Bill Text: TX SB805 | 2013-2014 | 83rd Legislature | Engrossed

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Bill Title: Relating to the regulation of banks, trust companies, and bank holding companies.

Sponsorship: Partisan Bill (Republican 1)

Status: (Engrossed - Dead) 2013-04-16 - Referred to Investments & Financial Services [SB805 Detail]

Download: Texas-2013-SB805-Engrossed.html

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By: Carona S.B. No. 805

A BILL TO BE ENTITLED
AN ACT
relating to the regulation of banks, trust companies, and bank
holding companies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsection (c), Section 11.107, Finance Code, is
amended to read as follows:
(c) The presiding officer may:
(1) adopt rules and procedures as the presiding
officer considers necessary for the orderly operation of the
finance commission and for communication among the finance
commission, the Texas Department of Banking [department], the
Department of Savings and Mortgage Lending, and the Office of
Consumer Credit Commissioner;
(2) adopt internal procedures governing the time and
place of meetings, the type of notice for special public meetings,
the manner in which public meetings are to be conducted, and other
similar matters; and
(3) appoint committees composed of finance commission
members as the presiding officer considers necessary to carry out
the commission's business.
SECTION 2. Subdivision (8), Subsection (a), Section 31.002,
Finance Code, is amended to read as follows:
(8) "Branch" means a location of a bank, other than the
bank's home office, at which the bank engages the public in the
business of banking. The term does not include:
(A) a drive-in facility located not more than
2,000 feet from the nearest wall of the home office or an approved
branch office of the bank;
(B) a night depository;
(C) an electronic terminal;
(D) a deposit or loan production office as
described by Section 32.204;
(E) a state or federally licensed armored car
service or other courier service transporting items for deposit or
payment, unless:
(i) the risk of loss of items in the custody
of the service is borne by the employing bank; or
(ii) the items in the custody of the service
are considered to be in customer accounts at the employing bank or
federally insured through the employing bank;
(F) a location at which the bank offers
exclusively nondepository financial products or services to the
public, including financial, investment, or economic advisory
services;
(G) a location that combines permissible
non-branch functions or facilities; or
(H) another office or facility as provided by
this subtitle or a rule adopted under this subtitle.
SECTION 3. Section 31.105, Finance Code, is amended by
amending Subsections (c) and (d) and adding Subsections (c-1) and
(e) to read as follows:
(c) The banking commissioner may:
(1) administer oaths and examine persons under oath on
any subject that the commissioner considers pertinent to the
financial condition or the safety and soundness of the activities
of a state bank; and
(2) subpoena witnesses and require and compel by
subpoena the production of documents not voluntarily produced.
(c-1) If a person refuses to obey a subpoena, a district
court of Travis County, on application by the banking commissioner,
may issue an order requiring the person to appear before the
commissioner and produce documents or give evidence regarding the
matter under examination or investigation.
(d) Disclosure of information to the banking commissioner
pursuant to an examination request or a subpoena issued under this
section does not constitute a waiver of or otherwise affect or
diminish an evidentiary privilege to which the information is
otherwise subject. A report of an examination under this section
is confidential and may be disclosed only under the circumstances
provided by this subtitle.
(e) A subpoena issued to a financial institution under this
section is not subject to Section 59.006.
SECTION 4. Section 32.204, Finance Code, is amended to read
as follows:
Sec. 32.204. DEPOSIT OR LOAN PRODUCTION OFFICES. (a) A
state bank may establish one or more deposit or loan production
offices for the purpose of:
(1) soliciting deposit accounts, applications for
loans, or equivalent transactions;
(2) [, accepting loan applications, and] performing
ministerial duties related to solicitations described by
Subdivision (1); and
(3) conducting other activities as permitted by rules
adopted under this subtitle [consummating a granted loan, such as
execution of loan documents and dispensation of loan proceeds by
check or other draft, including a certified or cashier's check, but
not by cash. A credit decision, commitment to make a loan, and
preparation of a check or other draft to dispense loan proceeds must
occur at the bank's home office or a branch office and may not occur
at a loan production office].
(b) The bank shall notify the banking commissioner in
writing of the location of and activities to be conducted at a
proposed deposit or loan production office of the bank. The bank
may establish the proposed office beginning on the 31st day after
the date [before the 31st day before the date of establishment of a
loan production office, except that] the banking commissioner
receives the bank's notice unless [may waive or shorten the period
if] the banking commissioner specifies that the proposed office be
established on an earlier or later date.
(c) The banking commissioner may extend the 30-day period
prescribed by Subsection (b) on a determination that the bank's
notice raises issues that require additional information or time
for analysis. If the period is extended, [does not have a
significant supervisory or regulatory concern regarding] the bank
may establish the proposed deposit or [its planned] loan production
office only with the prior written approval of the banking
commissioner.
SECTION 5. Section 33.104, Finance Code, is amended to read
as follows:
Sec. 33.104. ADVISORY DIRECTOR. (a) An advisory director
is not considered a director if the advisory director:
(1) is not elected by the shareholders of the bank;
(2) does not vote on matters before the board or a
committee of the board;
(3) is not counted for purposes of determining a
quorum of the board or committee; and
(4) provides solely general policy advice to the
board.
(b) A state bank may not disclose to an advisory director
confidential information pertaining to the bank or the bank's
customers unless:
(1) the board adopts a resolution that designates the
advisory director as a person who is officially connected to the
bank and that describes the purpose for disclosure of the
information, which must be a reasonable business purpose; and
(2) the disclosure is made under a written
confidentiality agreement between the bank and the advisory
director.
SECTION 6. Section 33.105, Finance Code, is amended to read
as follows:
Sec. 33.105. REQUIRED MONTHLY BOARD MEETING. (a) Except
as provided by Subsection (b), the [The] board of a state bank shall
hold at least one regular meeting each month.
(b) On application by the board, the banking commissioner
may grant the board approval to hold regular meetings on a less
frequent basis than the period prescribed by Subsection (a). The
commissioner may revoke or modify a prior approval granted under
this subsection if the commissioner determines that more frequent
regular meetings of the board are necessary to promote the safety
and soundness of the bank.
(c) At each regular meeting the board shall review and
approve the minutes of the prior meeting and review the operations,
activities, and financial condition of the bank. The board may
designate a committee from among its members to perform those
duties and approve or disapprove the committee's report at each
regular meeting. Each action of the board must be recorded in its
minutes.
SECTION 7. Subsection (c), Section 34.003, Finance Code, is
amended to read as follows:
(c) A state bank shall dispose of real property subject to
this section not later than[:
[(1)] the fifth anniversary of the date the real
property:
(1) [(A) it] was acquired except as otherwise
provided by rules adopted under this subtitle; [or]
(2) [(B) it] ceases to be used as a bank facility; or
(3) [(2) the second anniversary of the date it]
ceases to be a bank facility as provided by Section 34.002(b).
SECTION 8. Section 34.004, Finance Code, is amended to read
as follows:
Sec. 34.004. RETENTION OF NONPARTICIPATING ROYALTY
[PASSIVE INVESTMENT IN MINERAL] INTERESTS. (a) Notwithstanding
Section 34.003(a), a state bank may hold nonparticipating
[nonworking mineral or] royalty interests if:
(1) the state bank acquires the interest pursuant to
Section 34.003(a)(3) or retains the interest in a sale of property
acquired under that section;
(2) the interest is nonparticipating due to the fact
the interest:
(A) is nonpossessory;
(B) does not bear executive rights, the right of
ingress and egress, the right to receive bonus payments, or the
right to receive delay rentals; and
(C) is accordingly not subject to expenses of
exploration, development, production, operation, maintenance, or
abandonment, or [any] other expenses [expense] associated with
extracting and marketing the minerals subject to the [rights or]
interest;
(3) the interest is reasonably valued on the books of
the state bank for not more than a nominal amount, and the aggregate
amount of earnings from such interests is separately disclosed in
the annual financial statements of the state bank;
(4) the state bank does not make any new investments
relating to the [rights or] interests without the approval of the
banking commissioner; and
(5) the banking commissioner determines that the
possession of such [rights and] interests is not inconsistent with
the safety and soundness of the state bank.
(b) The banking commissioner may order a state bank that
holds nonparticipating [nonworking mineral or] royalty interests
to divest such interests at any time if the banking commissioner
determines that continued ownership of such interests is
detrimental to the state bank.
(c) Subject to compliance with this section,
nonparticipating [nonworking mineral or] royalty interests are not
considered to be real property for purposes of this subtitle.
SECTION 9. Subsection (b), Section 35.003, Finance Code, is
amended to read as follows:
(b) If the banking commissioner has grounds for action under
Subsection (a) and finds that a removal or prohibition order
appears to be necessary and in the best interest of the public [bank
involved and its depositors, creditors, or shareholders], the
banking commissioner may serve a proposed removal or prohibition
order, as appropriate, on a person alleged to have committed or
participated in the action. The proposed order must:
(1) be delivered by personal delivery or by registered
or certified mail, return receipt requested;
(2) state with reasonable certainty the grounds for
removal or prohibition;
(3) state the effective date of the order, which may
not be before the 21st day after the date the proposed order is
delivered or mailed; and
(4) state the duration of the order, including whether
the duration of the order is perpetual.
SECTION 10. Section 35.106, Finance Code, is amended to
read as follows:
Sec. 35.106. AUTHORITY OF SUPERVISOR. During a period of
supervision, a bank, without the prior approval of the banking
commissioner or the supervisor or as otherwise permitted or
restricted by the order of supervision, may not:
(1) dispose of, sell, transfer, convey, or encumber
the bank's assets;
(2) lend or invest the bank's money;
(3) incur a debt, obligation, or liability; [or]
(4) pay a cash dividend to the bank's shareholders; or
(5) remove an executive officer or director, change
the number of executive officers or directors, or have any other
change in the position of executive officer or director.
SECTION 11. Subsection (a), Section 181.002, Finance Code,
is amended by adding Subdivision (47-a) to read as follows:
(47-a) "Surplus" means the amount by which the assets
of a state trust company exceed the company's liabilities, capital,
and undivided profits.
SECTION 12. Section 181.104, Finance Code, is amended by
amending Subsections (d) and (f) and adding Subsections (f-1) and
(g) to read as follows:
(d) Disclosure of information to the banking commissioner
pursuant to an examination request or a subpoena issued under this
section does not constitute a waiver of or otherwise affect or
diminish an evidentiary privilege to which the information is
otherwise subject. A report of an examination under this section is
confidential and may be disclosed only under the circumstances
provided by this subtitle.
(f) The banking commissioner may:
(1) administer oaths and examine persons under oath on
any subject that the banking commissioner considers pertinent to
the financial condition or the safety and soundness of the
activities of a state trust company; and
(2) subpoena witnesses and require and compel by
subpoena the production of documents not voluntarily produced.
(f-1) If a person refuses to obey a subpoena, a district
court of Travis County, on application by the banking commissioner,
may issue an order requiring the person to appear before the
commissioner and produce documents or give evidence regarding the
matter under examination or investigation.
(g) A subpoena issued to a financial institution under this
section is not subject to Section 59.006.
SECTION 13. Section 183.104, Finance Code, is amended to
read as follows:
Sec. 183.104. ADVISORY DIRECTOR OR ADVISORY MANAGER.
(a) An advisory director or advisory manager is not considered to
be a director if the advisory director or advisory manager:
(1) is not elected by the shareholders or participants
of the state trust company;
(2) does not vote on matters before the board or a
committee of the board;
(3) is not counted for purposes of determining a
quorum of the board or committee; and
(4) provides solely general policy advice to the
board.
(b) A state trust company may not disclose to an advisory
director or advisory manager confidential information pertaining
to the state trust company or the company's clients unless:
(1) the board adopts a resolution that designates the
advisory director or advisory manager as a person who is officially
connected to the trust company and that describes the purpose for
disclosure of the information, which must be a reasonable business
purpose; and
(2) the disclosure is made under a written
confidentiality agreement between the state trust company and the
advisory director or advisory manager.
SECTION 14. Subsections (a) and (c), Section 184.002,
Finance Code, are amended to read as follows:
(a) Without the prior written approval of the banking
commissioner, a state trust company may not directly or indirectly
invest an amount in excess of the company's [60 percent of its]
restricted capital in state trust company facilities, furniture,
fixtures, and equipment. Except as otherwise provided by rules
adopted under this subtitle, in computing the limitation provided
by this subsection a state trust company:
(1) shall include:
(A) its direct investment in state trust company
facilities;
(B) an investment in equity or investment
securities of a company holding title to a facility used by the
state trust company for the purposes specified by Section 184.001;
(C) a loan made by the state trust company to or
on the security of equity or investment securities issued by a
company holding title to a facility used by the state trust company;
and
(D) any indebtedness incurred on state trust
company facilities by a company:
(i) that holds title to the facility;
(ii) that is an affiliate of the state trust
company; and
(iii) in which the state trust company is
invested in the manner described by Paragraph (B) or (C); and
(2) may exclude an amount included under Subdivisions
(1)(B)-(D) to the extent any lease of a facility from the company
holding title to the facility is capitalized on the books of the
state trust company.
(c) A state trust company shall dispose of any real property
subject to Subsection (a) not later than the fifth anniversary of
the date the real property:
(1) was acquired, except as otherwise provided by
rules adopted under this subtitle;
(2) ceases to be used as a state trust company
facility; or
(3) ceases to be a [comply with regulatory accounting
principles in accounting for its investment in and depreciation of]
state trust company facility as provided by Subsection (b)
[facilities, furniture, fixtures, and equipment].
SECTION 15. Subsection (b), Section 185.003, Finance Code,
is amended to read as follows:
(b) If the banking commissioner has grounds for action under
Subsection (a) and finds that a removal or prohibition order
appears to be necessary and in the best interest of the public
[state trust company involved and its clients, creditors,
shareholders, or participants], the banking commissioner may serve
a proposed removal or prohibition order, as appropriate, on an
officer, employee, director, manager or managing participant,
controlling shareholder or participant, or other person alleged to
have committed or participated in the violation or other conduct
described by Section 185.002(a). The order must:
(1) be delivered by personal delivery or by registered
or certified mail, return receipt requested;
(2) state with reasonable certainty the grounds for
removal or prohibition;
(3) state the effective date of the order, which may
not be before the 21st day after the date the proposed order is
delivered or mailed; and
(4) state the duration of the order, including whether
the duration of the order is perpetual.
SECTION 16. Section 185.106, Finance Code, is amended to
read as follows:
Sec. 185.106. DUTIES OF STATE TRUST COMPANY UNDER
SUPERVISION. During a period of supervision, a state trust
company, without the prior approval of the banking commissioner or
the supervisor or as otherwise permitted or restricted by the order
of supervision, may not:
(1) dispose of, sell, transfer, convey, or encumber
the state trust company's assets;
(2) lend or invest the state trust company's funds;
(3) incur a debt, obligation, or liability;
(4) pay a cash dividend to the state trust company's
shareholders or participants; [or]
(5) solicit or accept any new client accounts; or
(6) remove an executive officer or director, change
the number of executive officers or directors, or have any other
change in the position of executive officer or director.
SECTION 17. Subsection (a), Section 187.103, Finance Code,
is amended to read as follows:
(a) An out-of-state trust company that does not operate a
trust office in this state and that meets the requirements of this
subchapter may acquire an existing trust institution in this state
and after the acquisition operate and maintain the acquired
institution as a trust office in this state, subject to Subchapter
A, Chapter 183, or Subchapter A, Chapter 33, if applicable. [If the
institution to be acquired is a bank or a state savings bank,
Section 203.005 applies to the transaction.]
SECTION 18. Subsection (a), Section 187.105, Finance Code,
is amended to read as follows:
(a) A trust office of an out-of-state trust company may be
acquired or established in this state under this subchapter if:
(1) the out-of-state trust company confirms in writing
to the banking commissioner that while it maintains a trust office
in this state, it will comply with all applicable laws of this
state;
(2) the out-of-state trust company provides
satisfactory evidence to the banking commissioner of compliance
with Section 201.102 and the applicable requirements of its home
state regulator for acquiring or establishing and maintaining the
office;
(3) all filing fees have been paid as required by law;
and
(4) the banking commissioner finds that:
(A) applicable conditions of Section 187.102 or
187.103 have been met;
(B) if a state bank is being acquired, the
applicable requirements of Subchapter A, Chapter 33[, and Section
203.005] have been met, or if a state trust company is being
acquired, the applicable requirements of Subchapter A, Chapter 183
have been met; and
(C) any conditions imposed by the banking
commissioner pursuant to Subsection (b) have been satisfied.
SECTION 19. Subdivision (7), Subsection (a), Section
201.002, Finance Code, is amended to read as follows:
(7) "Bank supervisory agency" means any of the
following:
(A) an agency of another state with primary
responsibility for chartering and supervising banks;
(B) the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, [or] the Board
of Governors of the Federal Reserve System, or the Bureau of
Consumer Financial Protection, and any successor to these agencies;
or
(C) an agency of a country, including a colony,
dependency, possession, or political subdivision of a country,
other than the United States with primary responsibility for
chartering and supervising banks.
SECTION 20. Section 201.004, Finance Code, is amended by
amending Subsection (a) and adding Subsection (d) to read as
follows:
(a) The laws of this state, including laws regarding
community reinvestment, consumer protection, fair lending, and
establishment of intrastate branches, apply to an interstate branch
located in this state to the same extent the laws of this state
would apply if the branch in this state were a branch of an
out-of-state national bank [with its main office located] in this
state, except to the extent otherwise provided under federal law.
An out-of-state state bank that establishes an interstate branch in
this state under this subtitle may conduct any activity at the
branch in this state that is permissible under the laws of the
bank's home state, to the extent the activity is permissible for a
Texas state bank or for a branch of an out-of-state national bank in
this state.
(d) This subtitle does not limit or affect the authority of:
(1) the home state regulator of a bank's home state to
enforce any law applicable to a branch of an out-of-state state
bank;
(2) a law enforcement officer, a regulatory
supervisor, other than the commissioner, or another official of
this state to enforce the laws of this state applicable to a branch
of an out-of-state state bank; or
(3) this state to adopt, apply, or administer any tax
or method of taxation to a bank, bank holding company, or foreign
bank, or any affiliate of a bank, bank holding company, or foreign
bank, to the extent that the tax or tax method is otherwise
permissible by or under the United States Constitution or other
federal law.
SECTION 21. Section 201.005, Finance Code, is amended by
adding Subsection (c) to read as follows:
(c) A cooperative agreement entered into by the
commissioner under this section does not limit the authority of a
law enforcement officer, regulatory supervisor, or other official
of this state who is not a party to the agreement to enforce the laws
of this state applicable to a branch of an out-of-state state bank
located in this state.
SECTION 22. Subsection (b), Section 201.009, Finance Code,
is amended to read as follows:
(b) If the commissioner determines that an interstate
branch maintained by an out-of-state state bank in this state is
being operated in violation of a law of this state that is
applicable to the branch under Section 24(j), Federal Deposit
Insurance Act (12 U.S.C. Section 1831a(j)), including a law that
governs community reinvestment, fair lending, or consumer
protection [or in an unsafe and unsound manner], the commissioner,
with written notice to the home state regulator and subject to the
terms of any applicable cooperative agreement with the home state
regulator, may take any enforcement action the commissioner would
be empowered to take if the branch were a Texas state bank or state
savings bank, as the case may be[, except that the commissioner
shall promptly give notice to the home state regulator of each
enforcement action taken against an out-of-state state bank and, to
the extent practicable, shall consult and cooperate with the home
state regulator in pursuing and resolving the enforcement action].
An out-of-state state bank may appeal a final order or other
decision of the commissioner under this subtitle as provided by
Sections 31.202, 31.203, and 31.204, or as provided under Subtitle
C with respect to a state savings bank.
SECTION 23. Subsection (a), Section 203.002, Finance Code,
is amended to read as follows:
(a) An out-of-state bank may establish a de novo branch in
this state if:
(1) [the laws of the home state of the out-of-state
bank would permit a Texas bank to establish and maintain a de novo
branch in that state under substantially the same terms and
conditions as set forth in this subchapter;
[(2)] the out-of-state bank confirms in writing to the
commissioner that as long as it maintains a branch in this state, it
will comply with all applicable laws of this state;
(2) [(3)] the applicant provides satisfactory
evidence to the commissioner of compliance with the applicable
requirements of Section 201.102; and
(3) [(4)] the commissioner, acting on or before the
30th day after the date the commissioner receives notice of an
application under Subsection (b), certifies to the responsible
federal bank supervisory agency that the requirements of this
subchapter have been met.
SECTION 24. Subsection (a), Section 203.003, Finance Code,
is amended to read as follows:
(a) Subject to Section [Sections] 203.004 [and 203.005],
one or more Texas banks may enter into an interstate merger
transaction with one or more out-of-state banks under this chapter,
and an out-of-state bank resulting from the transaction may
maintain and operate the branches in this state of a Texas bank that
participated in the transaction. An out-of-state bank that will be
the resulting bank in the interstate merger transaction shall
comply with Section 201.102.
SECTION 25. Section 203.007, Finance Code, is amended to
read as follows:
Sec. 203.007. EXAMINATIONS[; PERIODIC REPORTS]. (a) With
respect to an interstate branch maintained by an out-of-state state
bank in this state, the [The] banking commissioner:
(1) with written notice to the home state regulator
and subject to the terms of any applicable cooperative agreement
with the home state regulator, may examine the branch for the
purpose of determining whether the branch is in [may make
examinations of a branch established and maintained in this state
pursuant to this chapter by an out-of-state bank as the banking
commissioner considers necessary to determine whether the branch is
being operated in] compliance with the laws of this state that are
applicable under Section 24(j), Federal Deposit Insurance Act (12
U.S.C. Section 1831a(j)), including laws governing community
reinvestment, fair lending, and consumer protection; and
(2) if expressly permitted under and subject to the
terms of any cooperative agreement with the home state regulator,
or if the bank has been determined to be in a troubled condition by
the home state regulator or the bank's appropriate federal banking
agency, may participate in the examination of the bank by the home
state regulator to ascertain whether the activities of the branch
in this state are being conducted in an unsafe or unsound manner
[and in accordance with safe and sound banking practices. Sections
31.105-31.107 or 96.054-96.057, as appropriate, apply to the
examinations].
(b) For purposes of this section, a bank is considered to be
in a troubled condition if the bank:
(1) has a composite rating, as determined in the bank's
most recent report of examination, of four or five under the Uniform
Financial Institutions Ratings System;
(2) is subject to a proceeding initiated by the
Federal Deposit Insurance Corporation for termination or
suspension of deposit insurance; or
(3) is subject to a proceeding initiated by the home
state regulator to:
(A) vacate, revoke, or terminate the bank's
charter;
(B) liquidate the bank; or
(C) appoint a receiver for the bank. [The
commissioner may prescribe requirements for periodic reports from
an out-of-state bank that operates a branch in Texas pursuant to
this chapter. Reporting requirements prescribed by the
commissioner under this section must be:
[(1) consistent with the reporting requirements
applicable to Texas state banks or state savings banks, as
appropriate; and
[(2) appropriate to discharge the responsibilities of
the commissioner under this chapter.]
SECTION 26. Subsection (c), Section 201.009, Subsection
(c), Section 203.003, and Section 203.005, Finance Code, are
repealed.
SECTION 27. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2013.