2019 New Hampshire Bill Establishing a Public Bank






AN ACT establishing a state bank.

SPONSORS: Rep. Marple, Merr. 24; Rep. Horrigan, Straf. 6 

COMMITTEE: Commerce and Consumer Affairs



This bill establishes a state bank.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.




In the Year of Our Lord Two Thousand Nineteen

AN ACT establishing a state bank.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1  New Chapter; Development Bank of New Hampshire.  Amend RSA by inserting after chapter 389-A the following new chapter:



389-B:1  Definitions.  In this chapter:

I.  “Advisory committee” means the development bank of New Hampshire advisory committee established in RSA 389-B:3.

II.  “Bank” means the development bank of New Hampshire.

III.  “Board” means the board of directors for the development bank of New Hampshire established in RSA 389-B:2.

IV.  “Public funds” means funds under the control or in the custody of a public official.

389-B-2  Board; Duties and Powers.

I.  The board of directors for the development bank of New Hampshire is established and shall consist of 5 voting members appointed by the governor and council.  The state treasurer and the banking commissioner shall serve as ex officio nonvoting members of the board.  The board shall oversee the operation, management, and control of the bank in accordance with this chapter.  The board shall designate one of its members as chair and shall determine the location of the bank and maintain places of business of the bank.

II.  The board shall establish the frequency of regular board meetings in bylaws and public notice requirements for meetings through rulemaking under RSA 389-B:7.  A special meeting may be called at any time upon notice by the governor, or by 3 members of the board.  Three voting members constitute a quorum and may transact business and exercise all rights, duties, and powers of the board.

III.  The board shall appoint a person with extensive experience in banking as the president of the bank.  The board may appoint and employ any subordinate officers, employees, and agents that the board considers necessary and shall define the duties, designate the titles, and fix the compensation of those positions.

IV.  The board may designate the president or another officer or employee as its agent with respect to the functions of the bank, subject to the supervision, limitation, and control of the board.  The board may remove and discharge any person appointed and employed under this chapter.

V.  Board members shall serve without compensation, except that members may be reimbursed for travel expenses associated with their duties under this chapter.

389-B:3  Advisory Committee.

I.  The board shall appoint the development bank of New Hampshire advisory committee to actively enlist the help of private enterprise and encourage use of the bank.  The advisory committee shall consist of 7 members and shall include representatives of the state’s financial, business, agricultural, and labor sectors and at least 2 officers of state-chartered financial institutions that do not maintain offices outside the state.

II.  The board shall appoint a chair, vice-chair, and secretary for the advisory committee from the members of the advisory committee.

III.  Advisory committee members shall serve a term of office of 4 years, except as provided by law for initial appointments.  Initial appointments for the development bank of New Hampshire advisory committee shall be for staggered terms.  The first 2 members shall be appointed for one-year terms, the second 2 members shall be appointed for 2-year terms, the third 2 members shall be appointed for 3-year terms, and the remaining members shall be appointed for 4-year terms.

IV.  The advisory committee shall:

(a)  Meet regularly with the board to review and make recommendations concerning the bank’s operations, finances, and loan practices;

(b)  Make recommendations to the board for improving management performance, customer service, and internal methods, procedures, and operating policies of the bank;

(c)  Make recommendations to the board relating to the establishment of additional objectives for the operation of the bank;

(d)  Make recommendations to the board concerning the appointment of officers of the bank; and

(e)  Participate on loan committees.

V.  Advisory committee members serve without compensation except that members may be reimbursed for travel expenses associated with their duties under this chapter.

389-B:4  Deposit of Funds.

I.  The bank may accept deposits of public funds.  Except as provided in RSA 389-B:5, the bank may not accept deposits of private funds.  All income earned by the bank on public funds shall be credited to and shall become a part of the revenues and income of the bank.

II.  The bank shall pay interest on public deposits at a rate comparable to rates paid by private depositories of public funds and may offer other financial products to the state treasurer on a competitive basis.

III.  Funds may also be appropriated from the general fund to allow the bank to fulfill its duties under this chapter.

389-B:5  Powers of the Bank.

I.  The bank may:

(a)  Make, purchase, guarantee, modify, or hold loans:

(1)  To state-chartered financial institutions;

(2)  That are insured or guaranteed in whole or in part by the United States or its agencies or instrumentalities;

(3)  Obtained as security pledged for, or originated in the restructuring of, any other loan properly originated or participated in by the bank; and

(4)  To instrumentalities of this state.

(b)  Purchase, guarantee, modify, or hold loans originated by financial institutions authorized to do business in this state.

(c)  Purchase participation interests in loans made or held by banks, bank holding companies, state-chartered or federally-chartered financial institutions, any other financial institutions, or any other entity that provides financial services and that meets underwriting standards that are generally accepted by state or federal financial regulatory agencies.

(d)  Make loans in the form of participation loans to qualified persons residing in or doing business in this state when the originator of the loan is a private financial institution.

II.  The bank shall not make loans to any private individual or legal entity.

III.  The bank shall invest its funds in conformity with policies of the board and the investment standards in RSA 6:8.  In no case shall the bank invest its funds in derivatives.

IV.  The bank may buy and sell federal bonds.

V.  The bank may lease, assign, sell, exchange, transfer, convey, grant, pledge, or mortgage all real and personal property, title to which has been acquired in any manner.

VI.  The bank may:

(a)  Act as a custodian bank for financial institutions authorized to do business in this state and accept deposits from the financial institutions in connection with this function;

(b)  Issue bank stock loans to financial institutions authorized to do business in this state; and

(c)  For financial institutions that make the bank a reserve depository, perform the functions and render the services of a clearinghouse, including all functions for providing domestic and foreign exchange, and rediscount notes, on terms prescribed by the board.

VII.  The bank may perform all acts and do all things necessary, convenient, advisable, or desirable to carry out the powers expressly granted or necessarily implied in this chapter through or by means of its president, officers, agents, or employees or by contracts with any person, firm, or corporation.

389-B:6  Transfer to General Fund.  As soon as possible after the end of each calendar year, the board shall determine the amount of income, if any, earned by the bank in that prior calendar year that is in excess of amounts necessary to pay for expenses of administering the activities of the bank less any reserves required pursuant to rules adopted in accordance with RSA 389-B:7, for delinquencies and future business and payment of debts from any initial funding.  The amount of the excess shall be transferred to the general fund.

389-B:7  Rulemaking.  The board shall adopt rules pursuant to RSA 541-A, relative to banking policies and procedures, including:

I.  Ensuring the safety and soundness of the bank that, to the extent possible, reflect applicable standards for safety and soundness set forth in Part 34 of Title 12 of the Code of Federal Regulations;

II.  Specifying the bank’s powers and permissible investments and activities consistent with RSA 389-B:5;

III.  Specifying services that the bank may provide;

IV.  Specifying limits for loans and other obligations the bank makes or undertakes; and

V.  Specifying reserve requirements.

389-B:8  Examination and Report.  The banking department shall examine the bank at least once each calendar quarter to verify and ensure that the bank is complying with the rules adopted under RSA 389-B:7.  The banking department shall report the results of the examination to the board and to the banking commissioner.  The department’s report shall be a public record subject to disclosure.

389-B:9  Audit.  The audit division of the legislative budget assistant shall audit the accounts and financial affairs of the bank at least once every 2 years.

389-B:10  Annual Report; Performance Measures.  Beginning July 1, 2022 and annually thereafter, the bank shall report to the governor and the legislature on the financial condition and performance of the bank and provide an analysis of the bank’s impact on the state consistent with the bank’s purposes set forth in RSA 389-B:1, particularly the bank’s impact on job creation and economic development.

389-B:11  Exempt From Liability.  Whenever any public funds are deposited in the bank, the public official who deposited the funds and the sureties on any bond of the public official shall be exempt from liability for loss of any of the funds while the funds are deposited in the bank.

389-B:12  Use of Name; Execution of Instruments.

I.  All business of the bank shall be conducted under the name of the development bank of New Hampshire.  Title to property pertaining to the operation of the bank shall be obtained and conveyed in the name of the development bank of New Hampshire.

II.  Instruments shall be executed in the name of the state.  Within the scope of authority granted by the board, the president of the bank may execute instruments on behalf of the bank, including any instrument granting, conveying, or otherwise affecting any interest in or lien upon real or personal property.

III.  Officers or employees of and legal counsel to the bank may execute instruments on behalf of the bank when authorized by the board.

2  State Treasurer and Bank Commissioner to Make Recommendations.  No later than January 15, 2020, the state treasurer and the bank commissioner, in consultation with the attorney general, shall submit a report to the house and senate finance committees with recommendations for implementing the development bank of New Hampshire.  The report shall include:

I.  A draft of any legislation needed to amend the New Hampshire constitution to authorize the state to establish the bank;

II.  A recommendation on the amount of money needed to adequately capitalize the bank;

III.  A draft of any legislation needed to transfer funds to the bank;

IV.  A description and draft of statutory changes needed to fully utilize the resources and powers of the bank and to eliminate any duplication of efforts or conflict with the authority or responsibilities of the New Hampshire municipal bond bank and any other state agencies;

V.  Recommendations for guaranteeing funds deposited in the bank;

VI.  Recommendations pertaining to the liability of the state and the bank in civil actions; and

VII.  Recommendations regarding the confidentiality of certain records held by the bank.

3  Effective Date.  This act shall take effect July 1, 2019.









AN ACT establishing a state bank.


FISCAL IMPACT:      [ X ] State              [    ] County               [    ] Local              [    ] None




Estimated Increase / (Decrease)


FY 2020

FY 2021

FY 2022

FY 2023












Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

Indeterminable Increase

Funding Source:

  [ X ] General            [    ] Education            [    ] Highway           [ X ] Other – Bank Assessments and Fees



This bill establishes the Development Bank of New Hampshire (State Bank) overseen by a board consisting of 5 members appointed by the Governor.  The State Treasurer and the Bank commissioner would serve as ex officio nonvoting members.  The bank’s operating funds will come from interest earned on deposits of public funds and, if necessary, appropriations from the state general fund.  Any excess funds remaining after expenses to administer the bank would be transferred to the state general fund after the end of each calendar year, potentially offsetting any funds initially appropriated from the general fund.  No private deposits could be accepted and no loans could be made to private individuals or legal entities.


The State Treasury Department assumes any appropriation would be made directly to the Development Bank of New Hampshire and there would be no impact on the revenues of expenditures of the Treasury Department.  The bill requires the State Treasurer and the Banking Commissioner, in consultation with the Attorney General, to recommend the amount of money necessary to adequately capitalize the bank.  The Treasury Department assumes financing for such capitalization would be through a state bond issue with the debt service on the bonds paid from bank profits.  The Treasury Department indicates there is no precise way to determine the amount or timing of such financing or the amount of assets that would be included on the bank’s balance sheet for the purpose of determining an adequate level of capitalization. One proxy for determining the amount of capitalization applies a global bank capitalization standard by which banks are required to maintain a 7% key capital ratio.  Basel III accord standards require a minimum capital ratio of 3-5% as reasonable. Based on average balances maintained by the Treasury in FY 2018 as a result of the deposit of public funds, ranging from $700-$800 million plus $340 million in cash held by the Treasury on behalf of nearly 50 separate and dedicated funds, approximately $50 million in capitalization would be required, which could fluctuate by multiples of this amount based on the variability of the timing of cash flows during the fiscal year.  These estimates do not account for any other assets the State Bank may need to account for on its balance sheet at the time of capitalization. The Treasury also notes creation of a State Bank would likely have an adverse impact on the Public Deposit Investment Pool established pursuant to RSA 383:22.

The Banking Department assumes it would charge the proposed state bank an assessment as it does with all state-chartered banks examined by the Department.  The amount charged to each state-chartered bank is based on bank assets, therefore, assessment for the proposed state bank is indeterminable until such time as pro-forma financial reports are generated.  The Department assumes the following concerning the fiscal impact of the bill:

  • The Department would bill the bank for the quarterly examinations conducted pursuant to proposed RSA 389-B:8.  Each required examination would take 5 days of examiner time.  If problems are discovered during the exam, more time would be needed.
  • In FY 2020 bank examiner and legal staff time would be necessary to provide the recommendations required by January 15, 2020.  The amount of such staff time and the potential cost is indeterminable.
  • FY 2021 and future years.  The bank would exist and the Commissioner would spend additional time serving as a nonvoting, ex officio board member.  The Department would conduct 4 examinations at an estimated annual cost of $18,280 ($914 per day X 5 days x 4 quarterly examinations).  The cost of examinations would increase in future years assuming a 4% rate of inflation.

The Department of Justice (DOJ) assumes it would need to hire a full-time attorney with the requisite experience on a contract basis in order to assist the Bank Commissioner and the State Treasurer with developing the required recommendations and reports.  The DOJ estimates  the cost of such contracted attorney would range between $75,000 and $100,000 for FY 2020 only and $0 thereafter.  The DOJ assumes the bank would hire its own in-house counsel after it is established and that the DOJ would not provide advice or represent the bank in the event of a lawsuit.


State Treasury Department, Banking Department, and Department of Justice