BILL ANALYSIS H.B. 3006 By: Giddings 04-06-95 Committee Report (Amended) BACKGROUND The Interim Special House Committee on Small business Access to capital recommended several changes to the banking laws in Texas in its interim report. One recommendation was to "require out-of-state banks to maintain locally controlled boards of directors in branch operations in order to retain local input regarding credit and other community investment banking needs as those local directors would individually have direct contact with the State Banking Commissioner." PURPOSE This bill defines banks' local lending areas and requires state banks to seat a majority of directors who are residents of the banks' local lending areas. Out-of-state bank holding companies are required to make agreements that a majority of directors who are seated are residents of the banks' local lending areas. 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. Chapter I, The Texas Banking Code, is amended by adding Article 2A as follows: Article 2A. LOCAL AREA. Defined as a bank's local community in the Community Reinvestment Act of 1977 (12 U.S.C. sec. 2901 et seq.). If the bank is not subject to the regulations or its local community is determined by its effective lending territory, the bank's local area is the area that would be its local community under the regulations and excludes regulations relating to effective lending territory. Each bank is required to file a statement of its local area with the banking commissioner. SECTION 2. Sections 1 and 2, Article 4, Chapter IV, Banking Code, (Article 342-404, V.T.C.S.), are amended as follows: Sec. 1. Adds "bank's local area" and deletes "State of Texas". Sec. 2. Adds "bank's local area" and deletes "State of Texas". SECTION 3. Section 4(3), Article 12, Chapter IX, Banking Code, (Article 342-912, V.T.C.S.), is amended as follows: Sec. 4(3). Adds "bank's local area" and deletes "State of Texas". SECTION 4. Transition section - required before September 1, 1996. (1) All out-of-state bank holding companies required to submit an agreement under Sec. 4(3), Article 12, Chapter IX, Banking Code, (Article 342-912, V.T.C.S.) must: (A) submit an amended agreement to the banking commissioner. (B) comply with the amended agreement. (2) Bank board to meet requirements of Article 4, Chapter IV, Banking Code, (Art. 342-404, V.T.C.S.). SECTION 5. Effective date. SECTION 6. Emergency clause. EXPLANATION OF AMENDMENTS Amends SECTION 5 of the bill and states that if a federal regulatory agency determines that a provision of this bill does not apply to a federally chartered bank in this state, the provision then does not apply to a state chartered state bank or a private bank in this state. SUMMARY OF COMMITTEE ACTION The committee considered HB 3006 in a public hearing on April 10, 1995. The following person testified in favor of the bill: Mae Beth Palone representing the Independent Bankers Association of Texas. The following person testified neutrally on the bill: Randall James representing the Texas Department of Banking. The following person testified against the bill: John Heasley representing the Texas Bankers Association. The bill was left pending. The committee considered HB 3006 in a public hearing on April 19, 1995. The committee considered an amendment to the bill which was adopted without objection. The bill was reported favorably as amended, with the recommendation that it do pass and be printed, by a record vote of: 5 Ayes, 0 Nays, 0 PNV, 4 Absent.