STAND. COM. REP. NO. 317

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1124
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 1124 entitled: 

     "A BILL FOR AN ACT RELATING TO THE CODE OF FINANCIAL
     INSTITUTIONS,"

begs leave to report as follows:

     The purpose of this measure is to eliminate the prohibition
on the establishment of a de novo interstate branch or the
acquisition of an interstate branch by an out-of-state bank, and
remove the five-year age requirement for the acquisition of a
whole bank by an out-of-state bank. 

     The Commissioner of Financial Institutions and the Bank of
Hawaii presented testimony in support of the measure.  The Hawaii
National Bank presented comments on and proposed an amendment to
the measure.  The Bank of Tokyo-Mitsubishi, Ltd., submitted
written testimony in support of the measure. 

     This measure allows an out-of-state bank to establish a de
novo interstate branch or acquire an existing interstate branch
subject to filing and fee requirements.  Additionally, it allows
an out-of-state bank to acquire a Hawaii bank through an
interstate merger transaction without the condition that the
Hawaii bank have been in continuous operation for a minimum of
five years.

     Your Committee finds that out-of-state banks operating
through the Internet, direct mail, and the telephone, already

 
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have access to Hawaii consumers, but are not subject to the
regulatory measures that govern financial institutions physically
domiciled in the State.  Permitting out-of-state banks to
establish or acquire interstate branches in Hawaii subject to
their compliance with the requirements and laws of the State
allows out-of-state banks to compete on a direct level with local
institutions while under the regulatory scrutiny of the Division
of Financial Institutions.

     Your Committee finds that adopting an open approach to
interstate branching should benefit the State and its residents
and make Hawaii a more attractive destination for visitors.  The
entry of additional financial services providers into the market
should create competition in the industry, resulting in improved
customer service and greater choices for consumers in financial
products and services.  Tourists would find Hawaii a convenient
place to visit because of the ease of conducting financial
transactions through interstate branches of their hometown banks.

     Your Committee has amended this measure by making technical,
nonsubstantive amendments and by deleting language to reflect
current statute.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1124, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 1124, S.D. 1, and be referred to the Committee on Ways and
Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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