BILL ANALYSIS
C.S.H.B. 1543
By: Marchant
03-17-95
Committee Report (Substituted)
BACKGROUND
In late 1993, the Texas Banking Commissioner with the support and
cooperation of the Independent Bankers Association of Texas and the
Texas Bankers Association, formed the Texas Banking Code Revision
Task Force. Comprised of a group of senior staff from the Texas
Department of Banking and volunteer attorneys recruited by the
Independent Bankers Association of Texas and the Texas Bankers
Association, the Task Force was charged with conducting a thorough
review and rewrite of the Texas Banking Code of 1943. In addition,
the Committee on Financial Institutions conducted an Interim Study
on the revision of the Code and provided a report with
recommendations to the 74th Legislature.
The guiding principles for the Task Force and the Committee were to
(1) to promote the dual banking system by ensuring that the
proposed Texas Banking Act possesses attributes that make being a
state-chartered bank in Texas at least as if not more attractive
than a national bank charter, (2) to preserve and enhance the
competitive parity between state banks and other forms of financial
institutions in Texas, (3) to reduce the regulatory burden on state
banks to the extent possible consistent with safety and soundness,
and (4) to provide the flexibility in the proposed Texas Banking
Act that is necessary to permit adaptability in the future in
response to the continuing evolution of federal law and modern
banking practice.
The Texas Banking Code is modernized and reorganized into the Texas
Banking Act with an emphasis on clarity, adaptability, convenience,
and continuity. Numbering of the sections has been changed to
conform with the usual form of a state code as recommended by the
Texas Legislative Council, in order to facilitate the eventual
codification of this law into the proposed Financial Code. The
proposed Texas Banking Act contains nine chapters that address the
topics spread over 10 chapters in current law. Chapter XI of the
Texas Banking Code is amended by the bill to correct cross
references with the new code. The proposed chapters are divided
topically into subchapters with generally shorter sections than in
current law to enhance clarity and accessibility. Language is
changed where necessary to conform with modern form and style as
recommended by the Legislative Council.
PURPOSE
The bill repeals the Texas Banking Code of 1943, except for Chapter
11 of that code which is the Trust Code, and enacts the Texas
Banking Act of 1995. Amendments have been made to Chapter 11 to
clarify cross-references to Chapters 1-9 of the Banking Act.
RULEMAKING AUTHORITY
Because the purpose of the bill is to repeal existing law, the
Texas Banking Code Chapters 1-10, and enact new law, the Texas
Banking Act of 1995, all sections of the bill which delegate
rulemaking authority are noted below, even if they are re-delegating rulemaking authority which was previously in statute.
Due to the format, scope and length of this bill, the sections
which grant additional rulemaking authority are mostly contained in
SECTION 1 of this bill (which contains the proposed chapters 1-9 of
the Banking Act). Therefore, the sections of the bill pertaining
to rulemaking will be listed as follows : SECTION 1, Ch. 1.001;
SECTION 1, Ch. 2.002; etc.
It is the committee's opinion that this bill grants rulemaking
authority to the Finance Commission in the following sections of
the bill: SECTION 1, Ch. 1.002, Ch. 1.012, Ch. 1.013, Ch. 1.014,
Ch. 1.106; Ch. 2.006, Ch. 2.009, Ch. 2.105; Ch. 3.001, Ch.3.004,
Ch. 3.007, Ch. 3.010, Ch. 3.103, Ch. 3.201, Ch. 3.203; Ch. 4.005;
Ch. 5.001, Ch. 5.002, Ch. 5.101, Ch. 5.102, Ch. 5.103, Ch. 5.107,
Ch. 5.201, Ch. 5.203, Ch. 5.304; Ch. 6.107; Ch. 9.002, Ch. 9.004,
Ch. 9.006, Ch. 9.008, Ch. 9.012; SECTION 2; SECTION 15, SECTION 18
and SECTION 19 of this bill.
It is the committee's opinion that this bill grants rulemaking
authority to the Savings and Loan Commissioner in SECTION 1, Ch.
1.106, SECTION 15, SECTION 16, and SECTION 18 of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Contains the Texas Banking Act of 1995. A summary of
each chapter contained in this SECTION follows.
Chapter 1. Definitions, Finance Commission, and Savings and Loan
Department/ Abolishment of the State Bank Board
Subchapter A of Chapter 1 is the enabling statute for the Finance
Commission and does not propose extensive changes from current law
other than modernization of antiquated language and a logical
reorganization of substantive provisions.
Section 1.001 is entitled "Short Title," the "Texas Banking Act."
The term "code" is abandoned at the request of Texas Legislative
Council as this law is technically not a code in modern usage.
Section 1.002 is the repository of most definitions for terms and
phrases used throughout the Act. Some chapters or sections contain
definitions for certain terms or phrases used exclusively in that
chapter or section.
Sections 1.003 through 1.007 contain provisions pertaining to the
appointment, performance and related topics for the Finance
Commission without significant change from the current law except
that absence from more than half of the regularly scheduled Finance
Commission meetings that a member is eligible to attend during a
calendar year, unexcused by vote of the Finance Commission, is a
new ground for disqualification. This new provision is uniformly
included in modern enabling statutes for state commissions and
boards.
Section 1.008 describes the minimum meeting requirements for the
Finance Commission and Subsection 1.008(b) is added to allow the
Finance Commission to have meetings by telephone conference call in
special circumstances, as permitted to several other state
commissions and boards.
Section 1.009 subjects the Finance Commission to the Texas Open
Meeting Act and Subsection 1.009(b) incorporates an exception to
the open meeting act to authorize deliberation in executive session
of matters made confidential by law.
Section 1.010 contains the provisions for the appointment, duties
and responsibilities of the presiding officer without significant
change from existing law.
Section 1.011 authorizes the Finance Commission to employ an
executive director. It can employ one of the commissioners as
executive director. The Finance Commission may also employ other
staff, including a hearing officer and an internal auditor, for the
purpose of consolidated services to the Department of Banking,
Savings and Loan Department and the Office of the Consumer Credit
Commissioner. The executive director will supervise and evaluate
Finance Commission staff, but not the other commissioners. Under
current law, the Department of Banking is authorized to employ a
hearing officer and an internal auditor, and that authority is in
effect shifted to the Finance Commission.
Section 1.012 broadly authorizes the Finance Commission to adopt
rules and regulations to accomplish the purposes of the Act,
including rules and regulations necessary or reasonable to preserve
or protect the safety and soundness of state banks, to grant the
same rights and privileges to state banks as are or may be granted
to national banks domiciled in this state, and to provide for fees
to recover the cost of regulation. The Finance Commission in
adopting rules is directed to consider the need to promote a stable
banking environment, to provide the public with convenient, safe,
and competitive banking services, to preserve and promote the
competitive parity of state banks with national banks and other
depository institutions in this state consistent with the safety
and soundness of state banks and the state bank system, and to
allow for economic development within this state.
Section 1.013 authorizes the Finance Commission to adopt rules for
safety and soundness of savings and loan associations and savings
banks. No significant change is intended to existing law, Article
342-114. Section 1.014 grants rulemaking authority regarding the
Office of Consumer Credit Commissioner and is based on current
Article 342-114A.
Subchapter B contains the provisions for the Savings and Loan
Commissioner and Department based on Article 342-205 of the current
code, with clarifications but no significant changes. The Task
Force debated whether to move the Savings and Loan Commissioner
provision to other law; Article 342-205 appears in the existing
code because it was "carved out" of the Banking Commissioner's
authority in 1961 when the Savings and Loan Department was created
by Acts 1961, 57th Leg., Ch. 198. However, because the Savings and
Loan Department is so closely connected to the Finance Commission,
these provisions have been isolated in a subchapter of the Finance
Commission chapter. The provisions can then be readily adapted in
the anticipated codification of the Financial Code in future years.
State Banking Board
Several Articles in current law are not carried forward.
Significantly, Article 342-115 regarding the State Banking Board is
not carried forward. The State Banking Board is proposed to be
abolished. The first law authorizing the incorporation and
regulation of state banks was passed in 1905. In 1910, the
Depositors Guaranty Law was enacted in response to a financial
panic in 1907. The State Banking Board was created by that law to
supervise the Depositors Guaranty Fund, and its members at the time
were the Attorney General, the State Treasurer, and the
Commissioner of Insurance and Banking. In 1913, the Legislature
transferred chartering authority from the Secretary of State to the
State Banking Board, where it has resided ever since, and
authorized the State Banking Board to inquire into the need for new
banks and the financial and moral integrity of the incorporators.
The chartering authority of the State Banking Board has been its
primary function since 1927, when the Depositors Guaranty Law was
repealed.
In the current code, the sole purposes for which the Banking Board
meets are to act on applications for new charters, changes of
domicile, and conversion of national banks to state banks. This is
a cumbersome and time-consuming process. After an application is
received, the Department of Banking investigates the application,
the staff of the Department makes a recommendation to the Banking
Board for approval or denial based on five factors, and the Banking
Board meets to make a decision. If the Banking Board, comprised of
the Banking Commissioner as chair, the State Treasurer (an office
proposed to be eliminated), and a public member appointed by the
Governor, concurs with the recommendation, the application will be
approved. If the application is denied, a hearing may be
requested, at which time the Banking Board must meet again to make
a final decision.
Use of the three member Banking Board for limited purposes in this
lengthy procedure is an unnecessary layer of bureaucracy in the
modern era and should be eliminated. The proposed system for new
charters and conversions should be more efficient and expedient,
with additional safeguards for the applicant, as discussed in
connection with Chapter 3.
Chapter 2. The Texas Department of Banking
Chapter 2 contains the provisions relating to the Texas Department
of Banking and the Banking Commissioner.
Subchapter A describes the Department of Banking and its powers and
duties. No significant changes are made from the current code
except those identified below.
Section 2.006 is based on current Article 342-112, without
significant changes.
Section 2.007 is new and provides for the filing and publication of
interpretive statements of the Banking Commissioner that contain
matters of general policy for the guidance of state banks. The
Secretary of State is directed to publish the filed statements in
the Texas Register and in a designated chapter of the Texas
Administrative Code. These published statements are not law and
are only for the research convenience of bankers, attorneys and the
general public. The weight to be given to published opinions and
policies, as specified in Section 2.007(c), is the same as under
current law.
Section 2.008 governs examination of state banks. The provisions
have been broadened somewhat to allow recovery of costs from
nonbanks that must be examined by the Department.
Section 2.009 directs the banks to submit call reports as required
by the Banking Commissioner but deletes a statutory publication
requirement. This provision takes on added significance because
federal call report publication requirements (i.e., quarterly
publication in a newspaper of general circulation) were repealed by
Section 308 of the Riegle Community Development and Regulatory
Improvement Act of 1994, although federal banking agencies are
directed by Section 307 to develop electronic filing and public
access capability. The Finance Commission may, by regulation,
specify other requirements for filing and publishing of call
reports. Therefore, absent regulations, state banks would not be
required to publish call reports in the newspaper under the
proposed Act. Call reports would remain public information.
Section 2.010 provides an exemption from liability for the Banking
Commissioner, Finance Commission members, examiners and other
employees of the Department in the performance of official duties
except for acts or omissions which are corrupt or malicious, the
same standards as in current law.
Subchapter B of Chapter 2 deals with confidentiality of
information. Article 342-210 currently governs confidential
information, generally information regarding the confidential
financial affairs of banks.
Chapter 3. Powers, Organization and Organizational Changes,
Capital and Surplus
Chapter 3 contains the provisions for organization of banks and
general corporate activities, including mergers, reorganizations
and consolidations. Additional power is added to Section 3.001 to
permit a state bank to become a "community development financial
institution," a type of bank with special privileges and duties
created by the Riegle Community Development and Regulatory
Improvement Act of 1994.
Subchapter A describes general law applicable to the organization
of state banks and procedures and requirements for a new bank
charter. Under Section 3.002(2), all state banks which were
originally approved for a limited life of up to 50 years will be
considered to have perpetual existence without further action by
the bank.
The Banking Commissioner will approve the issuance of a charter
without a hearing if no protests are received and if the
investigation of the application demonstrates that the six proposed
statutory conditions are met, an option not available under current
law. If the initial investigation appears to warrant a hearing,
the Banking Commissioner will set a hearing. A decision of the
Banking Commissioner may be appealed for review by the Finance
Commission or directly to district court. Any Finance Commission
decision is appealable to district court. The provision to allow
the Finance Commission to review charter decisions will permit
elimination of the State Banking Board without giving up any
protection for an applicant from the arbitrary decision of one
person, the only concern expressed by the industry when informed of
the proposal to eliminate the Banking Board.
Section 3.004(b) lists the six proposed statutory conditions for
issuance of a state bank charter:
1. A public necessity exists for the proposed state bank.
2. The proposed organizational and capital structure and
amount of initial capitalization is adequate for the
proposed business and location.
3. The anticipated volume of business indicates profitable
operation.
4. All proposed officers and directors have sufficient
banking experience, ability, standing, competence,
trustworthiness, and integrity to justify a belief that
the proposed state bank will operate in compliance with
law and that success of the proposed state bank is
probable.
5. Each principal shareholder has sufficient experience,
ability, standing, competence, trustworthiness, and
integrity to justify a belief that the proposed state
bank will be free from improper or unlawful influence
or interference with respect to the bank's operation in
compliance with law.
6. The organizers are acting in good faith.
Section 3.006 grants a newly chartered state bank six months from
approval to actually open for business. After the expiration of
that period, the Banking Commissioner has discretionary authority
to rescind the prior approval.
Section 3.007 incorporates the Texas Business Corporation Act and
empowers the Finance Commission to adopt rules modifying or
adapting the application of these corporate laws where inconsistent
or incompatible with the business of banking. This in effect is a
"catch-all" provision to guard against an inadvertent failure to
discover an inconsistency or incompatibility in the bill drafting
process. All discovered inconsistencies are expressly dealt with
in the proposed bill.
Section 3.008 authorizes the Banking Commissioner to convene a
hearing on any matter for decision. This provision will allow the
Banking Commissioner to make an administrative record on any matter
anticipated to be appealed, ensuring a faster resolution of the
dispute than would otherwise be available.
Section 3.009 provides for a review by the Finance Commission of
any adverse decision by the Banking Commissioner if the affected
party requests. The appeal may alternatively be taken directly to
the district court in Travis County without first seeking review by
the Finance Commission.
Section 3.010 implements parity between national and state banks
under Article XVI, Section 16(c) of the Texas Constitution, with a
provision that reinforces the power of the state legislature to
enact laws regulating the state banks according to Article XVI,
Section 16(a) of the Texas Constitution, that might differ from
national banking laws. Procedures are described for state banks to
notify the Banking Commissioner if the bank intends to conduct any
activity permitted for a national bank that is otherwise denied to
a state bank. Appropriate hearing and appeal provisions are
included for persons affected by an adverse decision. The Finance
Commission is expressly authorized to adopt rules permitting and
regulating the activity.
Subchapter B will govern changes in capital and charter amendments.
Section 3.101 permits a state bank that has received a charter from
the Banking Commissioner, and that has raised all its initial
capital paid in cash, to create authorized but unissued stock by
amending the articles of association of the bank.
Section 3.102 allows a state bank to create shares in series with
specific preferences, limitations and rights for each series, and
is modeled on Article 2.13 of the Texas Business Corporation Act.
Section 3.103 provides exemptions from prior approval of the
Banking Commissioner for an increase in capital when shares of
common stock are sold for cash or issued as share dividends or if
a transfer is made by board resolution from undivided profits to
capital or surplus.
Section 3.103 requires Banking Commissioner approval of voluntary
changes in the capitalization of state banks, with some exceptions.
The Finance Commission can create other exceptions by rule.
Section 3.104 permits a state bank to issue capital notes and
debentures that are subordinated to the claims of depositors and
may be convertible into shares of stock. This provision is
substantially similar to current law.
Subchapter C describes the various types of offices the state bank
may use for banking business. Section 3.201 gives the Finance
Commission authority to act by rule to approve new forms of banking
offices and facilities if required to serve the needs of the
public. The Banking Commissioner can approve a new form of
facility if no supervisory or regulatory concerns exist.
In Section 3.202 the concept of "domicile" for a state bank in
current law is changed to "home office," the location where the
bank keeps the corporate books and records and that is the
designated office for service of process on the bank. These
standards are similar to current law.
Section 3.203 provides that a state bank may establish a branch
with the Banking Commissioner's prior written approval. Approval
will be granted if the Banking Commissioner has no supervisory or
regulatory concerns regarding the proposed branch. This is
existing law.
Provisions for electronic terminals are in Section 3.204 and,
although much briefer, make no material change in existing law.
Federal law in this area is quite extensive.
Section 3.205 allows a state bank to open a loan production office
with 60 days prior notice to the Banking Commissioner. The loan
production office may only solicit loans, accept loan applications
and perform ministerial duties related to closing loans. Loan
production offices are currently authorized by rule, 7 Tex. Admin.
Code § 3.93.
Merger Provision
Subchapter D includes the new procedures for mergers. Merger
provisions of the Texas corporation laws are some of the most
modern and useful of any corporate laws in the United States.
Because regulatory review of a merger transaction is required to
protect depositors and creditors, these particular provisions have
not been incorporated by reference, as in other instances, but are
modeled after the Texas Business Corporation Act. Banks will be
able to enter into complex agreements for the acquisition and
disposal of assets in the form of mergers, the primary advantage of
which is simplicity, with the added advantage that the transactions
can qualify as tax-free reorganizations under the federal Internal
Revenue Code. A bank will thus be able to merge with virtually any
form of business entity that itself has the power to merge. One
common example would be a simplified method for eliminating the
bank's bank holding company in one step. Under existing law, the
current method for eliminating a bank holding company in a tax-free
manner is to cause the bank to create a corporate subsidiary, merge
the holding company into the subsidiary, then dissolve the
subsidiary in a cumbersome and more costly series of transactions.
Under the proposed law, the holding company can simply be merged
into the bank.
Subchapter E describes the procedures and responsibilities of the
sale or purchase of all or substantially all of the assets of any
financial institution by a state bank. Existing law is preserved in
large part but the language used is modernized.
Subchapter F describes procedures for conversion of a state bank
into some other form of banking institution or for conversion of
some other form of banking institution into a state bank.
Conversion between the state bank forms of "banking association"
and "limited banking association" is authorized.
Chapter 4. Shares and Participation Shares, Shareholders and
Participants, Management
Subchapter A governs a change of control of a state bank or bank
holding company. A filing requirement for notice subsequent to the
transfer of 10 percent of the outstanding shares of a state bank
has been eliminated.
Control is defined in Section 1.002(15) as generally the ability to
control or influence management regardless of the number of shares
transferred or the form used for accomplishment of control.
Ownership of 25 percent of the shares outstanding of any bank is a
presumption of control and requires application for approval.
Ownership of at least 10 percent comprising more shares than any
other shareholder is also a presumption of control.
Section 4.002 provides for the application requesting approval of
change in control and allows the Banking Commissioner to coordinate
a delay in publication of notice for a proposed change in control
if the application contemplates a public tender offer subject to
the provisions of 15 U.S.C. Section 78n(d)(1). The permitted
deferral of publication is necessary to avoid a conflict with
federal law that might otherwise preempt the notice provision.
Section 4.003 changes the time for approval or denial by the
Banking Commissioner for a change of control to 60 days from 30
days under the current code. The section also describes the
criteria for approval and the procedure for requesting a hearing by
the Banking Commissioner. The criteria are substantially unchanged
from current law.
Section 4.004 provides that an appeal to the district court is
subject to the substantial evidence rule if the change in control
application is denied. Current law contains a de novo standard,
generally considered wasteful of governmental resources in the
modern era.
Section 4.005 provides for exemptions from change of control
provisions if the acquisition is to satisfy or compromise a bona
fide, pre-existing debt, the shares are acquired by one who already
holds control, or if the change of control is subject to Subchapter
D of proposed Chapter 8 (regarding acquisitions of banks by bank
holding companies, subject to review and approval by the Board of
Governors of the Federal Reserve System). Acquisition by
inheritance is also exempt.
Subchapter B sets forth requirements for election of management and
the election and the duties and other responsibilities of
management. Because much of governing law in this area is in the
Texas Business Corporation Act, many articles from the current code
have been omitted.
Numerous crimes in current Chapter IV have also been deleted. The
Banking Code of 1943 contains numerous crimes that at present are
inconsistent with the Penal Code. Because these "bank" crimes are
more specific than crimes under the Penal Code that concern the
same conduct, prosecutors are reluctant to prosecute under the
Penal Code. Similarly, the proposed bill omits crimes in Chapter
IV that conflict with or are duplicated in federal law. Retained
in Section 4.106 are crimes involving knowing failure to file,
false statements on applications, and false or misleading
statements or concealed information in the examination process.
Section 4.103 describes the board of directors and its
responsibilities, and adds a disqualification for a person proposed
as a director if the bank experienced a loss attributable to a
charged off obligation of an entity controlled by the person, if
that control existed both at the time of funding and at the time of
default of the loan. The section also adds authority for the
appointment of a conservator if a bank fails to elect directors
within 60 days following the annual meeting of shareholders, for
the purpose of causing directors to be elected. If the conservator
is unsuccessful the bank may then be closed for liquidation, the
only option under the current code.
Section 4.105 designates the required officers by function rather
than title. The current code provides that employment contracts
between an officer and a state bank for a fixed term are void. The
prohibition is eliminated because national banks can enter
reasonable employment agreements with their employees.
Subchapter C contains special provisions for limited banking
associations without significant changes from the current code.
Chapter 5. Investments, Loans and Deposits
Chapter 5 is thoroughly reorganized and includes a subchapter on
deposits based on Chapter VII of the current code.
Subchapter A governs real estate acquisition and ownership
limitations for state banks. Section 5.001 defines "bank facility"
to include real estate owned or leased for employee work space,
bank parking, and for banking business such as computer
operations, storage and maintenance of foreclosed collateral
pending sale, records retention and storage, future expansion of
banking facility, activities for the convenience of its customers,
and any other activity authorized by rules. The limit for
investment in bank facilities and related investments is expressed
as 100 percent of its capital and certified surplus as opposed to
60 percent of equity capital in current law, and is roughly
comparable to current law.
Section 5.002 permits a state bank to acquire real property to
minimize a loss on a debt and extends the time for disposition of
the other real estate to 5 years from the date of acquisition,
including property abandoned from use as part of the bank facility.
Extensions may be granted by the Banking Commissioner if the bank
has attempted in good faith to dispose of the property or if the
immediate disposition would be detrimental to the bank. With the
permission of the Banking Commissioner, the bank may also exchange,
acquire or improve real estate to avoid or minimize potential loss.
Subchapter B for investments has been rewritten to provide
flexibility for state bank securities investments, with limitations
similar to those imposed on national banks under federal law.
Section 5.101(a) allows a state bank to deal in equity securities
for the account of others but may not generally underwrite any
issue of securities. Section 5.101(b) permits a bank to acquire
equity securities only to minimize loss on a loan. Section
5.101(c) permits a state bank to acquire investment (debt)
securities for the bank's own account subject to a limit of no more
than 15 percent of the bank's capital and certified surplus in any
one obligor or maker.
Section 5.101(d) overrides the limitations of the preceding
subsections and allows a state bank to deal in, underwrite or
purchase for the bank' own account, subject only to prudent banking
judgment, the general obligation bonds of most city, county, state,
or national governmental units, investment securities backed
unconditionally by the United States, residential mortgage backed
securities, investment securities issued by the Federal National
Mortgage Corporation, the Federal Home Loan Mortgage Corporation,
the Government National Mortgage Association, the Federal
Agriculture Mortgage Corporation, the Federal Farm Credit Banks
Funding Corporation, the North American Development Bank (created
by NAFTA), and a Federal Home Loan Bank.
Subsection 5.101(e) permits a state bank to underwrite certain
obligations of any state or local government for housing,
university, health care and public welfare purposes. Under
Subsections 5.101(f) and (g) investment in small business
securities is allowed but limited to 15 percent of the capital and
certified surplus of the bank and investment in adjustable rate and
money market preferred stocks is permitted but limited to 25
percent of capital and certified surplus of the bank.
Subsection 5.101(h) allows a state bank to deposit funds without
limit in a federally insured financial institution, a Federal
Reserve Bank or a Federal Home Loan Bank.
Because expansion of permissible investments for banks has been
driven by changes in federal law in recent years, a trend expected
to continue, under section 5.101(i) the Finance Commission can
adopt rules regarding new investments or new limitations to enhance
future adaptability of the Banking Act.
Section 5.102 prohibits the acquisition by a state bank of its own
stock except to minimize loss on a loan and certain other specific
exceptions. A state bank may purchase treasury stock with prior
approval by the Banking Commissioner or if permitted by
regulations. A lien by the bank on its own stock is limited to two
years and title to a bank's own stock may not be held by the bank
for more than one year without consent of the Banking Commissioner.
Bank holding company stock is considered stock of the subsidiary
bank for this purpose unless the bank holding company stock is
traded in a national public market.
Section 5.103 permits a state bank to invest and conduct certain
activities through an operating subsidiary (a subsidiary that the
bank controls through majority ownership), limited to those
activities in which a state bank or a bank holding company may
engage. Investment in an operating subsidiary is unlimited if the
activity by the subsidiary is solely that which a state bank may
conduct directly. If the activities include those which the bank
may not conduct directly, the investment by a bank in the
subsidiary may not be greater than 10 percent of the capital and
certified surplus of the bank and investments in all subsidiaries
may not exceed the bank's equity capital.
Section 5.103(c) allows a state bank to engage in certain
securities activities through a subsidiary which the bank may not
do directly. Under Section 5.103(d), minority investments by an
operating subsidiary are permitted in the equity securities of
another bank, a company engaged solely in activities allowed for a
bank service corporation, and a company engaged exclusively in
activities as an agent or similar business. These investments are
currently prohibited to a national bank.
Under Subsection 5.103(e) a bank must notify the Banking
Commissioner of its intent to form, acquire or perform a new
activity in a subsidiary. The activity is approved if the Banking
Commissioner does not notify the bank otherwise within 30 days or
sooner if the Banking Commissioner so notifies the bank. If the
Banking Commissioner notifies the bank that additional information
will be needed, the bank may not commence the activity until
receipt of written approval from the Banking Commissioner. All
subsidiaries of a bank are subject to regulation by the Banking
Commissioner as in current law.
Section 5.104 allows a state bank to invest in a registered
investment company (mutual fund) that holds only debt securities
and evidences of debt permissible for a state bank. Limitation of
the amount the bank may invest corresponds to the limits on the
bank's direct investments. The bank must periodically review the
investments of the mutual fund to determine that investment limits
are not exceeded.
Section 5.105 provides a list of other equity investments permitted
by a state bank, subject to limits. Bank service corporation
investment is limited to 15 percent of the capital and certified
surplus of the bank for each corporation and no more than five
percent of total assets of the bank may be invested in all bank
service corporations. An investment in an agricultural credit
corporation may not be greater than 30 percent of the capital and
certified surplus of the bank unless the bank owns at least 80
percent of the agricultural credit corporation. Investment in a
small business investment company may not exceed 10 percent of the
capital and certified surplus of the bank. A state bank may own
not more than five percent of any class of voting stock issued by
a bankers' bank and the total investment by the state bank in a
bankers' bank may not exceed 15 percent of the capital and
certified surplus of the bank.
Under Section 5.106 a state bank may invest in an entity of a
predominantly civic, community or public nature which includes low
and moderate income housing, services and jobs, and equity
securities of entities primarily engaged in such activities if the
investment would not expose the bank to unlimited liability. The
state bank may also serve as a community partner and make
investments in a community partnership, concepts added to federal
law by the Riegle Community Development and Regulatory Improvement
Act of 1994. All investments under Section 5.106 may not exceed 10
percent of the capital and certified surplus of the bank.
Section 5.107 prohibits a state bank from engaging in commerce
except to extent specifically provided in the Act or to minimize
loss on a loan. This provision is substantially unchanged from
current law, Article 342-503.
Subchapter C governs loans and lending limits. Under Section
5.201, a bank is allowed to make loans and extensions of credit up
to 25 percent of the capital and certified surplus of the bank to
any one borrower, the same as in existing law. Most of the
exceptions to the lending limit in existing law are retained,
although certain aggregate limits corresponding to federal law have
been added. Formerly listed lending exceptions that are more
appropriately classified as investments have been transferred to
Subchapter B.
Section 5.202 of the proposed Texas Banking Act allows the bank to
require a borrower to pay reasonable fees and expenses incurred in
making loans and these fees and expense are not considered interest
charged by the bank.
Section 5.203 permits a state bank to purchase or construct a
public facility and, as holder of the legal title, lease the
property to a public authority. The section also allows lease
financing transactions involving personal property, presently
authorized under Article 342-503. Property subject to lease may
not be held by the bank for more than six months after the lease
expires, and rental payments under the lease are not to be
considered interest.
Subchapter D governs deposit contracts of a state bank, and is a
thorough rewrite and modernization of Chapter VII in the current
code. The provisions in Article 342-603 relating to pledge of
assets to secure deposits have been moved to this chapter. The
provisions in Article 342-604 relating to security of uninvested
trust funds deposited in bank would logically belong in this
subchapter as well but is deleted because the subject matter is
addressed in Section 113.057 of the Property Code.
Section 5.307 adds a new set-off tool for banks. Under present
law, a bank must accelerate and demand payment of a debt in full in
the event of a default in payment of an installment. The bank can
then set off against the customer's accounts. The new right of
set-off will permit a bank to set off only the defaulted
installment, leaving the aggregate indebtedness in good standing.
To alleviate the surprise to consumers resulting from this change
in the law, banks are required to notify depositors of this right
of set-off before it can be used.
Chapter 6. Enforcement Actions
Chapter 6 contains enforcement actions for banks and for
unauthorized activity as defined in Section 1.002. Provisions
regarding supervision and conservatorship have also been relocated
to this chapter. All of the existing provisions in Chapter VI of
the current code have been moved to other chapters or omitted from
the proposed bill.
Subchapter A of proposed Chapter 6 is a revision of Article 342-412
of the current code with shorter sections that are less confusing
and more orderly for ease in understanding. The provisions
regarding cease and desist, removal, and prohibition orders are
essentially similar to current law but have been simplified and now
contain more procedural protection for the affected party.
Current law as contained in Article 342-412 applies differing
standards for removal or prohibition to members of three
overlapping groups: (1) officers, directors, or employees (commits
a violation or violates a cease and desist order); (2) officers or
directors (caused a substantial financial loss to another bank or
business institution, has shown personal dishonesty or a wilful or
continuing disregard for the safety and soundness of the other bank
or business institution, and has shown unfitness to continue as an
officer or director); and (3) persons participating in the conduct
of the affairs of a state bank (caused a substantial financial loss
to the state bank, another bank, or another business institution,
has shown personal dishonesty or a wilful or continuing disregard
for the safety and soundness of the state bank, other bank, or
other business institution, and has shown unfitness to participate
in the conduct of the state bank's affairs). Current law is
difficult to read and understand and contains several undefined
terms that make its application uncertain.
Section 6.003, an individual cannot be finally removed from banking
unless three findings are made:
1. the person committed a violation other than in an
inadvertent or unintentional manner or violated a final cease
and desist order, and
2. by reason of the violation, the bank suffered or will
probably suffer a financial loss, the interests of the bank's
depositors have been or could be prejudiced, or the person
received financial gain; and
3. the violation involved personal dishonesty or demonstrated
wilful or continuing disregard for the safety or soundness of
the bank.
A person removed from banking is banned under Section 6.007 from
working for state banks or trust companies under the jurisdiction
of the Banking Commissioner. A removal or prohibition may be
limited in duration and can be lifted by the Banking Commissioner.
Removal orders will be published periodically by the Banking
Commissioner, thereby giving access to this information by other
state regulators.
Section 6.008 contains a statute of limitations applicable to civil
enforcement orders.
Section 6.009-6.011 relate to penalties and enforcement of cease
and desist orders.
Section 6.012 relates to confidentiality of records.
Section 6.013 is new, and authorizes the Banking Commissioner to
bring a suit on sworn account to collect unpaid fees owed to the
state.
Subchapter B is a compilation of the provisions contained in
Article 342-801a of the current Code but organized into shorter
sections and subsections for readability and ease of use. In
Section 6.107, the authority of a conservator is clarified from
current law.
Subchapter C is new and provides enforcement authority over persons
performing activities without a charter, license, permit,
registration or other authority which should have been issued by
the Banking Commissioner.
Under Sections 6.201 and 6.202, the Banking Commissioner is
authorized to investigate and compel testimony regarding
unauthorized activity with state-wide subpoena power. Section
6.206 authorizes the issuance of a cease and desist order to stop
or prevent unauthorized activity and provides procedures for
hearings and appeals.
Section 6.209 authorizes an action to impose administrative
penalties or seek injunctive relief if a person violates a final
cease and desist order. Section 6.210 sets forth the penalties
authorized after hearing and a determination that the cease and
desist order has been violated. The penalties allowed include a
fine not to exceed $25,000 for each violation and restitution if
appropriate.
Chapter 7. Dissolution and Receivership
This chapter contains the revised provisions from Chapter VIII of
the current Code with subchapters and sections for better
organization. The chapter contains all the substantive provisions
from the current code and provisions borrowed from the Insurance
Code to provide a more complete set of statutory directions for
dissolution, receivership and liquidation of a state bank.
Subchapter A contains general provisions relating to the exclusive
nature of the authority in the Banking Commissioner to liquidate a
state bank, the role of the Federal Deposit Insurance Corporation
in liquidations, and the succession of trust powers by operation of
law. These provisions are the same as current law. A new provision
is added authorizing the Banking Commissioner to seek the
appointment of an independent receiver if the FDIC does not serve
as the liquidator.
Subchapter B describes the procedures for a voluntary liquidation
of a state bank. Section 7.101 requires corporate action by the
board of directors and shareholders according to the business
corporation laws. The current code simply calls for a vote of two
thirds of the shareholders.
Section 7.103 is a new provision with a mechanism for the
disposition of unclaimed personal property that ultimately will be
transferred to the state treasurer as unclaimed property. Section
7.104 is new and provides for the termination of all fiduciary
accounts with appropriate notice to the trustor and beneficiaries,
and maintenance of one office where fiduciary administration will
continue until disposition is complete. Section 7.106 subjects all
liquidating banks to the continued regulation and examination of
the Banking Department until the voluntary liquidation is complete.
Subchapter C contains the steps for involuntary dissolution and
liquidation similar to existing law, but it provides a more
thorough description of lawful procedure than is provided in the
current law. Section 7.203 allows the Banking Commissioner to act
as receiver without bond when closing a state bank and limits the
liability of the receiver and the employees and agents while acting
in an official capacity. The receiver has all necessary authority
to do any act required for the proper dissolution and liquidation
of the state bank and allows for the liquidation to continue for as
long as necessary for an orderly liquidation to be completed.
Section 7.209 allows the receiver to deposit money of the
liquidating estate of the bank into the Texas Treasury Safekeeping
Trust Company and in any federally insured state bank in Texas.
Any funds on deposit at a bank in excess of the limits of deposit
insurance must be secured by the bank.
Section 7.210 stops all pending lawsuits against the bank and stays
any further action against the bank being liquidated. It also
provides that the receiver is not required to plead in any of the
existing lawsuits until one year after the date of closing.
Section 7.211 gives the district court in which the receivership is
filed exclusive jurisdiction over any actions which occur after the
date of the closing of the bank. Any lawsuit that may be filed
against the receiver must be filed in Travis County. These
provisions are based on similar provisions in the Insurance Code.
All parties connected with the closed bank are required by Section
7.212 to turn over all books and records of the closed bank to the
receiver. Section 7.213 authorizes the receiver to obtain an
injunction or other order required to prevent waste or wrongful
disposition of assets of the closed bank or wrongful interference
with the receiver. These provisions duplicate similar provisions
in the Insurance Code.
Section 7.214 gives the receiver statewide subpoena power for
obtaining information and documents needed in the receivership.
Section 7.215 authorizes the receiver to terminate oral and
executory contracts, and any claim against the closed bank that is
not in writing is not valid against the receiver.
Section 7.216 makes any transfer or lien made or created within
four months prior to the closing of the bank voidable by the
receiver, and makes the parties who caused the transfer or lien
liable for the property or benefit received.
Section 7.220 requires the receiver to file quarterly status
reports with the court. Section 7.221 allows the district court to
order an audit of the books and records of the receivership at the
expense of the receiver. Section 7.222 describes the process for
disposing of the property from the closed bank not claimed by any
rightful owner. Section 7.223 prescribes the action terminating
all fiduciary positions of the closed bank. Section 7.224 contains
the process for disposition of the books and records during and
after the receivership. Section 7.225 requires that all books,
papers and records of the closed bank must be received in evidence
in any court if found among the effects of the closed bank, whether
or not they are originals. These provisions are modeled on similar
provisions in the Insurance Code.
Section 7.227 describes the procedures for disposition of any
assets discovered after the receivership is closed and includes
provisions for actions against any person that intentionally or
fraudulently concealed the assets.
Subchapter D covers the process for claims against the closed bank
and the resolution by the receiver. Sections 7.301 and 302
describe the dates for filing claims. Claims must be timely filed
to share in distributions.
Section 7.303 requires special proof for a judgment entered against
the bank prior to the closing of the bank to get a higher priority
for payment than an unsecured creditor. Section 7.304 allows the
secured claimant to take the security for the claim and have the
deficiency balance entered as an unsecured claim, subject to the
value of the security being determined under supervision of the
court. These provisions duplicate similar provisions in the
Insurance Code and in federal bankruptcy law.
Section 7.305 requires an unliquidated claim to be liquidated prior
to the time specified and prior to the closing of the receivership,
in which event the claim will share in any distributions ratably
with those of the same class. Section 7.306 provides procedures
for set-off for mutual claims of the claimant and the closed bank.
Section 7.307 allows the receiver six months to accept or reject
the claims, at which time the receiver will make a schedule of the
claims action available to each claimant. Section 7.308 provides
for objection to any claim by anyone prior to a date set by the
receiver in the notice to the claimants. Section 7.309 requires
action on a rejected claim to be filed within three months after
notice of rejection. An appeal of a rejected claim is a de novo
action in the receivership court.
Section 7.310 allows the receiver to make distributions from time
to time provided a reserve is set up cover rejected claims on
appeal and unliquidated claims with time left to determine.
Section 7.311 establishes a priority for claims against an insured
bank to be the same as in liquidation or purchase and assumption
for a national bank. Section 7.312 describes the priority for
claims against an uninsured bank to be, in order of priority,
administrative expenses, secured creditors to the extent of the
value of the collateral, beneficiaries of commingled fiduciary
funds, general creditors including taxes, and the claims of capital
debenture holders and the shareholders.
Section 7.313 provides that any excess assets will be turned over
to the control of the shareholders, who must appoint an agent to
take over the affairs of the bank. Section 7.314 requires that any
unclaimed property be transferred to the state treasurer.
Chapter 8. Provisions Applicable to Banks and Other Depository
Institutions; Bank Holding Companies
Chapter 8 is a collection of sections that pertain to depository
institutions and banks in general, safe deposit boxes, emergency
provisions for natural disasters and other crises, and bank holding
company regulation. Most of these provisions are in Article IX of
the current code.
Section 8.001 is based on current Article 342-410, dealing with
liability and indemnity of directors and officers, without
substantial changes.
Section 8.002 is based on current Article 342-609 without
significant change but including clarifications.
Section 8.003 is a new provision that allows out of state
depository institutions to open loan production and other
representative offices.
Section 8.004 carries forward the restrictions on unauthorized
banking activities in Article 342-902. Section 8.005 contains the
provisions in Article 342-907. Neither of these sections has
significant changes from current law.
Section 8.006 authorizes certain officers of a bank to acknowledge
signatures on a bank instrument regardless of employment by the
bank or ownership of bank shares, and is carried forward from
existing Article 342-509a. Section 8.007 exempts bank employees in
certain instances from the registration requirements of the
securities law when selling bank shares issued by the employer,
carried forward from existing Article 342-411a. Section 8.008
provides for automatic transfer of fiduciary rights, duties and
obligations to a successor institution and is based on existing
Article 342-305.
Section 8.009 authorizes certain affiliates in a holding company
system to act as agent for other affiliates, provided the agent is
empowered to conduct the activity, e.g., a mortgage company could
not accept deposits for an affiliated state bank.
Section 8.011 establishes a Compliance Review Committee to test,
review or evaluate an institution's performance.
Subchapter B governs safe deposit boxes and contains the provisions
from Article 342-906, rewritten into six sections, with
clarifications but without significant change.
Subchapter C contains, with clarifications but without significant
change, the provisions of Article 342-910 and Article 342-608
concerning emergencies and crises which warrant temporarily closing
a bank.
Subchapter D contains provisions governing bank holding companies
activities and acquisitions in Texas.
Section 8.301 includes provisions currently in Sections 1 through
3 of Article 342-912 without significant change except that
applications filed with the Board of Governors of the Federal
Reserve System will be required to be filed simultaneously with
Banking Commissioner. Section 8.301 also concerns the factors to
be used in determining compliance with the Community Reinvestment
Act and does not change existing law.
Section 8.302 places a cap on total deposits controlled by a bank
holding company and no holding company may acquire a state bank in
Texas if the holding company would control in excess of 20 percent
of all federally insured deposits in Texas. The percentage
deposit cap has been lowered from current law but the definition of
deposits has been broadened.
Section 8.303 requires that any state bank acquired by an out of
state holding company must have been in existence for not less than
five years.
Section 8.305 subjects a bank holding company to the enforcement
provisions of Chapter 6.
Chapter 9. Foreign Bank Agencies and Representative Offices
Chapter 9 is loosely based on Chapter X of the current code. Until
1985, foreign bank operations were prohibited in this state.
Chapter X was added to the Banking Code by the 69th Legislature to
authorize a foreign bank with at least $100 million in equity to
establish a single state licensed agency office in any county whose
population exceeds 1.5 million, if the foreign government grants
reciprocal rights.
Section 9.001 allows foreign bank agencies to be established by
foreign banks with a net worth of at least $100 million in
population centers with a population of more than 500,000.
Section 9.002 subjects the foreign bank agency to the regulatory
provisions of other chapters of the code where appropriate and
permits the Finance Commission to adopt rules governing foreign
bank agencies, including rules relating to fees and expenses to be
paid by the foreign bank agency.
Section 9.004 describes the contents required in an application for
the foreign bank agency license. The section also lists the
criteria for approval of a license application, primarily that the
foreign bank and its officers be reputable. Section 9.005 provides
for a hearing and appropriate appeal rights regarding an
application for license.
Section 9.006 is new and requires a foreign bank to register its
representative office locations with the Banking Commissioner.
Activities that can be conducted by a representative office are
specified.
Section 9.007 requires that the Secretary of State be appointed
agent for service of process on any office of a foreign bank
located in Texas, including representative offices.
Section 9.009 provides for a license or registration revocation
hearing and appropriate appeal rights. Section 9.010 provides that
a foreign bank must cease all activities in Texas if its
registration is revoked, and Section 9.011 provides that a foreign
bank must cease all previously licensed activities in Texas if the
license is revoked. Annual license renewal requirements contained
in current Article 342-1007 are eliminated. The provisions of
Article 342-1007(d) relating to the prohibition on federal agencies
by a foreign bank in Texas are also eliminated.
Section 9.012 is the powers and activities section and is similar
to existing law. A limited expansion of fiduciary powers is made
by Section 9.012(b) to permit a foreign bank agency to serve as an
indenture trustee or as a registrar, paying agent, or transfer
agent (on behalf of the issuer) for equity or investment
securities, effectively the "wholesale" side of the trust business.
Section 9.013 provides reporting requirements for foreign bank
agencies. Section 9.014 subjects foreign bank agencies to the
franchise tax. Section 9.015 sets forth procedures for
dissolution.
SECTION 2. Amendments to Chapter XI, The Texas Banking Code
Contains the Trust Code. The Trust Code, Chapter XI will remain
behind as an orphaned chapter of the old Banking Code, however,
some sections have been amended to correct cross-references to the
Texas Banking Code so that they refer to comparable provisions in
the Texas Banking Act.
Two substantive changes are made to the existing Chapter XI of the
Texas Banking Code. A provision was inserted to permit appeals of
chartering decisions to the Finance Commission. This provision
would extend the right to appeal to the Finance Commission on
charter applications to trust companies since the State Banking
Board is proposed to be eliminated.
Also, the capital requirement is raised for trust companies to $1
million from $500,000. The bill provides a five year transition
period to allow existing trust companies adequate time to achieve
the required level of capital, and regulatory discretion exists to
permit a longer transition period for trust companies that are in
good faith attempting to establish more capital but need more time.
Additionally, the bill contains a provision permitting the
Commissioner to reduce the capital requirement based on a finding
that the safety and soundness of the trust company will be
adequately protected by a lower capital requirement.
This section also contains, in part, the charitable trust
exemption. This clause, along with clauses in Sections 21 and 33
of the bill, would exempt charitable organizations from being
required to have a trust company charter and allow them to act as
trustee of a charitable trust which benefits their organization
under the Texas Non-Profit Corporation Act.
SECTION 3. New §30.007, Texas Civil Practice and Remedies Code
Current Article 342-705 of The Texas Banking Code governs
disclosure of financial information in customer records of
financial institutions. The statute is convoluted and ambiguous
(as is much of The Texas Banking Code) and needs redrafting.
Because the subject most often arises in litigation, the
appropriate location for the rewrite is in the Civil Practice &
Remedies Code rather than the Texas Banking Act.
The new section explicitly governs civil discovery issued under the
authority of a "tribunal," defined to include not only a court but
also a governmental agency exercising adjudicatory functions and an
arbitrator. Standards, procedures, and exemptions are clearly
stated to lend greater predictability to the process. Financial
institutions and credit unions are protected with regard to
expenses incurred in assembling documents responsive to a discovery
request.
SECTIONS 4-20. Conforming Amendments
These SECTIONS make conforming amendments to other statutes that
cross-reference to The Texas Banking Code.
One substantive change is made. SECTION 14 amends Section
171.1031(c) of the Tax Code to require that the Banking
Commissioner put a bank that is delinquent in paying its franchise
tax in conservatorship and then pay the delinquent taxes. Current
law requires that a delinquent bank be closed for liquidation. The
existing remedy goes far beyond any reasonably required action to
collect franchise taxes.
SECTION 21. Non-profit Corporation Power to Act as Trustee
A new Article 2.31 is added to the Non-Profit Corporation Act that
authorizes a charitable organization to act as trustee of a
charitable trust.
SECTIONS 22-25. Conforming Amendments
These SECTIONS make conforming amendments to other statutes that
cross-reference to The Texas Banking Code.
SECTION 26. Repealer
Chapters I-X of The Texas Banking Code are repealed, as are Article
489b (FDIC authority to act as receiver of a failed bank, now
covered by Section 7.003 of the Texas Banking Act).
SECTION 27. Savings Clause
This provision protects the validity of action taken under prior
law before the effective date of the Texas Banking Act proposed
bill.
SECTION 28. Private Banks
One private bank still exists in Texas. This provision states that
it may continue to exist and be treated as a state bank.
SECTION 29. Criminal Law Transition
Standard for bills that change criminal law, this provision saves
former criminal law for acts committed prior to the effective date
and applies new or changed criminal law only to acts for which all
elements of the crime occurred after the effective date of this
Act.
SECTION 30. Transition for Application Standards
This provision saves existing legal standards for approval of
applications accepted for filing prior to the effective date of
this Act.
SECTION 31. Transition for New Requirements on Existing Entities
The Texas Banking Act will create new filing requirements for
representative offices of out-of-state banks and foreign banks,
including a requirement that the Secretary of State be designated
as agent for service of process. These new filings will be due by
September 1, 1996.
SECTION 32. Transition for Administrative Proceedings
Standard for bills that change administrative procedures, this
provision saves existing law to apply to existing administrative
proceedings.
SECTION 33. Clarification of Texas Non-Profit Corporation Act
This section provides that Section 3 and Section 21 of this Act are
clarification of the law existing before the effective date of this
Act and adds that a nonprofit corporation serving as trustee before
the effective date of this Act is valid if consistent with amended
law in this Act.
SECTION 34. Conflicts with Other Enactments
This provision was added by Texas Legislative Council to resolve
conflicts with other enactments of the 74th Legislature that amend
The Texas Banking Code.
SECTION 35. Effective Date
The effective date is specified to be September 1, 1995.
SECTION 36. Emergency Clause
COMPARISON OF ORIGINAL TO SUBSTITUTE
After the original bill was filed a number of changes needed to be
made correcting language and numbering. In addition, some
substantive changes were made to allay industry concerns or to
clarify intent. A summary of the changes contained in the
substitute follow.
Regarding merger powers (Subchapter D, Chapter 3), in the original
bill this section could have possibly been construed to grant the
powers of a state bank's merger partner to the state bank, e.g., a
bank merges with an insurance company and the surviving entity does
business as a bank and as an insurance company. To clarify that
this is not the case, a new Subsection 3.301(d) was added; and
Section 3.302(b)(2) and Section 3.302(b)(4) were amended.
In the original bill, Section 5.202 could have been read as
granting banks an exemption from what is commonly called the
Consumer Credit Code. To clarify that this is not the case,
Subsection 5.202(a) and Subsection 5.202(c) were amended; and a new
Subsection 5.202(d) was added.
Regarding overstatement of the power of a state bank to acquire
real estate for leasing purposes. Subsection 5.203(a) was modified
to state that a bank may purchase or construct a public facility
and lease it to a public authority.
Section 6.201(d) was amended to clarify that subchapter (d) of
chapter 6 does not apply to depository institutions.
Section 8.004 regarding branch naming was deleted and the sections
and chapters were renumbered.
Establishes the authority for a bank to establish a Compliance
Review Committee by adding Sec. 8.011.
Regarding the increase in capital requirements for trust companies,
in SECTION 2, Art.342-1108, a new subsection (c) was added to give
the Commissioner discretionary authority to reduce the capital
requirement, if it is determined that a lower requirement would not
effect the safety and soundness of the company. Also, a five year
phase-in period was included to allow a trust company to have time
to establish and meet the capital requirement.
The charitable exemption was not in the original bill and has been
included in SECTION 2, SECTION 21 and SECTION 33 of the substitute
to make it possible for a charitable organization to serve as
trustee of a charitable trust of which the charitable organization
is the beneficiary.
SUMMARY OF COMMITTEE ACTION
The committee considered HB 1543 in a public hearing on March 20,
1995.
The committee considered a complete committee substitute for the
bill.
One amendment was offered to the substitute and was adopted without
objection.
The substitute as amended was adopted without objection.
The Chair instructed the Clerk to incorporate the amendment into
the substitute.
The following people testified neutrally on the bill:
Catherine A. Ghiglieri; and
Jeff Huffman.
The following people testified in favor of the bill:
Dennis Nixon;
Charles E. McMahen;
David Williams;
Dianne Hughes;
Jeffery C. Kanaly;
Jack Kyle Daniels;
Henry L. Naizer;
Anne Heiligenstein;
Karen M. Neeley; and
Ellen Eisenlohr Dorn.
The following people testified against the bill:
Robert Schroder;
Alvin J. Golden; and
Frank N. Ikard Jr.
HB 1543 was left pending.
The committee considered HB 1543 in a public hearing on March 27,
1995.
The committee reconsidered the vote by which they adopted the
complete committee substitute for HB 1543 without objection. The
committee reconsidered the vote by which they adopted the committee
amendment to the substitute without objection. The substitute and
the amendment were withdrawn.
The committee considered a new complete committee substitute for
the bill which was adopted without objection.
The following person testified neutrally on the bill:
Catherine A. Ghiglieri.
The motion to report HB 1543 favorably as substituted, with the
recommendation that it do pass and be printed, prevailed by the
following record vote: 6 Ayes, 0 Nays, 0 PNV, 3 Absent.