CHAPTER 270

An Act to amend the Code of Virginia by adding a section numbered
6.1-58.1, to permit banks to have subsidiary corporations. rH 622]

Approved April 1, 1968

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia be amended by adding a section numbered
6.1-58.1, as follows:

§ 6.1-58.1. A bank may acquire, own and hold the stock, securities
or obligations of one or more controlled subsidiary corporations. Such
investment in stock, securities or obligations together with any investment
of the bank in stock, securities or obligations of a bank service corpora-
tion, shall not exceed in the aggregate fifty percent of the bank’s capital
stock and permanent surplus, without the permission of the State Corpo-
ration Commission. Such permissible investments shall be in addition to
any permissible investment in the stock, securities or obligations of a
building corporation under § 6.1-57.

A controlled subsidiary corporation is defined as a domestic corpora-
tion in which a majority of the voting stock is owned by a bank or banks
organized under the laws of this State or the United States and author-
ized to do a banking business in this State, or in which a majority of the
voting stock is owned by a registered bank holding company, by banks
which are subsidiary banks of the same registered bank holding company,
or by such subsidiary banks and such registered bank holding company.

Such controlled subsidiary corporation shall not be authorized (1) to
receive deposits (except as hereafter provided); (2) to engage in the
trust business; or (3) to conduct any business which is required under
§ 13.1-50 to be specifically stated in the Articles of Incorporation, except
as may be authorized by the next paragraph.

Such controlled subsidiary corporation may engage in the business
of credit card operations, leasing, safe deposit, factoring, credit bureaus,
mortgage brokerage or servicing, data processing, international banking
and finance, and any other function or business activity in which a bank
might engage, except the receipt of deposits, or the trust business.

A subsidiary corporation engaged solely in the business of interna-
tional banking and finance, and subject to the regulation and supervision
by the Board of Governors of the Federal Reserve System, shall not be
prohibited from receiving deposits or from taking any other action which
any such regulated international banking and finance institution is per-
mitted to take.

Such controlled subsidiary corporation may charge and collect such
finance charges and fees or interest rates as are authorized to banks by
the laws of this State.

The provisions of § 6.1-60, relating to investment of funds in shares
of stock of another corporation shall be applicable to controlled subsidiary
corporations, except that a controlled subsidiary corporation may acquire,
own and hold stock in a subsidiary corporation if a bank would be per-
mitted to directly acquire, own or hold the stock hereunder. The provi-
sions of § 6.1-62 relating to loans to officers, directors or employees of
the bank shall be applicable both to loans by the subsidiary to officers,
directors or employees of the bank and to loans by the bank to officers,
directors or employees of the subsidiary, with the approval of the Board
of Directors of the bank only being required for purposes of § 6.1-62.
The limitations of §§ 6.1-63, 6.1-64, 6.1-65 and 6.1-66 as they relate to
appraisal value, maximum term and amortization on loans secured by real
estate shall be applicable to controlled subsidiary corporations. This para-
graph and the following are subject to the proviso that the restrictions
of § 6.1-60 through § 6.1-66 are not intended to be imposed upon any
controlled subsidiary which has no state banks as shareholders.

The provisions of § 6.1-61 relating to limitation upon obligations of
any one borrower shall apply to the total obligations of any borrower in
the aggregate to the subsidiary corporation and to any bank or bank
holding company owning stock securities or obligations of such subsidiary
corporation. The loan limit of the subsidiary shall be computed by attribut-
ing to the subsidiary a pro rata share of the lending limit of each bank
stockholder prorated in accordance with the percentage of stock owned
by such bank or in the case of a subsidiary, any of the stock, securities
or other obligations of which are owned by a bank holding company, the
loan limits of the subsidiary shall be computed by attributing to the sub-
sidiary a pro rata share of the lending limits of all bank subsidiaries of
such holding company prorated in accordance with the percentage of stock
owned by such holding company and all subsidiary banks thereof. In
computing whether a bank or subsidiary (which is not wholly owned) is
complying with its lending limit, the loans of the bank and the subsidiary
to any common borrower shall be aggregated on a basis pro rata to the
percentage of stock of the subsidiary owned by the bank.

Such controlled subsidiary corporation shall not otherwise be subject
to the provisions of the Virginia Banking Act, except where it is expressly
so provided.

A controlled subsidiary corporation shall be subject to audit and
examination by the Commission whether or not it is an affiliate as defined
in § 6.1-85 and in connection therewith, shall pay such examination fees
as shall be imposed under § 6.1-94 for the examination of trust depart-
ments. If upon examination, the Commission shall ascertain that the cor-
poration is created or operated in violation of this section or that the
manner of operation is detrimental to the business of the parent bank and
its depositors, it may order the bank to dispose of all or part of its invest-
ment in such corporation upon such terms as the Commission may deem
proper.

A controlled subsidiary may not merge or consolidate unless the sur-
viving corporation is itself a controlled subsidiary corporation as defined
herein, or unless as a result of such merger or consolidation the bank
divests itself of all stock or other securities which are held pursuant to
the authority herein granted.

The Commission shall have the same powers over controlled sub-
sidiary corporations as it has over banks under §§ 6.1-100, 6.1-101, 6.1-103,
6.1-104 and 6.1-105, excepting those controlled subsidiary corporations
which have no state banks as stockholders.