BILL ANALYSIS H.B. 3007 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 banks to make certain percentage loans to small businesses in their community in order to be eligible as a state depository." PURPOSE This bill requires state and national banks to loan at least 25 percent of their small business customers in the banks' local lending areas and sets out consequences if banks fail to do so. 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 V, Banking Code, (Art. 342-501 et. seq., V.T.C.S.), is amended by adding Article 15 as follows: Article 15. LENDING SERVICES TO SMALL BUSINESSES IN LOCAL AREA. (a) Requires that 25 percent of loans made by state and national banks to small businesses must be made to small businesses in the bank's local area (b) On the complaint of any person, the banking commissioner is required to hold hearings to determine whether a bank is in violation of Article 15. (c) defines banks local areas, provides for the establishment of such area, and requires banks to file statements of local areas with the banking commissioner. (d) defines small business. (1) defines intent of business. (2) defines ownership. (3) sets number of employees and annual gross receipts. SECTION 2. Section 404.021, is amended by adding Subsection (d). (d) establishes how, when and under what conditions the Commissioner has the option to withdraw state funds from a bank found not to be in compliance of Article 15. SECTION 3. This act applies only to loans made on or after the effective date. Loans made before the effective date are governed by the law in effect when the loans were made. SECTION 4. Effective date. SECTION 5. Emergency clause. EXPLANATION OF AMENDMENTS Committee amendment #1 states that if after the effective date of this Act, a federal regulatory agency determines that a provision of this bill does not apply to a federally chartered bank, then that provision does not apply to a state chartered or private bank in this state. Committee amendment #2 adds language to exclude Federal Small Business Administration loan from consideration in determining that a bank loans 25% of its small business loans in the bank's local area. SUMMARY OF COMMITTEE ACTION The committee considered HB 3007 in a public hearing on April 10, 1995. The following person testified in favor of the bill: Karen Neeley representing the Independent Bankers Association of Texas. The following person testified against the bill: John Heasley representing the Texas Bankers Association. The bill was left pending. The committee considered HB 3007 in a public hearing on April 19, 1995. The committee considered two amendments to the bill which were 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.