BILL ANALYSIS H.B. 1289 By: Patterson 03-31-95 Committee Report (Unamended) BACKGROUND The nature of the financial institution industry has changed over the past decade. Consolidations, mergers and federally subsidized acquisitions have reduced the number of institutions in the country. This has resulted in larger institutions moving to this state and establishing branch operations with out-of-state management and control. Due to these changes, information and reporting procedures on the activities of financial institutions have also become consolidated. Out-of-state institutions, which now control a majority of assets and deposits, only report on a statewide basis, whereas before, activities were reported in a more diverse and thorough way. From time to time, the legislature must make policy decisions regarding certain types of economic activity in diverse geographic areas. Because financial institutions do not report on a county, regional, or geographic region, but rather on a consolidated state-wide basis, the state does not know whether credit needs are being met on a regional and economic sector basis. The state legislature has a duty to see that financial institutions are servicing the communities they are chartered to serve. Without specific branch information, the legislature cannot determine if financial institution branches are adequately servicing their communities. PURPOSE HB 1289 will provide the citizens and public officials of the state of Texas with sufficient information to enable them to determine whether depository institutions are fulfilling the needs of the state and the communities in which they are located. RULEMAKING AUTHORITY It is the opinion of the committee that this bill grants rulemaking authority to The Finance Commission of Texas in Section 1 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Statement amending Title 16, Revised Statutes, adding Article 352 as follows: Sec. 1. Defines "financial institution" and branch office." Sec. 2. (a) The Act only applies to a financial institution or holding company which own or control one or more financial institutions with deposits of $300 million or more. (b) An institution otherwise covered by this ACT need not report if all offices, including branch offices as defined herein, are located within a single county. Sec. 3. Required a financial institution and holding company to submit its financial activity to their regulating authority each calendar quarter. A financial institution having deposits of $300 million or more shall submit a separate report regardless of whether it is owned by a holding company. The report required by this section shall provide the required information segregated on a branch-by-branch basis provided, however, that branch offices within a single county may be aggregated. If a branch is located in an incorporated city which is situated in more than one county, then the report may be based on metropolitan statistical area. This report shall be public information. Sec. 4. Requires the report include information on loans and deposits itemized by such categories as may be prescribed by the Federal Financial Institutions Examinations Council, or its successor, reports of condition or similar public records, provided that the information is reported by branch office transaction. Sec. 5. Authorizes the Finance Commission to adopt rules to establish uniform reporting requirements. Sec. 6. (a) States that each financial institution and holding company subject to the provisions of this Act shall submit the required report no later than thirty days after the close of each quarter and shall retain a copy for its home office. If it has a physical branch in other counties, it shall also make a statement available in each county. The statement at a branch office need only contain data relating to transactions in the county where that branch office is located. (c) An institution shall make the report available for inspection and copying during the hours the office is normally open to the public for business. It may impose a reasonable charge for photocopying services. (d) A financial institution shall post a general notice about the availability of the report required by this Act in the lobbies of its home office and any physical branch offices. Upon request, it shall promptly provide the location of the institution's offices where the report is available. At its option, an institution may include the location in its notice. Sec. 7. States that a financial institution which fails to make the report required by this ACT on or before he date required herein shall be subject to a fine of up to $500.00 per day for each day during which such violation continues. Any penalty imposed under this section shall be assessed and collected by the Banking Commissioner in the case of a banking association, the Savings and Loan Commissioner in the case of a savings association or savings bank, or the Credit Union Commissioner in the case of a credit union. All penalties collected under authority of this section shall be deposited into the Treasury. The Finance Commission shall prescribe regulations establishing such procedures as may be necessary to carry out this section. Sec. 8. Provides that any part of Article 352 that is ruled not to apply to any federally chartered financial institution by a federal regulatory agency will then not apply to state chartered counterparts of the federally chartered institution. SECTION 2. Requires financial institutions that are required to report under Article 352, Revised Statutes, to file their first report to cover the first calendar quarter of 1996 and file it during the second quarter 1996. SECTION 3. Emergency clause. SUMMARY OF COMMITTEE ACTION The committee considered HB 1289 in a public hearing on April 3, 1995. The following people testified in favor of the bill: Karen Neeley; and Robert Schneider. The following person testified against the bill: John Heasley. The bill was left pending. The committee considered HB 1289 in a formal meeting on April 11, 1995. The motion to report HB 1289 favorably without amendments, with the recommendation that it do pass and be printed, prevailed by the following record vote: 6 Ayes, 0 Nays, 0 PNV, 3 Absent.