Below is a revised mock legislative draft tailored for North Dakota, incorporating its existing state-owned bank, the Bank of North Dakota (BND), as a cornerstone for implementing "Quantitative Balancing" (QB). This version leverages North Dakota’s unique public banking infrastructure to pilot and expand QB, while still applying it to state-chartered private banks. The structure mirrors the previous draft but adjusts for North Dakota’s context—its smaller population, rural economy, and established banking model—as of February 20, 2025.
North Dakota Legislative Assembly
Bill No. SB-2025-103
Title: The North Dakota Quantitative Balancing Act of 2025
Introduced by: Senator T. Larson, Representative M. Olson
Date Introduced: March 1, 2025
Title: The North Dakota Quantitative Balancing Act of 2025
Introduced by: Senator T. Larson, Representative M. Olson
Date Introduced: March 1, 2025
AN ACT
To establish the Quantitative Balancing framework for state-chartered financial institutions and the Bank of North Dakota, to enhance transparency and accountability in banking operations, to strengthen the financial stability of North Dakota, and for other purposes.
SECTION 1. SHORT TITLE
This Act may be cited as the "North Dakota Quantitative Balancing Act of 2025."
SECTION 2. FINDINGS AND PURPOSE
(a) Findings: The Legislative Assembly of North Dakota finds that:
(1) Transparent banking practices are vital to the economic security of North Dakota’s residents and businesses;
(2) The state has authority under the 10th Amendment of the U.S. Constitution to regulate state-chartered financial institutions and the Bank of North Dakota;
(3) The Bank of North Dakota, as a public institution, provides a unique opportunity to model innovative banking reforms;
(4) Quantitative Balancing can protect depositors, stabilize the state’s economy, and generate resources for public benefit.
(1) Transparent banking practices are vital to the economic security of North Dakota’s residents and businesses;
(2) The state has authority under the 10th Amendment of the U.S. Constitution to regulate state-chartered financial institutions and the Bank of North Dakota;
(3) The Bank of North Dakota, as a public institution, provides a unique opportunity to model innovative banking reforms;
(4) Quantitative Balancing can protect depositors, stabilize the state’s economy, and generate resources for public benefit.
(b) Purpose: The purpose of this Act is to:
(1) Require state-chartered banks and the Bank of North Dakota to segregate customer deposits as custodial funds;
(2) Recognize seigniorage profits as a liability payable to the state treasury;
(3) Establish transparent reporting standards for cash flows and money creation activities.
(1) Require state-chartered banks and the Bank of North Dakota to segregate customer deposits as custodial funds;
(2) Recognize seigniorage profits as a liability payable to the state treasury;
(3) Establish transparent reporting standards for cash flows and money creation activities.
SECTION 3. DEFINITIONS
For the purposes of this Act:
(a) "State-chartered bank" means a financial institution chartered and regulated under North Dakota Century Code Title 6, excluding nationally chartered banks.
(b) "Bank of North Dakota" (BND) means the state-owned bank established under North Dakota Century Code Chapter 6-09.
(c) "Quantitative Balancing" (QB) means the system of banking practices requiring segregation of deposits, recognition of seigniorage liabilities, and transparent reporting as outlined herein.
(d) "Deposits" means funds placed with a state-chartered bank or the BND by customers, excluding equity or investment instruments.
(e) "Seigniorage" means the profit derived by a bank from the difference between interest earned on loans or investments and the cost of maintaining deposits.
(f) "State Treasury" means the North Dakota State Treasurer’s Office.
(a) "State-chartered bank" means a financial institution chartered and regulated under North Dakota Century Code Title 6, excluding nationally chartered banks.
(b) "Bank of North Dakota" (BND) means the state-owned bank established under North Dakota Century Code Chapter 6-09.
(c) "Quantitative Balancing" (QB) means the system of banking practices requiring segregation of deposits, recognition of seigniorage liabilities, and transparent reporting as outlined herein.
(d) "Deposits" means funds placed with a state-chartered bank or the BND by customers, excluding equity or investment instruments.
(e) "Seigniorage" means the profit derived by a bank from the difference between interest earned on loans or investments and the cost of maintaining deposits.
(f) "State Treasury" means the North Dakota State Treasurer’s Office.
SECTION 4. QUANTITATIVE BALANCING REQUIREMENTS
(a) Segregation of Deposits:
(1) Effective January 1, 2026, every state-chartered bank and the Bank of North Dakota shall segregate all customer deposits into a custodial account, distinct from operational or lending funds.
(2) Deposits in custodial accounts shall not be used for lending or investment unless explicitly authorized by the depositor in writing.
(3) Custodial accounts shall be held in trust for depositors, with the State Treasury designated as the secondary beneficiary in the event of bank insolvency.
(1) Effective January 1, 2026, every state-chartered bank and the Bank of North Dakota shall segregate all customer deposits into a custodial account, distinct from operational or lending funds.
(2) Deposits in custodial accounts shall not be used for lending or investment unless explicitly authorized by the depositor in writing.
(3) Custodial accounts shall be held in trust for depositors, with the State Treasury designated as the secondary beneficiary in the event of bank insolvency.
(b) Recognition of Seigniorage Liabilities:
(1) Each state-chartered bank and the BND shall calculate its quarterly seigniorage profit, defined as net interest income from loans and investments minus deposit maintenance costs.
(2) Sixty percent (60%) of the BND’s seigniorage profit and forty percent (40%) of private state-chartered banks’ seigniorage profit shall be recorded as a liability payable to the State Treasury, remitted annually on or before March 31 of the following year.
(3) The remaining seigniorage profit may be retained by the bank for operational purposes, subject to existing capital requirements.
(1) Each state-chartered bank and the BND shall calculate its quarterly seigniorage profit, defined as net interest income from loans and investments minus deposit maintenance costs.
(2) Sixty percent (60%) of the BND’s seigniorage profit and forty percent (40%) of private state-chartered banks’ seigniorage profit shall be recorded as a liability payable to the State Treasury, remitted annually on or before March 31 of the following year.
(3) The remaining seigniorage profit may be retained by the bank for operational purposes, subject to existing capital requirements.
(c) Transparency and Reporting:
(1) State-chartered banks and the BND shall submit quarterly reports to the North Dakota Department of Financial Institutions, detailing:
(i) Total deposits in custodial accounts;
(ii) Seigniorage profits and liabilities;
(iii) Cash flow statements compliant with standards set by the Department.
(2) Reports shall be made publicly available on the Department’s website within 30 days of submission.
(1) State-chartered banks and the BND shall submit quarterly reports to the North Dakota Department of Financial Institutions, detailing:
(i) Total deposits in custodial accounts;
(ii) Seigniorage profits and liabilities;
(iii) Cash flow statements compliant with standards set by the Department.
(2) Reports shall be made publicly available on the Department’s website within 30 days of submission.
SECTION 5. IMPLEMENTATION AND OVERSIGHT
(a) North Dakota Department of Financial Institutions:
(1) The Department of Financial Institutions (DFI) is authorized to promulgate rules and regulations to implement this Act, including accounting standards aligned with US-GAAP ASC 942-230-20 or IFRS-IAS 7, as applicable.
(2) The DFI shall establish a Quantitative Balancing Oversight Committee, composed of five members—two from the BND, two from the private banking sector, and one appointed by the Governor—to monitor compliance and recommend adjustments.
(1) The Department of Financial Institutions (DFI) is authorized to promulgate rules and regulations to implement this Act, including accounting standards aligned with US-GAAP ASC 942-230-20 or IFRS-IAS 7, as applicable.
(2) The DFI shall establish a Quantitative Balancing Oversight Committee, composed of five members—two from the BND, two from the private banking sector, and one appointed by the Governor—to monitor compliance and recommend adjustments.
(b) Bank of North Dakota Pilot Program:
(1) The BND shall implement QB principles by July 1, 2025, serving as a pilot to test the framework for 12 months.
(2) The DFI shall report findings from the BND pilot to the Legislative Assembly by September 1, 2026, with recommendations for statewide expansion.
(1) The BND shall implement QB principles by July 1, 2025, serving as a pilot to test the framework for 12 months.
(2) The DFI shall report findings from the BND pilot to the Legislative Assembly by September 1, 2026, with recommendations for statewide expansion.
(c) Coordination with Federal Authorities:
(1) The DFI, in collaboration with the BND, shall consult with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve to ensure compliance with federal banking regulations.
(2) The DFI may request exemptions or waivers as necessary to facilitate QB adoption by state-chartered banks.
(1) The DFI, in collaboration with the BND, shall consult with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve to ensure compliance with federal banking regulations.
(2) The DFI may request exemptions or waivers as necessary to facilitate QB adoption by state-chartered banks.
SECTION 6. ROLE OF THE BANK OF NORTH DAKOTA
(a) The Bank of North Dakota shall:
(1) Adopt QB principles as outlined in Section 4, setting a precedent for private state-chartered banks;
(2) Offer technical assistance and training to private banks transitioning to QB;
(3) Provide incentives, such as partnership loans or reduced fees, to encourage voluntary QB adoption by private institutions.
(1) Adopt QB principles as outlined in Section 4, setting a precedent for private state-chartered banks;
(2) Offer technical assistance and training to private banks transitioning to QB;
(3) Provide incentives, such as partnership loans or reduced fees, to encourage voluntary QB adoption by private institutions.
SECTION 7. LEGAL PROVISIONS
(a) Non-Monetary Intent: This Act shall not be construed as an attempt to create or regulate currency, but as a reform to enhance transparency and accountability in state-chartered banking and the Bank of North Dakota.
(b) Severability: If any provision of this Act is found invalid by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect.
(c) Preemption Defense: This Act is enacted under the state’s reserved powers under North Dakota Century Code and shall not conflict with federal monetary authority as defined by the U.S. Constitution.
(b) Severability: If any provision of this Act is found invalid by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect.
(c) Preemption Defense: This Act is enacted under the state’s reserved powers under North Dakota Century Code and shall not conflict with federal monetary authority as defined by the U.S. Constitution.
SECTION 8. FUNDING AND REVENUE
(a) Seigniorage liabilities remitted to the State Treasury shall be deposited into a North Dakota Quantitative Balancing Fund.
(b) Funds shall be allocated as follows:
(1) 50% to agricultural development and rural infrastructure;
(2) 30% to depositor protection and financial literacy programs;
(3) 20% to renewable energy projects.
(c) The State Treasurer shall submit an annual report on fund usage to the Legislative Assembly by January 15 of each year.
(b) Funds shall be allocated as follows:
(1) 50% to agricultural development and rural infrastructure;
(2) 30% to depositor protection and financial literacy programs;
(3) 20% to renewable energy projects.
(c) The State Treasurer shall submit an annual report on fund usage to the Legislative Assembly by January 15 of each year.
SECTION 9. EFFECTIVE DATE
This Act shall take effect on July 1, 2025, except as otherwise provided herein.
END OF BILL
Notes on the North Dakota Draft
- Leveraging BND: The Bank of North Dakota is central to the rollout (Sections 5(b) and 6), using its public status to pilot QB and support private banks. This reflects North Dakota’s real-world advantage as the only U.S. state with a public bank.
- Adjusted Seigniorage Split: The BND pays a higher share (60%) to the treasury than private banks (40%), reflecting its public ownership and aligning with North Dakota’s history of using BND profits for state benefit.
- Rural Focus: Funding allocations (Section 8(b)) prioritize agriculture and rural needs, consistent with North Dakota’s economic profile.
- Existing Framework: References the North Dakota Century Code (e.g., Title 6, Chapter 6-09) to ground the bill in current law, enhancing legal feasibility.
- Timeline: The BND pilot starts earlier (July 2025) to capitalize on its readiness, with broader implementation delayed to 2026 for private banks.
This draft positions North Dakota as a trailblazer for QB, using its unique banking system to test and refine the concept.
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