Changes to Ohio Banking Law
By H. Grant Stephenson
Last year, the Ohio Legislature made a number of important
changes 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,
The heavy lifting of the new Ohio banking bill is
language that consolidates a number of existing financial institution charters
into one single charter. Going forward, Ohio-chartered
banks, savings and loans and savings banks will be operating under one common
form of charter.
So, generally speaking, the changes made by the new
banking code can be summarized with two words:
consolidation and clarification. The happy result is much needed
To accomplish consolidation,
for example, the banking bill makes numerous changes to the sections of the
Ohio Revised Code which deal with chartering matters, mostly in Chapter 1109 of
the Ohio Revised Code. It also repeals eight former chapters of the Ohio
Revised Code which dealt with specific financial institution charters such as society
for savings, savings and loan associations and savings banks (old Ohio Revised
Code Chapters 1133, 1151, 1153, 1155, 1157, 1161, 1163 and 1165).
A new chapter is introduced into the Code to deal with
the mutual ownership structure of some thrift institutions (new Ohio Revised
Code Chapter 1114). And a new chapter is introduced to deal with mutual holding
companies (new Ohio Revised Code Chapter 1116).
The bill clarifies
existing 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 the
extent to which the general corporation statute applies to banks chartered
under Title 11 (see new Ohio Revised Code Section 1113.01).
The bill also makes an important change to current law
aimed at limiting the personal liability of individual bank directors. Now a bank director is liable for damages if
he or she knowingly violates, or permits any other officers or agents of the
bank to violate, any provision of banking law. The new banking bill
specifically incorporates the common defenses provided by Ohio corporate law to
directors for actions taken to further the best interest of the bank or in
reliance in good faith on the bank’s management, staff or external experts (new
Ohio Revised Code Section 1105.11(A) and (B).
The bill also provides that Ohio banks should have “competitive
parity” with other types of nationally-chartered financial institutions that
operate in Ohio (new Ohio Revised Code Section 1101.02). The result is that generally speaking Ohio
banks can undertake the same business activities of national banks, with some
The bill also clarifies that the enforcement authority
for Ohio banking law is limited to banking regulators and does not include
private parties (new Ohio Revised Code Section 1101.05). It also creates a new privilege for a bank’s
self-assessment reports (new Ohio Revised Code Section 1121.19) to prevent the
use of these reports against the bank in litigation.
The bill clarifies and modernizes the statutory
treatment of a number of other subjects, such as, for example: (1) electronic
banking (permitted with a customer’s consent, new Ohio Revised Code Sections
1109.04(B) and (C)); (2) when supervisory information that is deemed to be
privileged and confidential (new Ohio Revised Code Section 1121.18(A)); and (3)
capital restoration in the event a bank becomes undercapitalized (new Ohio Revised
Code Section 1121.52).
So the new legislation is broad in scope as the examples
given in this brief description are intended to suggest. Ohio’s bankers and bank customers should
benefit from the changes it makes that are intended to clarify and consolidate
Ohio’s statutory banking law.