LB341 – Executive Bank Officer Licensing Reforms

Good afternoon members of the Banking, Commerce and Insurance Committee.  My name is Nicole Fox, and I am the Director of Government Relations for the Platte Institute for Economic Research.  Thank you, Senator Lindstrom, for introducing LB 341.  I am here today to testify in support of this bill.

Under current law (8-139), no loan or investment shall be made by a bank, directly or indirectly, without the approval of an active executive bank officer.  No person shall act as an active executive officer until the bank obtains a license from the Department of Banking.  LB 341 would authorize a bank to elect to have its active executive officers exempted from the requirement to apply for and obtain a license from the Department of Banking.

The Platte Institute has spoken with representatives with the Nebraska Bankers Association, and it is their professional opinion that the executive officer’s license requirement does not serve any meaningful purpose, and should be eliminated. Nebraska is the only state in which an Executive Officer’s license is required for active executive officers.  In addition, active executive officers employed by national banks operating in Nebraska are not subject to these requirements, which results in a competitive disadvantage for state banks.

Over the past 2 decades, very few individuals have been denied the right to obtain a license, and very few enforcement actions have been brought against executive officers for violations. Issuance of the original executive officer’s license comes at a cost of $50, with an annual renewal fee of $15.  The regulatory burden associated with this licensing requirement far outweighs any benefits derived from its existence.

Nearly 200 different occupations in Nebraska require a government license, affecting nearly 1 in 4 workers.  This is negatively impacting small businesses trying to hire employees, potential entrepreneurs wanting to start a business and individuals seeking a means to earn an honest living.  Reform of occupational licensing laws to lessen burdensome regulation is an economic issue that needs to be addressed. 

Occupational licensing laws were initially created as a means of protecting the public from negligent and unqualified practitioners, but more and more, instead of protecting the public from harm, we now understand that occupational licensing is frequently a hoop that individuals and businesses must jump through in terms of time, paperwork and money.  Often, the cost is passed on to consumers by raising the price of goods and services.  A study by the Heritage Foundation showed that occupational licensing reform could save Nebraska households over $900 annually.  The licensing of executive officers is a tax on their employment when there are already safeguards in place for hiring qualified professionals.

Allowing a bank to elect to have its active executive officers exempted from the requirement to apply for and obtain a license from the Department of Banking as proposed by LB 341 reduces burdensome regulation that will make Nebraska’s job licensing requirements more consistent and competitive with our neighboring states as well as help state banks in Nebraska compete with the national banks located here.  I ask that you advance LB 341 out of committee.

Thank you for the opportunity to testify today.  I am happy to answer any questions the committee may have.