Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, October 24, 2017, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative Bart Rowland, Co-Chair; Senators Julie Raque Adams, Rick Girdler, Morgan McGarvey, Dennis Parrett, Albert Robinson, John Schickel, and Dan "Malano" Seum; Representatives Will Coursey, Jim DuPlessis, Joseph M. Fischer, Jim Gooch Jr., Dennis Keene, Adam Koenig, Stan Lee, Chad McCoy, Michael Meredith, Steve Riggs, Wilson Stone, Scott Wells, and Addia Wuchner.
Guests: Patrick O’Connor, Deputy Commissioner of Policy, Kentucky Department of Insurance; Ballard Cassady, President and Chief Executive Officer and John Cooper, Governmental Affairs Consultant, Kentucky Bankers Association.
LRC Staff: Sean Donaldson, Jessica Sharpe, and Dawn Johnson.
Approval of Minutes
A motion by Representative Lee and second by Senator Girdler to approve the minutes of the September 26, 2017, meeting carried by voice vote.
Department of Insurance Administrative Regulations
The committee reviewed administrative regulations 806 KAR 5:031, 806 KAR 7:011, 806 KAR 9:051, 806 KAR 17:575, and 806 KAR 24:022. Patrick O’Connor, Deputy Commissioner of Policy, Kentucky Department of Insurance was available for questions. Chairman Buford asked for clarification on 806 KAR 7:011. Mr. O’Connor said the department would like to rely on statutes that address restricting insurers’ ability to either issue a security or guarantee for an officer or director. The department will no longer prohibit the investment in indebtedness in a spouse or relative by blood or marriage who is living in the same household but will rely on fiduciary duty doctrines to determine whether those transactions are prohibited, allowing insurance companies to decide whether it is a worthwhile transaction.
Issues Related to the Kentucky Banking Industry
Ballard Cassady, President and CEO, and John Cooper, Kentucky Bankers Association, spoke on the status of Kentucky’s independent banking industry. Mr. Cassady explained that the primary focus of state community banks is to serve Kentuckians and contribute to the overall success of the Commonwealth. He stressed the need for tax reform noting that the proportionate tax being paid by community banks has increased even though their numbers are dwindling. Regulatory and compliance costs as a result of the Dodd-Frank Act and the burden of accounting standards designed for international banks being applied to all United States institutions have reduced profit margins. The tax structure for Kentucky’s independent banks is less advantageous than that of nearly every other state. The banking industry pays at least 60 percent more in taxes than any other corporation in the Commonwealth. Mr. Cassady said the increased and inequitable tax burden, along with federal regulatory and capital reserve burdens placed on community banks, have contributed to the stress seen in Kentucky’s independent banking industry. Despite these trends, community banks continue to be the strongest lenders in small business holding 43 percent of all small loans to businesses and farms in the United States. Mr. Cassady asked the committee to consider these matters in the upcoming legislative session.
There being no further business to come before the committee, the meeting was adjourned at 10:25 AM.