BILL ANALYSIS

Senate Research Center	S.B. 1644
88R12646 MLH-F	By: Parker
	Business & Commerce
	4/6/2023
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

The Texas Department of Banking (TDB) has observed some statutory language that requires technical correction or enhancement to address regulatory issues that have come up since last legislative session.

S.B. 1644 seeks to fix incorrect citations and inaccurate language, address regulatory concerns regarding banking insiders who have engaged in illegal or suspicious activity, and grants the TDB commissioner access to information concerning bank reports of suspected exploitation of vulnerable adults in the Texas Finance Code.

Sections 1 and 5 of S.B. 1644 are purely technical corrections. Section 2 closes a loophole regarding the use of the term "bank" by out-of-state entities. Sections 3, 6 and 7 enhance enforcement authority for problem banks and insiders who have abused their position. Section 4 closes a loophole regarding persons seeking to gain control of a bank. Section 8 provides the banking commissioner access to information from banks regarding suspected exploitation of vulnerable adults.

As proposed, S.B. 1644 amends current law relating to the regulation of state banks.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 31.002(a)(15), Finance Code, to redefine "deposit."

SECTION 2. Amends Section 31.005(b), Finance Code, as follows:

(b) Provides that Subsection (a) (relating to prohibiting a person from using the term "bank" or similar terms that would imply to the public that the person is engaged in the business of banking in this state) does not apply to a federally insured depository institution, rather than depository institution or other entity, organized under the laws of this state, another state, the United States, or a foreign sovereign state to the extent that the depository institution or other entity meets certain criteria.

SECTION 3. Amends Section 31.105, Finance Code, by adding Subsection (c-2), as follows:

(c-2) Authorizes the banking commissioner of Texas (banking commissioner), if a person currently serving as an officer, director, employee, controlling shareholder, or other position participating in the affairs of a state bank refuses to comply with a subpoena, to issue an order on an emergency basis removing the person from the person's position and prohibiting the person from participating in the affairs of the state bank or any other entity chartered, registered, permitted, or licensed by the banking commissioner until the person complies with the subpoena.

SECTION 4. Amends Section 33.005, Finance Code, as follows:

Sec. 33.005. EXEMPTIONS. Provides that the following acquisitions are exempt from Section 33.001 (Acquisition of Control):

(1) makes no changes to this subdivision;

(2) unless the banking commissioner provides otherwise in writing, an acquisition of voting securities in any class or series by a controlling person who:

(A) was identified as a controlling person in a state bank in a prior application filed with and approved by the banking commissioner, rather than has previously complied with and received approval under Subchapter A (Transfer of Ownership Interest) or who was identified as a controlling person in a prior application filed with and approved by the banking commissioner;

(B) has from the date of receipt of approval under this subchapter continuously held power to vote 25 percent or more of any class of voting securities of the state bank; or

(C) is considered to have from the date of receipt of approval under this subchapter continuously controlled the state bank under Section 33.001(b) (relating to providing that the principal shareholder of a state bank that directly or indirectly owns or has the power to vote a greater percentage of voting securities of the bank than any other shareholder is considered to control the bank);

(3) makes no changes to this subdivision;

(4) deletes existing text providing that a transaction subject to Chapter 202 (Bank Holding Companies) is exempt from Section 33.001 if the post-transaction controlling person has previously complied with and received approval as a controlling person under this subchapter. Makes a nonsubstantive change; and

(5) makes no changes to this subdivision.

SECTION 5. Amends Section 34.103(c), Finance Code, as follows:

(c) Prohibits a state bank from establishing or acquiring a subsidiary or a controlling interest in a subsidiary that engages in activities as principal in which the bank is prohibited from engaging directly unless the state bank's investment in the subsidiary has been allowed, rather than approved, by the Federal Deposit Insurance Corporation under Section 24, Federal Deposit Insurance Act (12 U.S.C. Section 1831a).

SECTION 6. Amends Section 35.002(a), Finance Code, as follows:

(a) Provides that the banking commissioner has grounds to issue a cease and desist order to a current or former officer, employee, or director of a state bank, rather than an officer, employee, or director of a state bank, or the bank itself acting through an authorized person, if the banking commissioner determines from examination or other credible evidence that the bank or person directly or indirectly has performed certain actions.

SECTION 7. Amends Section 35.106, Finance Code, as follows:

Sec. 35.106. AUTHORITY OF SUPERVISOR. Prohibits a bank, during a period of supervision, without the prior approval of the banking commissioner or the supervisor or as otherwise permitted or restricted by the order of supervision, from engaging in any other activity determined by the banking commissioner to threaten the safety and soundness of the bank. Makes nonsubstantive changes.

SECTION 8. Amends Section 281.006, Finance Code, as follows:

Sec. 281.006. RECORDS. Requires a financial institution, to the extent permitted by state or federal law, to provide, on request, access to or copies of records relevant to the suspected financial exploitation of a vulnerable adult to the Department of Family and Protective Services (DFPS), the banking commissioner, a law enforcement agency, or a prosecuting attorney's office, either as part of a report to DFPS, the banking commissioner, law enforcement agency, or prosecuting attorney's office or at the request of DFPS, the banking commissioner, law enforcement agency, or prosecuting attorney's office in accordance with an investigation.

SECTION 9. Makes application of Section 35.002(a), Finance Code, as amended by this Act, prospective.

SECTION 10. Provides that to the extent of any conflict, this Act prevails over another Act of the 88th Legislature, Regular Session, 2023, relating to nonsubstantive additions to and corrections in enacted codes.

SECTION 11. Effective date: upon passage or September 1, 2023.