By: Averitt (Senate SponsorSibley)
H.B. No. 2155
(In the SenateReceived from the House May11,2001; May11,2001, read first time and referred to Committee on Business and Commerce; May11,2001, reported favorably by the following vote: Yeas 4, Nays 0; May11,2001, sent to printer.)
A BILL TO BE ENTITLED
AN ACT
relating to the operation of state banks, state trust companies, and certain financial holding companies in the financial services industry.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION1. Sections 31.002(a)(5), (8), (32), and (33), Finance Code, are amended to read as follows:
(5)"Banking association" means a state bank that is organized under this subtitle as a corporation [banking association], authorized to issue shares of stock, and controlled by its shareholders.
(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 drivein 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 [subject to Section 59.201];
(D)a loan production office as described by [subject to] 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 [a bank acting as an agent for another depository institution as provided by Section 59.005(a)]; [or]
(G)a location that combines permissible nonbranch functions or facilities; or
(H)another office or facility as provided by this subtitle or a rule adopted under this subtitle [other offices as determined by rule].
(32)"Investment security" means a marketable obligation evidencing indebtedness of a person in the form of a bond, note, debenture, or commonly known as an investment security, subject to further definition by rule adopted under this subtitle [other debt instrument not otherwise classified as a loan or extension of credit].
(33)"Limited banking association" means a state bank that is organized under this subtitle as a limited liability company [banking association], authorized to issue participation shares, and controlled by its participants.
SECTION2. Sections 31.003(a) and (b), Finance Code, are amended to read as follows:
(a)The finance commission may adopt rules to accomplish the purposes of this subtitle and Chapters 11, 12, and 13, including rules necessary or reasonable to:
(1)implement and clarify this subtitle and Chapters 11, 12, and 13;
(2)preserve or protect the safety and soundness of state banks;
(3)grant at least the same rights and privileges to state banks that are or may be granted to national banks domiciled in this state;
(4)recover the cost of maintaining and operating the department and the cost of enforcing this subtitle and other applicable law [Chapters 11, 12, and 13] by imposing and collecting ratable and equitable fees for notices, applications, and examinations; and
(5)facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission.
(b)In adopting rules, the finance commission shall consider the need to:
(1)promote a stable banking environment;
(2)provide the public with convenient, safe, and competitive banking services;
(3)preserve and promote the competitive position [parity] of state banks with regard to national banks and other depository institutions in this state consistent with the safety and soundness of state banks and the state bank system; and
(4)allow for economic development in this state.
SECTION3. Section 31.303, Finance Code, is amended to read as follows:
Sec.31.303.DISCLOSURE TO OTHER AGENCIES. (a) For purposes of this section:
(1)"Affiliated group" means two or more persons affiliated through common ownership or a contractual common undertaking involving the sharing of customer information among those persons.
(2)"Agency" means a department or agency of this state, another state, the United States, or a foreign government with whom the United States currently maintains diplomatic relations, or any related agency or instrumentality.
(3)"Functional regulatory agency" means an agency that regulates and charters, licenses, or registers persons engaged in financial activities or activities incidental or complimentary to financial activities, including activities related to banking, insurance, or securities, within the jurisdiction of the agency.
(4)"Privilege" includes any workproduct, attorneyclient, or other privilege recognized under federal or state law [On request and on execution of an appropriate confidentiality agreement approved by the banking commissioner, the commissioner may:
[(1)disclose to a federal banking regulatory agency confidential information concerning a financial institution within the agency's jurisdiction or an affiliate or service provider of the financial institution; and
[(2)permit the agency access to files and records or reports concerning the financial institution or its affiliate or service provider].
(b)The banking commissioner may, as the commissioner considers necessary or proper to the enforcement of the laws of this state, another state, the United States, or a foreign sovereign state with whom the United States currently maintains diplomatic relations, or in the best interest of the public, disclose [or authorize release of confidential] information in the possession of the department to another [department of this state, another state, the United States, a foreign sovereign state, or any related] agency [or instrumentality]. The banking commissioner may not disclose information under this section that is confidential under applicable state or federal law unless:
(1)the recipient agency agrees to maintain the confidentiality and take all reasonable steps to oppose an effort to secure disclosure of the information from the agency; or
(2)the banking commissioner determines in the exercise of discretion that the interest of law enforcement outweighs and justifies the potential for disclosure of the information by the recipient agency.
(c)The banking commissioner by agreement may establish an information sharing and exchange program with a functional regulatory agency that has overlapping regulatory jurisdiction with the department, with respect to all or part of an affiliated group that includes a financial institution, to reduce the potential for duplicative and burdensome filings, examinations, and other regulatory activities. Each agency party to the agreement must agree to maintain confidentiality of information that is confidential under applicable state or federal law and take all reasonable steps to oppose any effort to secure disclosure of the information from the agency. An agreement may also specify procedures regarding use and handling of confidential information and identify types of information to be shared and procedures for sharing on a recurring basis.
(d)Disclosure of information by or to the banking commissioner under this section does not constitute a waiver of or otherwise affect or diminish an evidentiary privilege to which the information is otherwise subject, whether or not the disclosure is governed by a confidentiality agreement.
(e)Notwithstanding other law, an agency of this state:
(1)may execute, honor, and comply with an agreement to maintain confidentiality and oppose disclosure of information obtained from the banking commissioner as provided in this section; and
(2)shall treat as confidential any information obtained from the banking commissioner that is entitled to confidential treatment under applicable state or federal law and take all reasonable steps to oppose an effort to secure disclosure of the information from the agency.
SECTION4. Section 32.001, Finance Code, is amended by amending Subsections (b), (c), and (e), and by adding Subsection (f) to read as follows:
(b)A state bank may:
(1)receive and pay deposits with or without interest, discount and negotiate promissory notes, borrow or lend money with or without security or interest, invest and deal in securities, buy and sell exchange, coin, and bullion, and exercise incidental powers as necessary to carry on the business of banking as provided by this subtitle;
(2)act as agent, or in a substantially similar capacity, with respect to a financial activity or an activity incidental or complementary to a financial activity [including a fiscal agent, registrar, or transfer agent, and in that capacity receive and disburse money and transfer securities];
(3)act in a fiduciary capacity, without giving bond, as guardian, receiver, executor, administrator, or trustee, including a mortgage or indenture trustee; [and]
(4)provide financial, investment, or economic advisory services;
(5)issue or sell instruments representing pools of assets in which a bank may invest directly;
(6)with prior written approval of the banking commissioner, engage in a financial activity or an activity that is incidental or complementary to a financial activity; and
(7)engage in any other activity, directly or through a subsidiary, authorized by this subtitle or rules adopted under this subtitle [or determined by the banking commissioner to be closely related to banking].
(c)For purposes of other state law, a banking association is considered a corporation and a limited banking association is considered a limited liability company. To the extent consistent with this subtitle [Subject to Section 32.008], a banking association [state bank] may exercise the powers of a Texas business corporation and a limited banking association may exercise the powers of a Texas limited liability company as reasonably necessary to enable exercise of [its] specific powers under this subtitle.
(e)A state bank may be organized or reorganized as a community development financial institution or may serve as a community development partner, as those terms are defined by the Riegle Community Development and Regulatory Improvement Act of 1994 (Pub. L. No. 103325).
(f)In the exercise of discretion consistent with the purposes of this subtitle, the banking commissioner may require a state bank to conduct an otherwise authorized activity through a subsidiary.
SECTION5. Section 32.003(b), Finance Code, is amended to read as follows:
(b)The banking commissioner shall grant a state bank charter only if the commissioner determines that the organizers have established that public convenience and advantage will be promoted by the establishment of the state bank. In determining whether public convenience and advantage will be promoted, the banking commissioner shall consider the convenience of the public to be served and whether:
(1)[a public necessity exists for the bank;
[(2)] the organizational and capital structure and amount of initial capitalization is adequate for the business plan [and location];
(2)[(3)]the anticipated volume and nature of business indicates a reasonable probability of success and profitability based on the market sought to be served [profitable operation];
(3)[(4)]the officers, directors, managers, and managing participants as a group have sufficient banking experience, ability, standing, competence, trustworthiness, and integrity to justify a belief that the bank will operate in compliance with law and that success of the bank is probable;
(4)[(5)]each principal shareholder or participant has sufficient experience, ability, standing, competence, trustworthiness, and integrity to justify a belief that the bank will be free from improper or unlawful influence or interference with respect to the bank's operation in compliance with law; and
(5)[(6)]the organizers are acting in good faith.
SECTION6. Section 32.008, Finance Code, is amended to read as follows:
Sec.32.008.APPLICATION OF [LAWS RELATING TO] GENERAL CORPORATE LAW [BUSINESS CORPORATION]. (a) The Texas Business Corporation Act and the Texas Miscellaneous Corporation Laws Act (Article 13021.01 et seq., Vernon's Texas Civil Statutes) apply to a banking association, and the Texas Limited Liability Company Act (Article 1528n, Vernon's Texas Civil Statutes) applies to a limited banking association, [state bank] to the extent not inconsistent with this subtitle or the proper business of a state bank, except that:
(1)a reference in those Acts to the secretary of state means the banking commissioner unless the context requires otherwise; and
(2)the right of shareholders or participants to cumulative voting in the election of directors or managers exists only if granted by the bank's articles of association.
(b)The finance commission may adopt rules to limit or refine the applicability of the laws listed by Subsection (a) to a state bank or to alter or supplement the procedures and requirements of those laws [the Texas Business Corporation Act] applicable to an action taken under this chapter.
(c)Unless expressly authorized by this subtitle or a rule adopted under this subtitle, a state bank may not take an action authorized by a law listed by Subsection (a) [the Texas Business Corporation Act] regarding its corporate status, its capital structure, or a matter of corporate governance, of the type for which those laws [the Texas Business Corporation Act] would require a filing with the secretary of state if the bank were a business corporation, without submitting the filing to the banking commissioner and obtaining the banking commissioner's prior written approval of the action.
SECTION7. Sections 32.010(a) and (b), Finance Code, are amended to read as follows:
(a)Notwithstanding another law, a Texas state bank may perform an act, own property, or offer a product or service that is at the time permissible within the United States for a depository institution organized under federal law or the law of this state or another state, if the banking commissioner approves the exercise of the power as provided by this section, subject to the same limitations and restrictions applicable to the other depository institution by pertinent law, except to the extent the limitations and restrictions are modified by rules adopted under Subsection (e). This section may not be used by a Texas state bank to alter or negate the application of the laws of this state with respect to:
(1)establishment and maintenance of a branch in this state or another state or country;
(2)[sale of insurance products and services in this state;
[(3)]permissible interest rates and loan fees chargeable in this state;
(3)[(4)]fiduciary duties owed to a client or customer by the bank in its capacity as fiduciary in this state;
(4)[(5)]consumer protection laws applicable to transactions in this state; or
(5)licensing and regulatory requirements administered by a functional regulatory agency in this state, as defined by Section 31.303, including licensing and regulatory requirements pertaining to:
(A)insurance activities;
(B)securities activities; and
(C)[(6)]real estate development, marketing, and sales activities [in this state].