BILL ANALYSIS



C.S.H.B. 889
By: Marchant
03-06-95
Committee Report (Substituted)


BACKGROUND

Congress recently passed and the President signed the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("Riegle-Neal Act").  As is evident from its name, it authorizes interstate
banking throughout the United States within one year of enactment. 
At the same time, however, it creates interstate branching unless
a state chooses to opt out before June 1, 1997.

Under Texas law, out-of-state holding companies may acquire banks
in Texas.  Thus, interstate banking is already present in Texas. 
However, the current law was carefully written to ensure that a
Texas bank charter be maintained and managed under a Texas Board. 
Thus under Texas law, any banking organization choosing to come to
Texas may do so providing that they maintain a Texas charter. 
Under interstate branching, those same out-of-state bank holding
companies could simply convert their operations in Texas to
branches of their operations elsewhere.  This could eliminate local
boards of directors and reduce local input.

If permitted, branches could be acquired in a variety of ways: 
merger with existing banks, purchase of existing facilities, or de
novo chartering. 

Interstate branching presents the potential for significant
consolidation of institutions and a potential reduction of local
boards of directors, local officers, and local service to the
communities.

PURPOSE

To implement provisions in the Riegle-Neal Interstate Banking and
Branching Efficiency Act permitting each state to opt out of
interstate branching.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1. Defines "branch," "domestic bank," and "out-of-state
bank."

SECTION 2. Prohibits interstate mergers and branches.
           
           (1)  Provides that a domestic bank may not engage in a
merger transaction       involving an out-of-state bank;

           (2)  provides that an out-of-state bank may not
establish a de novo branch in this           state or acquire a
branch in this state by purchase or other means;
           
           (3)  provides that a domestic bank may not establish a
de novo branch in a state          other than this state or acquire
a branch in a state other than this state by           purchase or
other means.

SECTION 3. Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The introduced version of HB 889 proposed amendments to the Banking
Code Act of 1943.  The Banking Code has been recently revised and
is proposed legislation before the Legislature at this time.  If
the Banking Code Act is approved by the Legislature, the introduced
version of HB 889 would have made amendments to an obsolete Code. 
Therefore, a more generic committee substitute was drafted to
ensure the proper placement of this Act into either the Banking
Code of 1943 or the new Banking Code should it be approved.

SUMMARY OF COMMITTEE ACTION

HB 889 was considered by the committee in a public hearing on March
1, 1995.

The following people were recognized by the Chair to testify before
the committee.

The following people testified in favor of the bill:

     Chairman Marchant;
     Cleve T. Breedlove representing the Independent Bankers
Association of Texas (IBAT);
     Bernie Francis representing Business Control Systems, Inc.;
     David R. Seim representing IBAT;
     Durwood Tucker representing the Texas Farm Bureau;     
     Charles Carter representing the Independent Cattlemens
Association of Texas;
     Robert Howden representing the National Federation of
Independent Business/Texas    (NFIB);
     Christine Mitchell representing NFIB/Texas;
     Shayne Woodard representing the Texas Association of Builders;
and
     J. Pat Hickman representing IBAT.
     Karen Neeley representing IBAT.

The following people testified against the bill:

     Fredrick M. (Rick) Smith representing Community Bank of Waco
and the Texas Bankers    Association (TBA);
     Harvey R. Mitchell representing Bank One, Texas;
     John M. Heasley representing TBA;
     Lee Rona McKinney representing Bank One, Texas;
     Jerry Killingsworth representing himself;
     Robert H. Sewell representing Equitable Bank and TBA;
     Gene D. Wyatt representing himself;
     Tom Daniels representing Comerica Bank Dallas and himself; and
     Merriman Morton representing Texas Commerce Bank, Austin.

Chairman Marchant closed.

HB 889 was left pending.

HB 889, which was pending business before the committee, was
considered by the committee in a public hearing on March 6, 1995. 
Rep. Patterson offered a complete committee substitute for the bill
which was adopted without objection.  The motion to report HB 889
favorably as substituted, with the recommendation that it do pass
and be printed, prevailed by the following vote: 6 Ayes, 0 Nays, 0
PNV, 3 Absent.