BILL ANALYSIS C.S.H.B. 1020 By: Oliveira (Sponsor) Economic Development 05-22-95 Senate Committee Report (Substituted) BACKGROUND The Texas Savings Bank Act (Article 489e, V.T.C.S.) was passed during the 73rd Legislature. The bill created a new type of financial institution, the state-chartered savings bank. The new institution is required to invest at least 15 percent in local community loans as well as local-service-area deposits in residential mortgage loans, home improvement loans, interim residential construction loans, home improvement loans, and mortgage-backed securities secured by loans from the savings bank's local service area. There has been some difficulty in implementing the Act due to difficulties in interpreting the Act in conjunction with other statutes like the Savings and Loan Act. PURPOSE As proposed, C.S.H.B. 1020 provides technical and clarifying amendments to the Texas Savings Bank Act which was passed during the 73rd Legislature. These revisions are aimed at clarifying hearings, appeals, and confidentiality procedures, the definition of a financial institution, and the roles local supervision and the Finance Commission of Texas play in regulating financial institutions. The bill also amends other sections of the Texas Savings Bank Act to alleviate confusion between other statutes and the Texas Savings Bank Act. RULEMAKING AUTHORITY It is the committee's opinion that this bill grants rulemaking authority to the Finance Commission of Texas under SECTION 9 (Section 7.01(b), Article 489e, V.T.C.S.) and to the savings and loan commissioner under SECTION 16 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 1.03(1), Article 489e, V.T.C.S. (Texas Savings Bank Act), to redefine "administrative procedure act." SECTION 2. Amends Section 2.05(a), Article 489e, V.T.C.S., to require an application to incorporate a savings bank (application) to include, in part, financial information about the officers required by the rules of the savings and loan commissioner (commissioner) and the Finance Commission of Texas (finance commission). SECTION 3. Amends Section 2.10, Article 489e, V.T.C.S., by amending Subsection (a) and adding Subsection (c), as follows: (a) Sets forth the conditions under which a hearing on an application to incorporate is not required. (c) Requires the commissioner, not later than the 30th day after the date of the completion of the hearing, to enter a final order approving or denying the application. Authorizes an applicant to appeal a final order, and sets forth requirements for an appeal. Provides that filing an appeal under this section does not stay an order of the commissioner. SECTION 4. Amends Chapter 2, Article 489e, V.T.C.S., by adding Section 2.15, as follows: Sec. 2.15. PREFERENCE FOR LOCAL CONTROL. Authorizes the commissioner, if more than one application to incorporate a new savings bank or establish an additional office of an existing savings bank in the same community is before the commissioner at the same time, to give additional weight to the application having the greater degree of control vested in or held by residents of the community. SECTION 5. Amends Sections 3.07(c) and (g), Article 489e, V.T.C.S., as follows: (c) Authorizes the commissioner to waive the requirement that a notice of an application be published or permit delay of the publication if the commissioner determines that the waiver or delay is in the public interest. Provides that the information that would have been contained in a published notice that the commissioner waived becomes public information under Chapter 552, Government Code, on the 34th day after the date the application is filed. (g) Requires the commissioner, not later than the 60th day after the date the application is filed, to approve the application without a hearing or notify the proposed transferee in writing of the commissioner's intent to deny the application based on the requirements of this section and the grounds for denial. Authorizes the proposed transferee to file a written request for a hearing on the application before the 31st day after the date the notice of intent is mailed to the proposed transferee. Authorizes the commissioner to enter an order, to be final and nonappealable, denying the application if a hearing is not timely requested. Requires the commissioner to issue public notice of the application if the proposed transferee requests a hearing, rather than when an application is complete. Requires the commissioner, after the hearing, to enter a final order approving or denying the application. Deletes a provision relating to a hearing that is not required. SECTION 6. Amends Section 4.02, Article 489e, V.T.C.S., as follows: (a) Created from existing text. (b) Provides that an audit under this section is not required if the savings bank received at its most recent examination a composite rating of 1 or 2 on the CAMEL financial institution rating scale, or had at the beginning of its current fiscal year consolidated assets of $500 million or less. SECTION 7. Amends Section 4.08, Article 489e, V.T.C.S., as follows: (a) Requires the commissioner and any other employee of the Savings and Loan Department of Texas (department) appointed or acting under this Act, except as provided by this Act or rules under this Act, to keep confidential any information regarding a financial institution or a shareholder, participant, officer, director, manager, affiliate, or service provider of a financial institution, other than a public statement or a public portion of a call report or profit and loss statement. Provides that all related files and records of the department are confidential and not to be disclosed. Requires a person who wilfully makes a false official report on the condition of a financial institution, rather than a savings bank, to be removed from office or further employment with the department. Deletes language regarding information obtained through an examination or an individual's position. (b)-(e) Created from existing text. (f) Requires confidential information provided to a financial institution or an affiliate or service provider of the institution, to be the confidential property of the department. Prohibits the information from being disclosed by the recipient, or by an officer, director, manager, employee, or agent of the recipient, to a person not officially connected to the recipient through certain relationships, unless approved in writing by the commissioner or authorized by rules under this section. (g) Requires the discovery of confidential information under legal process from a person subject to this section to comply with rules under this Act. Authorizes the rules to restrict release of confidential information and to require that a protective order be issued before release of confidential information. (h) Authorizes the commissioner to refuse the release any information or record in the custody of the department, if the commissioner believes release of the information or record might jeopardize an investigation of possibly unlawful activities. SECTION 8. Amends Section 6.03(a), Article 489e, V.T.C.S., to delete a person who is not a United States citizen from the list of persons exempted from the membership of the board of directors of a savings bank. SECTION 9. Amends Section 7.01, Article 489e, V.T.C.S., as follows: (a) Created from existing text. (b) Authorizes the finance commission, by rule, to expand savings bank powers to accommodate or take advantage of changing technology and to enable state savings banks to respond to the needs of and convenience demanded by consumers and businesses through on-premises and off-premises operations, with a specific exception. Requires the finance commission, in adopting rules under this subsection, to consider the need to promote a stable financial institution environment; provide the public with convenient, safe, and competitive financial services; and allow for economic development within the state. SECTION 10. Amends Section 7.05, Article 489e, V.T.C.S., as follows: (a) Authorizes a savings bank, without prior approval of the commissioner, to invest not more than an amount equal to its regulatory capital in real estate, buildings, related facilities, and in leasehold improvements for rented facilities for use by the savings bank and its banking premises. (b) Authorizes the finance commission by rule adopted under Section 7.01(b) of this Act to approve a new form of savings bank facility, or authorize the commissioner to approve such a facility if the commissioner does not have a significant supervisory or regulatory concern regarding the proposed facility. SECTION 11. Amends Section 7.09, Article 489e, V.T.C.S., to authorize a savings bank to lend and invest not more than 40, rather than 15, percent of its total assets in commercial loans. SECTION 12. Amends Section 7.10(b), Article 489e, V.T.C.S., to exclude, from the prohibition against the investment of a savings bank in a subsidiary corporation if its aggregate investments in subsidiaries would exceed 10 percent of its total assets, amounts invested in a subsidiary corporation the activities of which are limited to activities that could be conducted directly by the parent savings bank. SECTION 13. Amends Section 8.02, Article 489e, V.T.C.S., to require a savings bank to maintain a minimum of 10 percent of an amount equal to its average daily deposits for the most recently completed calendar quarter in cash, or other readily marketable investments as allowed by rules adopted by the commissioner and the finance commission. SECTION 14. Amends Section 11.07, Article 489e, V.T.C.S., by adding Subsection (f), to authorize a foreign savings and loan association to merge with a domestic savings bank under this section as if the foreign savings and loan association were a foreign savings bank. Requires the commissioner, if the surviving institution is the foreign savings and loan association, to issue and deliver to the foreign savings and loan association a certificate of authority under Subsection (e) of this section to do business in this state. Defines "foreign savings and loan association." SECTION 15. Amends Section 12.12(a), Article 489e, V.T.C.S., to provide that a reference in statutes of this state to a corporation, association, or other organization incorporated or organized under Article 852a, V.T.C.S. (Texas Savings and Loan Act), is also a reference to a savings bank, as defined in this Act. SECTION 16. (a) Makes application of this Act prospective. (b) Requires the savings and loan commissioner, by rule, to prescribe the manner and period in which a savings bank shall come into compliance with Section 7.05 or 8.02, Article 489e, V.T.C.S., as amended by this Act. SECTION 17. Emergency clause. Effective date: upon passage.