Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 3rd Meeting

of the 2006 Interim


<MeetMDY1> September 11, 2006


The<MeetNo2> 3rd meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Monday,<MeetMDY2> September 11, 2006, at<MeetTime> 3:00 PM, <Room> at the Galt House in the Carroll-Ford Room, Louisville, Ky.  Senator Tom Buford, Co-Chair, and Representative James Bruce, Co-Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative James E. Bruce, Co-Chair; Senators Julie Denton, Ernie Harris, Dorsey Ridley, Richard "Dick" Roeding, and Dan Seum; Representatives Sheldon E. Baugh, James R. Comer, Jr., Ron Crimm, Robert R. Damron, Mike Denham, Jim Gooch, Jr., J. R. Gray, Mike Harmon, Dennis Keene, Rick W. Rand, Frank Rasche, Steve Riggs, Brandon D. Smith, Tommy Thompson, Ron Weston, Susan Westrom, and Rob Wilkey.


Guests:  Cordell Lawrence, Executive Director, Office of Financial Institutions, David Coyle, Office of Financial Institutions, Ballard Cassady, President and CEO, Kentucky Bankers Association and John Cooper, Government Affairs Consultant, Kentucky Bankers Association.


LRC Staff:  Greg Freedman, Rhonda Franklin, and Jamie Griffin.


The minutes of the August 22, 2006, meeting were approved. 


Cordell Lawrence, Executive Director, Office of Financial Institutions ("office"), addressed the committee regarding the number of retiring bank examiners and how the Office of Financial Institutions will maintain a sufficient number of experienced bank examiners and the assessment schedule for bank examinations.  Mr. Lawrence stated that the Office of Financial Institutions, along with every other agency, has been analyzing the potential retirement issue and has reached the following preliminary conclusions:  Financial Examiners I, II, III, IV and Specialists are not particularly susceptible to the glut of retirements in 2008; Certified Financial Institutions Examiners grade 16 and 17 positions are most vulnerable; There is sufficient staff in the lower grade positions to backfill Certified Financial Institutions Examiners, with increased emphasis on training and the office hopes to supplement the workforce with former Federal FDIC Examiners when possible.  He stated that they face the problem of competition for examiners due to higher salaries available in the federal government and the banking industry.  He stated that the following options are being considered to address these issues:  Increase salaries by 6.67% by implementing a 40 hour work week; additional salary increases through either the legislative process or through the Personnel Cabinet, to increase entry level salaries for each grade to 80% of comparable federal grades with a cap equal to 90% of federal maximum for each grade; accelerate recruiting efforts from among the ranks of retired FDIC, Federal Reserve, OCC examiners and college graduates; increase the training provided by senior examiners through on the job training to accelerate the learning curve for junior examiners.  Mr. Lawrence gave the committee a copy of the current assessment fee schedule for banks.  He stated that based on the asset sizes of the banks at December 31, 2005, total assessments collected were $1,684,323.00, this amount compares to the $10,092,785.00, that they would have paid had they been chartered by the OCC.  He stated that Kentucky chartered banks paid only 16.69% of what they would have paid as National banks.


Mr. Lawrence also addressed the oversight of the Office of Financial Institutions by the Environmental Protection Cabinet under the current organizational structure of the Cabinet.


Representative James Bruce made the motion to draft a resolution urging the Governor to change the title heads of the Office of Insurance and the Office of Financial Institutions from Executive Director to Commissioner.  Second made by Representative J.R. Gray.  Motion adopted.


Representative Sheldon Baugh asked if there was an age limit for bank examiner positions and asked what the entry level salary was for state and federal examiners.


Mr. Lawrence stated there was no age limit and the entry level for state examiners is approximately $26,500 and for federal examiners it is approximately $40,000.


Senator Tom Buford stated that the Office brings in more money in fees than it generally uses which is forwarded to the Revenue Cabinet and the Office could use a portion of that revenue to raise salaries for examiners.


Mr. Lawrence stated that a surplus of $2 million dollars was returned to the general fund in the 2005 fiscal year and they estimate a surplus of $6 million dollars for 2006 fiscal year.


Ballard Cassady, President and CEO, Kentucky Bankers Association and John Cooper, Government Affairs Consultant, welcomed the committee to the annual convention and stated that the association adopted a resolution honoring Representative James E. Bruce for 42 years in the House of Representatives.  Mr. Cassady stated that Representative Bruce has been a wonderful friend to Kentucky's banking industry and will be sorely missed.  He stated that beginning this year at the closing ceremony of the Kentucky Bankers' Convention the James E. Bruce Award will be presented to an individual or firm in recognition of outstanding government relations efforts and dedication to the banking industry.


Senator Tom Buford stated that it has been a pleasure working with Representative Bruce and that he is a great inspiration to other legislators.


The meeting adjourned at 4:00 p.m.