Changes to Ohio Banking LawBy H. Grant StephensonLast year, the Ohio Legislature made a number of importantchanges to Ohio’s statutory banking code. These are the first comprehensive changes in more than twenty years.  Most of the changes were effective January 1,2018.The heavy lifting of the new Ohio banking bill islanguage that consolidates a number of existing financial institution chartersinto one single charter.  Going forward, Ohio-charteredbanks, savings and loans and savings banks will be operating under one commonform of charter.

So, generally speaking, the changes made by the newbanking code can be summarized with two words: consolidation and clarification.  The happy result is much neededmodernization. To accomplish consolidation,for example, the banking bill makes numerous changes to the sections of theOhio Revised Code which deal with chartering matters, mostly in Chapter 1109 ofthe Ohio Revised Code. It also repeals eight former chapters of the OhioRevised Code which dealt with specific financial institution charters such as societyfor savings, savings and loan associations and savings banks (old Ohio RevisedCode Chapters 1133, 1151, 1153, 1155, 1157, 1161, 1163 and 1165).A new chapter is introduced into the Code to deal withthe mutual ownership structure of some thrift institutions (new Ohio RevisedCode Chapter 1114).

And a new chapter is introduced to deal with mutual holdingcompanies (new Ohio Revised Code Chapter 1116). The bill clarifiesexisting law by dealing with a number of issues that have arisen over time.While some are minor, some are critically important.

For example, it clarifies theextent to which the general corporation statute applies to banks charteredunder Title 11 (see new Ohio Revised Code Section 1113.01).The bill also makes an important change to current lawaimed at limiting the personal liability of individual bank directors.

  Now a bank director is liable for damages ifhe or she knowingly violates, or permits any other officers or agents of thebank to violate, any provision of banking law. The new banking billspecifically incorporates the common defenses provided by Ohio corporate law todirectors for actions taken to further the best interest of the bank or inreliance in good faith on the bank’s management, staff or external experts (newOhio Revised Code Section 1105.11(A) and (B).The bill also provides that Ohio banks should have “competitiveparity” with other types of nationally-chartered financial institutions thatoperate in Ohio (new Ohio Revised Code Section 1101.02).

 The result is that generally speaking Ohiobanks can undertake the same business activities of national banks, with someexceptions.The bill also clarifies that the enforcement authorityfor Ohio banking law is limited to banking regulators and does not includeprivate parties (new Ohio Revised Code Section 1101.05).  It also creates a new privilege for a bank’sself-assessment reports (new Ohio Revised Code Section 1121.19) to prevent theuse of these reports against the bank in litigation.The bill clarifies and modernizes the statutorytreatment of a number of other subjects, such as, for example: (1) electronicbanking (permitted with a customer’s consent, new Ohio Revised Code Sections1109.04(B) and (C)); (2) when supervisory information that is deemed to beprivileged and confidential (new Ohio Revised Code Section 1121.18(A)); and (3)capital restoration in the event a bank becomes undercapitalized (new Ohio RevisedCode Section 1121.

52).So the new legislation is broad in scope as the examplesgiven in this brief description are intended to suggest.  Ohio’s bankers and bank customers shouldbenefit from the changes it makes that are intended to clarify and consolidateOhio’s statutory banking law.