Insurance Company". Section 36a-285.

"Time account". Section 36a-316.

"Transaction". Section 36a-215.

"Travelers check". Section 36a-596.

"Troubled financial institution". Section 36a-215.

"Unsecured loan". Section 36a-615.

Sec. 9. Section 36a-251 of the general statutes, as amended by section 1 of public act 95-70, section 36a-278 of the general statutes and section 36a-279 of the general statutes, as amended by section 6 of public act 95-70, are repealed.

Approved May 2, 1996. Effective October 1, 1996.

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