By: Gutierrez H.B. No. 1174
73R2475 LJD-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to examinations of state-chartered banks and to
1-3 disciplinary actions involving state-chartered banks; providing a
1-4 penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Article 8, Chapter II, The Texas Banking Code
1-7 (Article 342-208, Vernon's Texas Civil Statutes), is amended to
1-8 read as follows:
1-9 Art. 8. Examination--May Administer Oaths--Fees--Disposition.
1-10 The Banking Commissioner shall examine each state and private bank
1-11 annually and no more, unless the Banking Commissioner deems
1-12 additional examinations necessary to safeguard the interest of
1-13 depositors, creditors, and stockholders, and to enforce the
1-14 provisions of this Code, except that the Banking Commissioner may
1-15 defer an examination for no more than six months if the Banking
1-16 Commissioner considers the deferment necessary for the efficient
1-17 enforcement of this Code. The Banking Commissioner may accept
1-18 examinations of state banks by a federal agency in lieu of an
1-19 examination required by this Article. The performance of bank
1-20 services by a processor shall be subject to regulation and
1-21 examination by the Banking Commissioner to the same extent as if
1-22 the services were being performed by the bank itself on its own
1-23 premises. The Banking Commissioner, the Deputy Banking
1-24 Commissioner, the general counsel, the Departmental Examiner, and
2-1 each examiner or other representative designated by the Banking
2-2 Commissioner may administer oaths and examine any person under oath
2-3 upon any subject which the commissioner, general counsel, examiner,
2-4 or representative <he> deems pertinent to the financial condition
2-5 of any state or private bank and may exercise any power provided by
2-6 Section 7, Article 12, Chapter IV, of this code. The Banking
2-7 Commissioner and the Finance Commission shall assess and collect a
2-8 fee in connection with each examination, based on the bank's total
2-9 assets, covering the cost of such examination, the equitable or
2-10 proportionate cost of maintenance and operation of the Banking
2-11 Department, and the enforcement of the provisions of the Banking
2-12 Code, including but not limited to, the premium on the bond of the
2-13 Banking Commissioner and other officers and employees of the
2-14 Banking Department, and such other fidelity or casualty insurance
2-15 or coverage required or furnished pursuant to or in connection with
2-16 the provisions of the Banking Code, together with all other
2-17 expenses of the Banking Department, which fee shall in no event be
2-18 less than Fifty Dollars ($50) for each examination so made. The
2-19 Banking Commissioner may assess and collect a fee annually, in
2-20 addition to the fee collected in connection with each examination,
2-21 based on the bank's total assets, to cover the equitable or
2-22 proportionate cost of maintenance and operation of the Banking
2-23 Department and the enforcement of the provisions of the Banking
2-24 Code. All sums of money paid to the Banking Department under this
2-25 Code shall be deposited in the State Treasury to the credit of the
2-26 Banking Department Expense Fund.
2-27 SECTION 2. Article 12, Chapter IV, The Texas Banking Code
3-1 (Article 342-412, Vernon's Texas Civil Statutes), is amended by
3-2 adding Section 2a to read as follows:
3-3 2a. An order issued under Section 2 of this Article
3-4 requiring a State bank or any bank officer, director, or employee
3-5 to take affirmative action to correct any conditions resulting from
3-6 any violation or practice with respect to which the order is issued
3-7 may require the bank or the officer, director, or employee to:
3-8 (a) make restitution or provide reimbursement,
3-9 idemnification, or guarantee against loss if:
3-10 (i) the bank or the officer, director, or
3-11 employee was unjustly enriched in connection with the violation or
3-12 practice; or
3-13 (ii) the violation or practice involved a
3-14 knowing and wilful violation of any applicable law or regulation or
3-15 prior order of the Banking Commissioner;
3-16 (b) restrict the growth of the bank;
3-17 (c) dispose of any loan or asset involved;
3-18 (d) rescind an agreement or contract;
3-19 (e) employ qualified officers or employees, who may be
3-20 subject to approval by the Banking Commissioner;
3-21 (f) place limitations on the activities or functions
3-22 of a State bank or any officer, director, or employee; or
3-23 (g) take any other action as the Banking Commissioner
3-24 determines to be appropriate.
3-25 SECTION 3. Section 3, Article 12, Chapter IV, The Texas
3-26 Banking Code (Article 342-412, Vernon's Texas Civil Statutes), as
3-27 amended by Section 45, Chapter 780 and Section 4, Chapter 1196,
4-1 Acts of the 71st Legislature, Regular Session, 1989, is amended to
4-2 read as follows:
4-3 3. (a) If the Banking Commissioner finds by examination or
4-4 other credible evidence that an officer, director or employee has
4-5 committed or participated in a violation or practice listed in
4-6 Section 1 of this article or has violated a cease and desist order
4-7 that has become final and further finds that removal from office is
4-8 necessary and in the best interests of such bank and its
4-9 depositors, creditors and stockholders, then the Banking
4-10 Commissioner may serve such officer, director or employee with a
4-11 written notice of the Banking Commissioner's intention to remove
4-12 the officer, director, or employee from office or employment.
4-13 (b) If the Banking Commissioner finds that a director or
4-14 officer of a State bank, by conduct or practice relating to another
4-15 bank or business institution that resulted in substantial financial
4-16 loss or other damage, has shown personal dishonesty or a wilful or
4-17 continuing disregard for the other bank's or business institution's
4-18 safety or soundness and has shown unfitness to continue as a
4-19 director or officer, the Banking Commissioner may serve on the
4-20 director or officer a written notice of the Banking Commissioner's
4-21 intention to remove the director or officer from office.
4-22 (c) If the Banking Commissioner finds that a person
4-23 participating in the conduct of the affairs of a State bank, by
4-24 conduct or practice relating to the State bank, another bank, or
4-25 another business institution that resulted in substantial financial
4-26 loss or other damage, has shown personal dishonesty or a wilful or
4-27 continuing disregard for the State bank's, other bank's, or other
5-1 business institution's safety or soundness and has shown unfitness
5-2 to participate in the conduct of affairs of the State bank, the
5-3 Banking Commissioner may serve on the person a written notice of
5-4 the Banking Commissioner's intention to prohibit the person's
5-5 further participation in the conduct of the affairs of the State
5-6 bank.
5-7 (d) A notice under Subsection (a), (b), or (c) of this
5-8 section shall state the grounds for removal or prohibition from
5-9 participation with reasonable certainty and shall state the
5-10 effective date of removal or prohibition, which must be not less
5-11 than ten (10) days after delivery or mailing of the notice. Unless
5-12 the bank, the directors or the person to whom the notice applies
5-13 shall file a notice of appeal with the Finance Commission within
5-14 ten (10) days after such delivery or mailing of notice, whichever
5-15 is the case, the removal or prohibition shall be effective and
5-16 final and said person shall thereafter, according to the terms of
5-17 the notice, be prohibited from further holding office or employment
5-18 by, or participating in the affairs of, the said State bank. A
5-19 copy of the notice shall be entered upon the minutes of the
5-20 directors, and an officer shall acknowledge receipt and certify to
5-21 the Banking Commissioner that such person has been removed from
5-22 office, employment, or participation.
5-23 (e) If the Banking Commissioner considers it necessary to
5-24 protect the bank or the interests of its depositors, the Banking
5-25 Commissioner may deliver with a notice under Subsections (a)
5-26 through (c) of this section an order immediately suspending the
5-27 person from office, if a director or officer, and prohibiting a
6-1 director, officer, or other person from further participation in
6-2 the conduct of the affairs of the bank. The order takes effect on
6-3 delivery and remains in effect pending completion of administrative
6-4 proceedings on the notice served under Subsection (a), (b), or (c),
6-5 unless earlier stayed by a court in a proceeding authorized by the
6-6 Administrative Procedure and Texas Register Act (Article 6252-13a,
6-7 Vernon's Texas Civil Statutes). The Banking Commissioner shall
6-8 also deliver a copy of the order to the State bank involved.
6-9 (f) The resignation, termination of employment or
6-10 participation, or separation of an officer, director, employee, or
6-11 person participating in the conduct of the affairs of a State bank
6-12 does not affect the jurisdiction and authority of the Banking
6-13 Commissioner to issue a notice and proceed under this section
6-14 against the person if the notice is served before the sixth
6-15 anniversary of the date the party resigned, terminated employment
6-16 or participation, or separated from the State bank.
6-17 (g)(1) While an order issued under this section is in effect
6-18 a person who has been removed or suspended as an officer, director,
6-19 employee, or person participating in the conduct of the affairs of
6-20 a State bank may not hold office in or participate in any manner in
6-21 the conduct of:
6-22 (A) another State bank;
6-23 (B) a national bank with a branch or office located in
6-24 this state;
6-25 (C) a state or federal savings and loan association
6-26 with a branch or office located in this state; or
6-27 (D) a state or federal credit union with a branch or
7-1 office located in this state.
7-2 (2) Subdivision (1) of this section does not apply, to the
7-3 extent of the consent, if on or after the date the order is issued
7-4 the person who has been removed or suspended:
7-5 (A) proposes to become associated as an officer,
7-6 director, employee, or person participating in any manner in the
7-7 conduct of the affairs of a financial institution described in
7-8 Subdivision (1) of this section; and
7-9 (B) obtains a written consent from:
7-10 (i) the Banking Commissioner, in the case of a
7-11 proposed association with another State bank; or
7-12 (ii) the state or federal agency having primary
7-13 regulatory authority over the financial institution, in the case of
7-14 a proposed association with a financial institution other than a
7-15 State bank.
7-16 (3) An agency granting a consent under Subdivision
7-17 (2)(B)(ii) of this section shall report the action to the Banking
7-18 Commissioner.
7-19 (4) Except as provided by Subdivision (2) of this section, a
7-20 violation of this section by a person subject to an order described
7-21 by this section is a violation of the order.
7-22 (5) This subsection does not apply to a person other than a
7-23 person who is an individual unless the Banking Commissioner
7-24 specifically finds in its notice that the removal or prohibition
7-25 applies to a corporation, firm, or other business enterprise.
7-26 SECTION 4. Section 5, Article 12, Chapter IV, The Texas
7-27 Banking Code (Article 342-412, Vernon's Texas Civil Statutes), is
8-1 amended to read as follows:
8-2 5. After a cease and desist order or an order of removal
8-3 becomes effective and final, should a State <or private> bank <or
8-4 its board of directors> or any <duly authorized> officer, director,
8-5 employee, or person participating in the conduct of the affairs of
8-6 a <of said> bank fail or refuse to comply with such an order, then
8-7 the Banking Commissioner may, upon notice, assess a penalty against
8-8 said State <or private> bank or the officer, director, employee, or
8-9 person in an amount not to exceed Five Hundred Dollars ($500) per
8-10 day for each day the bank or the officer, director, employee, or
8-11 person is in violation of said order of the Banking Commissioner or
8-12 the Finance Commission. Failure to remit any penalty so assessed
8-13 shall subject the bank or the officer, director, employee, or
8-14 person to a suit for collection by the Attorney General of Texas to
8-15 be instituted in the District Court of Travis County, Texas. In
8-16 addition to the remedy above provided, the Attorney General of
8-17 Texas, upon the relation of the Banking Commissioner, may bring
8-18 suit in the District Court of Travis County, Texas, against any
8-19 bank in violation of the final orders of the Banking Commissioner
8-20 or the Finance Commission to enjoin the further violation of said
8-21 orders and the violations and practices charged by the Banking
8-22 Commissioner as the grounds for such orders.
8-23 SECTION 5. Article 12, Chapter IV, The Texas Banking Code
8-24 (Article 342-412, Vernon's Texas Civil Statutes), is amended by
8-25 adding Section 7 to read as follows:
8-26 7. (a) In the course of or in connection with any
8-27 proceeding under this article, the Banking Commissioner or the
9-1 Banking Commissioner's designated representative, including any
9-2 person designated to conduct a hearing under this article, may
9-3 administer oaths and affirmations, take or cause to be taken
9-4 depositions, and issue, revoke, quash, or modify subpoenas and
9-5 subpoenas duces tecum. The Banking Commissioner may adopt rules
9-6 with respect to any proceeding, claim, examination, or
9-7 investigation under this article.
9-8 (b) The attendance of witnesses and the production of
9-9 documents provided by this section may be required from any place
9-10 in this state.
9-11 (c) The Banking Commissioner, the Banking Commissioner's
9-12 designated representative, or any party to a proceeding under this
9-13 article may apply to a district court in Travis County, Texas, for
9-14 enforcement of any subpoena or subpoena duces tecum issued under
9-15 this section, and that court has jurisdiction and power to order
9-16 and require compliance with the subpoena or subpoena duces tecum.
9-17 A witness subpoenaed under this section shall be paid the same fees
9-18 and mileage that are paid to a witness in accordance with the
9-19 Administrative Procedure and Texas Register Act (Article 6252-13a,
9-20 Vernon's Texas Civil Statutes). A court with jurisdiction of a
9-21 proceeding instituted under this section may allow any party
9-22 reasonable expenses and attorney's fees as the court considers just
9-23 and proper.
9-24 (d) A person who wilfully fails or refuses to attend and
9-25 testify, answer any lawful inquiry, or produce books, papers,
9-26 correspondence, memoranda, contracts, agreements, or other records,
9-27 if in the person's power so to do, in obedience to a subpoena of
10-1 the Banking Commissioner or the Banking Commissioner's designated
10-2 representative is guilty of a misdemeanor and, on conviction, is
10-3 subject to a fine of not more than $1,000, confinement in jail for
10-4 a term of not more than one year, or both.
10-5 SECTION 6. The importance of this legislation and the
10-6 crowded condition of the calendars in both houses create an
10-7 emergency and an imperative public necessity that the
10-8 constitutional rule requiring bills to be read on three several
10-9 days in each house be suspended, and this rule is hereby suspended,
10-10 and that this Act take effect and be in force from and after its
10-11 passage, and it is so enacted.