1-1 AN ACT
1-2 relating to the operation of state banks, state trust companies,
1-3 and certain financial holding companies in the financial services
1-4 industry.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Sections 31.002(a)(5), (8), (32), and (33),
1-7 Finance Code, are amended to read as follows:
1-8 (5) "Banking association" means a state bank that is
1-9 organized under this subtitle as a corporation [banking
1-10 association], authorized to issue shares of stock, and controlled
1-11 by its shareholders.
1-12 (8) "Branch" means a location of a bank, other than
1-13 the bank's home office, at which the bank engages the public in the
1-14 business of banking. The term does not include:
1-15 (A) a drive-in facility located not more than
1-16 2,000 feet from the nearest wall of the home office or an approved
1-17 branch office of the bank;
1-18 (B) a night depository;
1-19 (C) an electronic terminal [subject to Section
1-20 59.201];
1-21 (D) a loan production office as described by
1-22 [subject to] Section 32.204;
1-23 (E) a state or federally licensed armored car
1-24 service or other courier service transporting items for deposit or
2-1 payment, unless:
2-2 (i) the risk of loss of items in the
2-3 custody of the service is borne by the employing bank; or
2-4 (ii) the items in the custody of the
2-5 service are considered to be in customer accounts at the employing
2-6 bank or federally insured through the employing bank;
2-7 (F) a location at which the bank offers
2-8 exclusively nondepository financial products or services to the
2-9 public, including financial, investment, or economic advisory
2-10 services [a bank acting as an agent for another depository
2-11 institution as provided by Section 59.005(a)]; [or]
2-12 (G) a location that combines permissible
2-13 non-branch functions or facilities; or
2-14 (H) another office or facility as provided by
2-15 this subtitle or a rule adopted under this subtitle [other offices
2-16 as determined by rule].
2-17 (32) "Investment security" means a marketable
2-18 obligation evidencing indebtedness of a person in the form of a
2-19 bond, note, debenture, or commonly known as an investment security,
2-20 subject to further definition by rule adopted under this subtitle
2-21 [other debt instrument not otherwise classified as a loan or
2-22 extension of credit].
2-23 (33) "Limited banking association" means a state bank
2-24 that is organized under this subtitle as a limited liability
2-25 company [banking association], authorized to issue participation
2-26 shares, and controlled by its participants.
2-27 SECTION 2. Sections 31.003(a) and (b), Finance Code, are
3-1 amended to read as follows:
3-2 (a) The finance commission may adopt rules to accomplish the
3-3 purposes of this subtitle and Chapters 11, 12, and 13, including
3-4 rules necessary or reasonable to:
3-5 (1) implement and clarify this subtitle and Chapters
3-6 11, 12, and 13;
3-7 (2) preserve or protect the safety and soundness of
3-8 state banks;
3-9 (3) grant at least the same rights and privileges to
3-10 state banks that are or may be granted to national banks domiciled
3-11 in this state;
3-12 (4) recover the cost of maintaining and operating the
3-13 department and the cost of enforcing this subtitle and other
3-14 applicable law [Chapters 11, 12, and 13] by imposing and collecting
3-15 ratable and equitable fees for notices, applications, and
3-16 examinations; and
3-17 (5) facilitate the fair hearing and adjudication of
3-18 matters before the banking commissioner and the finance commission.
3-19 (b) In adopting rules, the finance commission shall consider
3-20 the need to:
3-21 (1) promote a stable banking environment;
3-22 (2) provide the public with convenient, safe, and
3-23 competitive banking services;
3-24 (3) preserve and promote the competitive position
3-25 [parity] of state banks with regard to national banks and other
3-26 depository institutions in this state consistent with the safety
3-27 and soundness of state banks and the state bank system; and
4-1 (4) allow for economic development in this state.
4-2 SECTION 3. Section 31.303, Finance Code, is amended to read
4-3 as follows:
4-4 Sec. 31.303. DISCLOSURE TO OTHER AGENCIES. (a) For purposes
4-5 of this section:
4-6 (1) "Affiliated group" means two or more persons
4-7 affiliated through common ownership or a contractual common
4-8 undertaking involving the sharing of customer information among
4-9 those persons.
4-10 (2) "Agency" means a department or agency of this
4-11 state, another state, the United States, or a foreign government
4-12 with whom the United States currently maintains diplomatic
4-13 relations, or any related agency or instrumentality.
4-14 (3) "Functional regulatory agency" means an agency
4-15 that regulates and charters, licenses, or registers persons engaged
4-16 in financial activities or activities incidental or complimentary
4-17 to financial activities, including activities related to banking,
4-18 insurance, or securities, within the jurisdiction of the agency.
4-19 (4) "Privilege" includes any work-product,
4-20 attorney-client, or other privilege recognized under federal or
4-21 state law [On request and on execution of an appropriate
4-22 confidentiality agreement approved by the banking commissioner, the
4-23 commissioner may:]
4-24 [(1) disclose to a federal banking regulatory agency
4-25 confidential information concerning a financial institution within
4-26 the agency's jurisdiction or an affiliate or service provider of
4-27 the financial institution; and]
5-1 [(2) permit the agency access to files and records or
5-2 reports concerning the financial institution or its affiliate or
5-3 service provider].
5-4 (b) The banking commissioner may, as the commissioner
5-5 considers necessary or proper to the enforcement of the laws of
5-6 this state, another state, the United States, or a foreign
5-7 sovereign state with whom the United States currently maintains
5-8 diplomatic relations, or in the best interest of the public,
5-9 disclose [or authorize release of confidential] information in the
5-10 possession of the department to another [department of this state,
5-11 another state, the United States, a foreign sovereign state, or any
5-12 related] agency [or instrumentality]. The banking commissioner may
5-13 not disclose information under this section that is confidential
5-14 under applicable state or federal law unless:
5-15 (1) the recipient agency agrees to maintain the
5-16 confidentiality and take all reasonable steps to oppose an effort
5-17 to secure disclosure of the information from the agency; or
5-18 (2) the banking commissioner determines in the
5-19 exercise of discretion that the interest of law enforcement
5-20 outweighs and justifies the potential for disclosure of the
5-21 information by the recipient agency.
5-22 (c) The banking commissioner by agreement may establish an
5-23 information sharing and exchange program with a functional
5-24 regulatory agency that has overlapping regulatory jurisdiction with
5-25 the department, with respect to all or part of an affiliated group
5-26 that includes a financial institution, to reduce the potential for
5-27 duplicative and burdensome filings, examinations, and other
6-1 regulatory activities. Each agency party to the agreement must
6-2 agree to maintain confidentiality of information that is
6-3 confidential under applicable state or federal law and take all
6-4 reasonable steps to oppose any effort to secure disclosure of the
6-5 information from the agency. An agreement may also specify
6-6 procedures regarding use and handling of confidential information
6-7 and identify types of information to be shared and procedures for
6-8 sharing on a recurring basis.
6-9 (d) Disclosure of information by or to the banking
6-10 commissioner under this section does not constitute a waiver of or
6-11 otherwise affect or diminish an evidentiary privilege to which the
6-12 information is otherwise subject, whether or not the disclosure is
6-13 governed by a confidentiality agreement.
6-14 (e) Notwithstanding other law, an agency of this state:
6-15 (1) may execute, honor, and comply with an agreement
6-16 to maintain confidentiality and oppose disclosure of information
6-17 obtained from the banking commissioner as provided in this section;
6-18 and
6-19 (2) shall treat as confidential any information
6-20 obtained from the banking commissioner that is entitled to
6-21 confidential treatment under applicable state or federal law and
6-22 take all reasonable steps to oppose an effort to secure disclosure
6-23 of the information from the agency.
6-24 SECTION 4. Section 32.001, Finance Code, is amended by
6-25 amending Subsections (b), (c), and (e), and by adding Subsection
6-26 (f) to read as follows:
6-27 (b) A state bank may:
7-1 (1) receive and pay deposits with or without interest,
7-2 discount and negotiate promissory notes, borrow or lend money with
7-3 or without security or interest, invest and deal in securities, buy
7-4 and sell exchange, coin, and bullion, and exercise incidental
7-5 powers as necessary to carry on the business of banking as provided
7-6 by this subtitle;
7-7 (2) act as agent, or in a substantially similar
7-8 capacity, with respect to a financial activity or an activity
7-9 incidental or complementary to a financial activity [including a
7-10 fiscal agent, registrar, or transfer agent, and in that capacity
7-11 receive and disburse money and transfer securities];
7-12 (3) act in a fiduciary capacity, without giving bond,
7-13 as guardian, receiver, executor, administrator, or trustee,
7-14 including a mortgage or indenture trustee; [and]
7-15 (4) provide financial, investment, or economic
7-16 advisory services;
7-17 (5) issue or sell instruments representing pools of
7-18 assets in which a bank may invest directly;
7-19 (6) with prior written approval of the banking
7-20 commissioner, engage in a financial activity or an activity that is
7-21 incidental or complementary to a financial activity; and
7-22 (7) engage in any other activity, directly or through
7-23 a subsidiary, authorized by this subtitle or rules adopted under
7-24 this subtitle [or determined by the banking commissioner to be
7-25 closely related to banking].
7-26 (c) For purposes of other state law, a banking association
7-27 is considered a corporation and a limited banking association is
8-1 considered a limited liability company. To the extent consistent
8-2 with this subtitle [Subject to Section 32.008], a banking
8-3 association [state bank] may exercise the powers of a Texas
8-4 business corporation and a limited banking association may exercise
8-5 the powers of a Texas limited liability company as reasonably
8-6 necessary to enable exercise of [its] specific powers under this
8-7 subtitle.
8-8 (e) A state bank may be organized or reorganized as a
8-9 community development financial institution or may serve as a
8-10 community development partner, as those terms are defined by the
8-11 Riegle Community Development and Regulatory Improvement Act of 1994
8-12 (Pub. L. No. 103-325).
8-13 (f) In the exercise of discretion consistent with the
8-14 purposes of this subtitle, the banking commissioner may require a
8-15 state bank to conduct an otherwise authorized activity through a
8-16 subsidiary.
8-17 SECTION 5. Section 32.003(b), Finance Code, is amended to
8-18 read as follows:
8-19 (b) The banking commissioner shall grant a state bank
8-20 charter only if the commissioner determines that the organizers
8-21 have established that public convenience and advantage will be
8-22 promoted by the establishment of the state bank. In determining
8-23 whether public convenience and advantage will be promoted, the
8-24 banking commissioner shall consider the convenience of the public
8-25 to be served and whether:
8-26 (1) [a public necessity exists for the bank;]
8-27 [(2)] the organizational and capital structure and
9-1 amount of initial capitalization is adequate for the business plan
9-2 [and location];
9-3 (2) [(3)] the anticipated volume and nature of
9-4 business indicates a reasonable probability of success and
9-5 profitability based on the market sought to be served [profitable
9-6 operation];
9-7 (3) [(4)] the officers, directors, managers, and
9-8 managing participants as a group have sufficient banking
9-9 experience, ability, standing, competence, trustworthiness, and
9-10 integrity to justify a belief that the bank will operate in
9-11 compliance with law and that success of the bank is probable;
9-12 (4) [(5)] each principal shareholder or participant
9-13 has sufficient experience, ability, standing, competence,
9-14 trustworthiness, and integrity to justify a belief that the bank
9-15 will be free from improper or unlawful influence or interference
9-16 with respect to the bank's operation in compliance with law; and
9-17 (5) [(6)] the organizers are acting in good faith.
9-18 SECTION 6. Section 32.008, Finance Code, is amended to read
9-19 as follows:
9-20 Sec. 32.008. APPLICATION OF [LAWS RELATING TO] GENERAL
9-21 CORPORATE LAW [BUSINESS CORPORATION]. (a) The Texas Business
9-22 Corporation Act and the Texas Miscellaneous Corporation Laws Act
9-23 (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes) apply to
9-24 a banking association, and the Texas Limited Liability Company Act
9-25 (Article 1528n, Vernon's Texas Civil Statutes) applies to a limited
9-26 banking association, [state bank] to the extent not inconsistent
9-27 with this subtitle or the proper business of a state bank, except
10-1 that:
10-2 (1) a reference in those Acts to the secretary of
10-3 state means the banking commissioner unless the context requires
10-4 otherwise; and
10-5 (2) the right of shareholders or participants to
10-6 cumulative voting in the election of directors or managers exists
10-7 only if granted by the bank's articles of association.
10-8 (b) The finance commission may adopt rules to limit or
10-9 refine the applicability of the laws listed by Subsection (a) to a
10-10 state bank or to alter or supplement the procedures and
10-11 requirements of those laws [the Texas Business Corporation Act]
10-12 applicable to an action taken under this chapter.
10-13 (c) Unless expressly authorized by this subtitle or a rule
10-14 adopted under this subtitle, a state bank may not take an action
10-15 authorized by a law listed by Subsection (a) [the Texas Business
10-16 Corporation Act] regarding its corporate status, its capital
10-17 structure, or a matter of corporate governance, of the type for
10-18 which those laws [the Texas Business Corporation Act] would require
10-19 a filing with the secretary of state if the bank were a business
10-20 corporation, without submitting the filing to the banking
10-21 commissioner and obtaining the banking commissioner's prior written
10-22 approval of the action.
10-23 SECTION 7. Sections 32.010(a) and (b), Finance Code, are
10-24 amended to read as follows:
10-25 (a) Notwithstanding another law, a Texas state bank may
10-26 perform an act, own property, or offer a product or service that is
10-27 at the time permissible within the United States for a depository
11-1 institution organized under federal law or the law of this state or
11-2 another state, if the banking commissioner approves the exercise of
11-3 the power as provided by this section, subject to the same
11-4 limitations and restrictions applicable to the other depository
11-5 institution by pertinent law, except to the extent the limitations
11-6 and restrictions are modified by rules adopted under Subsection
11-7 (e). This section may not be used by a Texas state bank to alter
11-8 or negate the application of the laws of this state with respect
11-9 to:
11-10 (1) establishment and maintenance of a branch in this
11-11 state or another state or country;
11-12 (2) [sale of insurance products and services in this
11-13 state;]
11-14 [(3)] permissible interest rates and loan fees
11-15 chargeable in this state;
11-16 (3) [(4)] fiduciary duties owed to a client or
11-17 customer by the bank in its capacity as fiduciary in this state;
11-18 (4) [(5)] consumer protection laws applicable to
11-19 transactions in this state; or
11-20 (5) licensing and regulatory requirements administered
11-21 by a functional regulatory agency in this state, as defined by
11-22 Section 31.303, including licensing and regulatory requirements
11-23 pertaining to:
11-24 (A) insurance activities;
11-25 (B) securities activities; and
11-26 (C) [(6)] real estate development, marketing,
11-27 and sales activities [in this state].
12-1 (b) A state bank that intends to exercise a power, directly
12-2 or through a subsidiary, granted by Subsection (a) that is not
12-3 otherwise authorized for state banks under the statutes of this
12-4 state shall submit a letter to the banking commissioner describing
12-5 in detail the power that the bank proposes to exercise and the
12-6 specific authority of another depository institution to exercise
12-7 the power. The bank shall attach copies, if available, of relevant
12-8 law, regulations, and interpretive letters. The bank may begin to
12-9 exercise the proposed power after the 30th day after the date the
12-10 banking commissioner receives the bank's letter unless the banking
12-11 commissioner specifies an earlier or later date or prohibits the
12-12 activity. The banking commissioner may prohibit the bank from
12-13 exercising the power only if the banking commissioner finds that:
12-14 (1) specific authority does not exist for another
12-15 depository institution to exercise the proposed power;
12-16 (2) if the state bank is insured by the Federal
12-17 Deposit Insurance Corporation, the state bank is prohibited from
12-18 exercising the power pursuant to Section 24, Federal Deposit
12-19 Insurance Act (12 U.S.C. Section 1831a), [as amended,] and related
12-20 regulations [12 C.F.R. Part 362]; or
12-21 (3) the exercise of the power by the bank would
12-22 adversely affect the safety and soundness of the bank.
12-23 SECTION 8. Subchapter A, Chapter 32, Finance Code, is amended
12-24 by adding Section 32.011 to read as follows:
12-25 Sec. 32.011. FINANCIAL ACTIVITIES. (a) The finance
12-26 commission by rule may determine that an activity not otherwise
12-27 approved or authorized for a state bank under this subtitle or
13-1 other law is:
13-2 (1) a financial activity;
13-3 (2) incidental to a financial activity; or
13-4 (3) complementary to a financial activity.
13-5 (b) In adopting a rule under Subsection (a), the finance
13-6 commission shall consider:
13-7 (1) the purposes of this subtitle and the
13-8 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
13-9 (2) changes or reasonably expected changes in the
13-10 marketplace in which state banks compete;
13-11 (3) changes or reasonably expected changes in the
13-12 technology for delivering financial services;
13-13 (4) whether the activity is necessary or appropriate
13-14 to allow a state bank to:
13-15 (A) compete effectively with another company
13-16 seeking to provide financial services;
13-17 (B) efficiently deliver information and services
13-18 that are financial in nature through the use of technological
13-19 means, including an application necessary to protect the security
13-20 or efficacy of systems for the transmission of data or financial
13-21 transactions; or
13-22 (C) offer customers available or emerging
13-23 technological means for using financial services or for the
13-24 document imaging of data;
13-25 (5) whether the activity would pose a substantial risk
13-26 to the safety or soundness of a state bank or the financial system
13-27 generally;
14-1 (6) if otherwise determined to be permissible, whether
14-2 the conduct of the activity by a state bank should be qualified
14-3 through the imposition of reasonable and necessary conditions to
14-4 protect the public and require appropriate regard for safety and
14-5 soundness of the bank and the financial system generally; and
14-6 (7) whether a state bank would be permitted to engage
14-7 in the activity under applicable federal law, including 12 U.S.C.
14-8 Section 1831a, and related regulations.
14-9 (c) A rule adopted by the finance commission under this
14-10 section does not alter or negate applicable licensing and
14-11 regulatory requirements administered by a functional regulatory
14-12 agency of this state, as defined by Section 31.303, including
14-13 licensing and regulatory requirements pertaining to:
14-14 (1) insurance activities;
14-15 (2) securities activities; and
14-16 (3) real estate development, marketing, and sales
14-17 activities.
14-18 SECTION 9. Section 34.101, Finance Code, is amended to read
14-19 as follows:
14-20 Sec. 34.101. SECURITIES. (a) A state bank may purchase and
14-21 sell [equity and investment] securities without recourse solely on
14-22 the order and for the account of a customer.
14-23 (b) Except as otherwise provided by this subtitle or rules
14-24 adopted under this subtitle, a [A] state bank may not:
14-25 (1) underwrite an issue of securities; or
14-26 (2) [except as otherwise provided by this subtitle or
14-27 rules adopted under this subtitle.]
15-1 [(c) Except as otherwise provided by this subtitle or rules
15-2 adopted under this subtitle, a state bank may not] invest its money
15-3 in equity securities except as necessary to avoid or minimize a
15-4 loss on a loan or investment previously made in good faith.
15-5 (c) [(d)] A state bank may purchase investment securities
15-6 for its own account under limitations and restrictions prescribed
15-7 by rules adopted under this subtitle. Except as otherwise provided
15-8 by this section, the amount of the investment securities of any one
15-9 obligor or maker held by the bank for its own account may not
15-10 exceed an amount equal to the lesser of 15 percent of the bank's
15-11 capital and certified surplus or the bank's total equity capital.
15-12 The banking commissioner may authorize investments in excess of
15-13 this limitation on written application if the banking commissioner
15-14 determines that:
15-15 (1) the excess investment is not prohibited by other
15-16 applicable law; and
15-17 (2) the safety and soundness of the requesting state
15-18 bank is not adversely affected.
15-19 (d) [(e)] Notwithstanding Subsections (a)-(c) [(a)-(d)], a
15-20 state bank may, without limit and subject to the exercise of [with]
15-21 prudent banking judgment, deal in, underwrite, or purchase for its
15-22 own account:
15-23 (1) bonds and other legally created general
15-24 obligations of a state, an agency or political subdivision of a
15-25 state, the United States, or an instrumentality of the United
15-26 States;
15-27 (2) obligations [investment securities] that this
16-1 state, an agency or political subdivision of this state, the United
16-2 States, or an instrumentality of the United States has
16-3 unconditionally agreed to purchase, insure, or guarantee;
16-4 (3) securities that are offered and sold under 15
16-5 U.S.C. Section 77d(5);
16-6 (4) mortgage related securities or small business
16-7 related securities, as those terms are defined by 15 U.S.C. Section
16-8 78c(a)[, except that notwithstanding Section 347 of the Riegle
16-9 Community Development and Regulatory Improvement Act of 1994 (Pub.
16-10 L. 103-325) a note or obligation that is secured by a first lien on
16-11 one or more parcels of real property on which is located one or
16-12 more commercial structures is subject to the limitations of
16-13 Subsection (d)];
16-14 (5) mortgages, obligations, or other securities that
16-15 are or ever have been sold [investment securities issued or
16-16 guaranteed] by the Federal Home Loan Mortgage Corporation under 12
16-17 U.S.C. Sections 1434 and 1455;
16-18 (6) obligations, participation, or other instruments
16-19 of or issued by[,] the Federal National Mortgage Association or[,]
16-20 the Government National Mortgage Association;
16-21 (7) obligations issued by [,] the Federal Agricultural
16-22 Mortgage Corporation, [or] the Federal Farm Credit Banks Funding
16-23 Corporation, or a Federal Home Loan Bank;
16-24 (8) obligations of the Federal Financing Bank or the
16-25 Environmental Financing Authority;
16-26 (9) obligations or other instruments or securities of
16-27 the Student Loan Marketing Association;
17-1 (10) qualified Canadian government obligations, as
17-2 defined by 12 U.S.C. Section 24; or
17-3 (11) if the state bank is well capitalized, as defined
17-4 by Section 38, Federal Deposit Insurance Act (12 U.S.C. Section
17-5 1831o), obligations, including limited obligation bonds, revenue
17-6 bonds, and obligations that satisfy the requirements of 26 U.S.C.
17-7 Section 142(b)(1), issued by or on behalf of a state or a political
17-8 subdivision of a state, including a municipal corporate
17-9 instrumentality of one or more states or a public agency or
17-10 authority of a state or political subdivision of a state.
17-11 (e) Notwithstanding Subsections (a) and (b), subject to the
17-12 exercise of prudent banking judgment, a state bank may deal in,
17-13 underwrite, or purchase for its own account, including for purposes
17-14 of Subsection (c) obligations as to which the bank is under
17-15 commitment, the following:
17-16 (1) obligations [(6) investment securities] issued
17-17 [or guaranteed] by a development bank, corporation, or other entity
17-18 created by international agreement if the United States is a member
17-19 and a capital stock shareholder;
17-20 (2) obligations issued by a state or political
17-21 subdivision or an agency of a state or political subdivision for
17-22 housing, university, or dormitory purposes, that are at the time
17-23 eligible for purchase by a state bank for its own account [the
17-24 North American Development Bank]; or
17-25 (3) bonds, notes, and other obligations issued by the
17-26 Tennessee Valley Authority or by the United States Postal Service
17-27 [(7) securities issued by a Federal Home Loan Bank].
18-1 (f) [Subsection (b) does not apply to an obligation issued
18-2 by a state or an agency or political subdivision of a state for
18-3 housing, higher education, health care, or public welfare purposes
18-4 if, before dealing in, underwriting, or purchasing the obligation,
18-5 the bank evaluates the obligation to determine whether the
18-6 obligation is of sufficient investment quality and marketability
18-7 for investment by the bank and whether the obligation has been
18-8 issued for the appropriate purpose by a qualifying issuer. A bank
18-9 that has made a firm commitment to underwrite an obligation is
18-10 considered to hold the obligation for purposes of the limitations
18-11 of Subsection (d).]
18-12 [(g) Notwithstanding 15 U.S.C. Section 77r-1(c), Subsection
18-13 (d) applies to investments in small business related securities as
18-14 defined by 15 U.S.C. Section 78c(a).]
18-15 [(h)] A state bank may not invest more than an amount equal
18-16 to the lesser of 25 percent of the bank's [its] capital and
18-17 certified surplus or the bank's total equity capital in investment
18-18 grade adjustable rate preferred stock and money market (auction
18-19 rate) preferred stock.
18-20 (g) [(i)] A state bank may deposit money in a federally
18-21 insured financial institution, a Federal Reserve Bank, or a Federal
18-22 Home Loan Bank without limitation.
18-23 (h) [(j)] The finance commission may adopt rules to
18-24 administer and carry out this section, including rules to:
18-25 (1) define or further define terms used by this
18-26 section;
18-27 (2) establish limits, requirements, or exemptions
19-1 other than those specified by this section for particular classes
19-2 or categories of [investment] securities; and [or]
19-3 (3) limit or expand investment authority for state
19-4 banks for particular classes or categories of [investment]
19-5 securities.
19-6 SECTION 10. Sections 34.103(a)-(d), Finance Code, are amended
19-7 to read as follows:
19-8 (a) Subject to this section and except [Except] as otherwise
19-9 provided by this subtitle or rules adopted under this subtitle, a
19-10 state bank may conduct any activity or make any investment through
19-11 an operating subsidiary that a state bank or a bank holding
19-12 company, including a financial holding company, is authorized to
19-13 conduct or make under [the laws of this] state or federal law if
19-14 the operating subsidiary is adequately empowered and appropriately
19-15 licensed to conduct its business.
19-16 (b) Except for investment in a subsidiary engaging solely in
19-17 activities that may be engaged in directly by the bank and that are
19-18 conducted on the same terms and conditions that govern the conduct
19-19 of the activities by the bank, a state bank without the prior
19-20 written approval of the banking commissioner may not invest more
19-21 than an amount equal to 10 percent of the lesser of its capital and
19-22 certified surplus or the bank's total equity capital in a single
19-23 subsidiary [and may not invest more than the amount of its equity
19-24 capital in all subsidiaries]. For purposes of this subsection, the
19-25 [The] amount of a state bank's investment in a subsidiary is the
19-26 sum of the amount of the bank's investment in [equity or
19-27 investment] securities issued by the subsidiary and any loans and
20-1 extensions of credit from the bank to the subsidiary.
20-2 (c) A state bank may not establish or acquire a subsidiary
20-3 or a controlling interest in a subsidiary that engages in
20-4 activities as principal in which [as provided by 12 C.F.R. Section
20-5 337.4 to conduct securities activities that] the bank is prohibited
20-6 from engaging [conducting] directly unless:
20-7 (1) the state bank's investment in the subsidiary has
20-8 been approved by the Federal Deposit Insurance Corporation under
20-9 Section 24, Federal Deposit Insurance Act (12 U.S.C. Section
20-10 1831a); or
20-11 (2) with respect to a subsidiary engaged in activities
20-12 as principal that a national bank may conduct only through a
20-13 financial subsidiary, including firm underwriting of equity
20-14 securities other than as permitted by Section 34.101, and not
20-15 otherwise engaged in activities as principal that are impermissible
20-16 for a state bank or a financial subsidiary of a national bank, the
20-17 subsidiary's activities and the bank's investment are in compliance
20-18 with the restrictions and requirements of Section 46, Federal
20-19 Deposit Insurance Act (12 U.S.C. Section 1831w).
20-20 (d) Except as otherwise provided by this subtitle or a rule
20-21 adopted under this subtitle, a state bank may not make a
20-22 non-controlling minority investment in equity securities of a
20-23 company unless:
20-24 (1) the investment or company is described by
20-25 Subsection (c)(2) or Section 34.104 or 34.105;
20-26 (2) the company engages solely in activities that are
20-27 part of or incidental to the permissible business of a state bank
21-1 under this subtitle and:
21-2 (A) the state bank is adequately empowered to
21-3 prevent the company from engaging in activities not part of or
21-4 incidental to the permissible business of a state bank or, as a
21-5 practical matter, is otherwise enabled to withdraw or liquidate its
21-6 investment in the company in such an event;
21-7 (B) as a legal and accounting matter, the loss
21-8 exposure of the state bank with respect to the activities of the
21-9 company is limited and does not include any open-ended liability
21-10 for an obligation of the company; and
21-11 (C) the investment is convenient or useful to
21-12 the state bank in carrying out its business and is not a mere
21-13 passive investment unrelated to the bank's banking business; or
21-14 (3) the investment is made indirectly through an
21-15 operating subsidiary in equity securities issued by [of]:
21-16 (A) [(1)] another bank;
21-17 (B) [(2)] a company that engages solely in an
21-18 activity that is permissible for a bank service corporation or a
21-19 bank holding company subsidiary; or
21-20 (C) [(3)] a company that engages solely in
21-21 activities as agent or trustee or in a brokerage, custodial,
21-22 advisory, or administrative capacity, or in a substantially similar
21-23 capacity.
21-24 SECTION 11. Section 34.107, Finance Code, is amended to read
21-25 as follows:
21-26 Sec. 34.107. ENGAGING IN COMMERCE PROHIBITED. (a) A state
21-27 bank may not buy, sell, or otherwise deal in goods in trade or
22-1 commerce or own or operate a business not part of the business of
22-2 banking except:
22-3 (1) as necessary to avoid or minimize a loss on a loan
22-4 or investment previously made in good faith; or
22-5 (2) as otherwise provided by this subtitle or rules
22-6 adopted under this subtitle.
22-7 (b) Engaging in an approved activity, directly or through a
22-8 subsidiary, that is a financial activity or incidental or
22-9 complementary to a financial activity, whether as principal or
22-10 agent, is not considered to be engaging in commerce.
22-11 SECTION 12. Section 34.201(a), Finance Code, is amended to
22-12 read as follows:
22-13 (a) Without the prior written approval of the banking
22-14 commissioner, the total loans and extensions of credit by a state
22-15 bank to a person outstanding at one time may not exceed an amount
22-16 equal to 25 percent of the lesser of the bank's capital and
22-17 certified surplus or the bank's total equity capital. This
22-18 limitation does not apply to:
22-19 (1) liability as endorser or guarantor of commercial
22-20 or business paper discounted by or assigned to the bank by its
22-21 owner who has acquired it in the ordinary course of business;
22-22 (2) indebtedness evidenced by bankers' acceptances as
22-23 described by 12 U.S.C. Section 372 and issued by other banks;
22-24 (3) indebtedness secured by a bill of lading,
22-25 warehouse receipt, or similar document transferring or securing
22-26 title to readily marketable goods, except that:
22-27 (A) the goods must be insured if it is customary
23-1 to insure those goods; and
23-2 (B) the aggregate indebtedness of a person under
23-3 this subdivision may not exceed an amount equal to 50 percent of
23-4 the lesser of the bank's capital and certified surplus or the
23-5 bank's total equity capital;
23-6 (4) indebtedness evidenced by notes or other paper
23-7 secured by liens on agricultural products in secure and properly
23-8 documented storage in bonded warehouses or elevators if the value
23-9 of the collateral is not less than 125 percent of the amount of the
23-10 indebtedness and the bank's interest in the collateral is
23-11 adequately insured against loss, except that the aggregate
23-12 indebtedness of a person under this subdivision may not exceed an
23-13 amount equal to 50 percent of the lesser of the bank's capital and
23-14 certified surplus or the bank's total equity capital;
23-15 (5) indebtedness of another depository institution
23-16 arising out of loans with settlement periods of less than one week;
23-17 (6) indebtedness arising out of the daily transaction
23-18 of the business of a clearinghouse association in this state;
23-19 (7) liability under an agreement by a third party to
23-20 repurchase from the bank an investment security listed in Section
23-21 34.101(d) [34.101(e)] to the extent that the agreed repurchase
23-22 price does not exceed the original purchase price to the bank or
23-23 the market value of the investment security;
23-24 (8) the portion of an indebtedness that this state, an
23-25 agency or political subdivision of this state, the United States,
23-26 or an instrumentality of the United States has unconditionally
23-27 agreed to repay, purchase, insure, or guarantee;
24-1 (9) indebtedness secured by [investment] securities
24-2 listed in Section 34.101(d) [34.101(e)] to the extent that the
24-3 market value of the [investment] securities equals or exceeds the
24-4 indebtedness;
24-5 (10) the portion of an indebtedness that is fully
24-6 secured by a segregated deposit account in the lending bank;
24-7 (11) loans and extensions of credit arising from the
24-8 purchase of negotiable or nonnegotiable installment consumer paper
24-9 that carries a full recourse endorsement or unconditional guarantee
24-10 by the person transferring the paper if:
24-11 (A) the bank's files or the knowledge of its
24-12 officers of the financial condition of each maker of the consumer
24-13 paper is reasonably adequate; and
24-14 (B) an officer of the bank designated for that
24-15 purpose by the board certifies in writing that the bank is relying
24-16 primarily on the responsibility of each maker for payment of the
24-17 loans or extensions of credit and not on a full or partial recourse
24-18 endorsement or guarantee by the transferor;
24-19 (12) the portion of an indebtedness in excess of the
24-20 limitation of this subsection that is fully secured by marketable
24-21 securities or bullion with a market value at least equal to the
24-22 amount of the overage, as determined by reliable and continuously
24-23 available price quotations, except that the exempted indebtedness
24-24 or overage of a person under this subdivision may not exceed an
24-25 amount equal to 15 percent of the lesser of the bank's capital and
24-26 certified surplus or the bank's total equity capital;
24-27 (13) indebtedness of an affiliate of the bank if the
25-1 transaction with the affiliate is subject to the restrictions and
25-2 limitations of 12 U.S.C. Section 371c;
25-3 (14) indebtedness of an operating subsidiary of the
25-4 bank other than a subsidiary described by Section 34.103(c)(2); and
25-5 (15) the portion of the indebtedness of a person
25-6 secured in good faith by a purchase money lien taken by the bank in
25-7 exchange for the sale of real or personal property owned by the
25-8 bank if the sale is in the best interest of the bank.
25-9 SECTION 13. Sections 34.204(a) and (b) , Finance Code, are
25-10 amended to read as follows:
25-11 (a) [A state bank may purchase or construct a public
25-12 facility and, as holder of legal title, lease the facility to a
25-13 public authority having sufficient resources to pay all rentals as
25-14 they become due. A lease under this subsection must provide that
25-15 legal title to the property transfers to the lessee on consummation
25-16 and expiration of the lease.]
25-17 [(b)] Subject to rules adopted under this subtitle, a state
25-18 bank may, directly or indirectly through an operating subsidiary,
25-19 provide the equivalent of a financing transaction by acting as
25-20 lessor under a lease for the benefit [become the owner and lessor
25-21 of tangible personal property for lease financing transactions on a
25-22 net lease basis on the specific request and for the use] of a
25-23 customer.
25-24 (b) Without the written approval of the banking commissioner
25-25 to continue holding property acquired for leasing purposes under
25-26 this subsection, the bank may not hold personal [the] property more
25-27 than six months or real property more than two years after the date
26-1 of expiration of the original or any extended or renewed lease
26-2 period agreed to by the customer for whom the property was acquired
26-3 or by a subsequent lessee.
26-4 SECTION 14. Section 59.005, Finance Code, is amended to read
26-5 as follows:
26-6 Sec. 59.005. AGENCY ACTIVITIES. (a) A financial institution
26-7 [state bank] may[, on compliance with this section, agree to]
26-8 receive deposits, renew time deposits, close loans, service loans,
26-9 receive payments on loans and other obligations, and perform other
26-10 services[, with the prior approval of the banking commissioner,] as
26-11 an agent for another financial institution under a written agency
26-12 agreement.
26-13 (b) [A state bank that proposes to enter into an agency
26-14 agreement under this section shall file a letter with the banking
26-15 commissioner, not later than 30 days before the effective date of
26-16 the agreement, setting forth:]
26-17 [(1) a notice of intention to enter into an agency
26-18 agreement with a financial institution;]
26-19 [(2) a description of the services proposed to be
26-20 performed under the agency agreement;]
26-21 [(3) a copy of the agency agreement; and]
26-22 [(4) other information the banking commissioner
26-23 requests.]
26-24 [(c) If a proposed service is not specifically designated in
26-25 Subsection (a) and has not previously been approved by rule or in
26-26 an opinion or interpretation issued by the banking commissioner,
26-27 the banking commissioner shall decide whether to approve the
27-1 offering of the service on or before the 30th day after the date of
27-2 receipt of the notice required by Subsection (b). In deciding
27-3 whether to approve a proposed service that is not specifically
27-4 designated by Subsection (a) or in a rule or prior opinion or
27-5 interpretation, the banking commissioner shall consider whether the
27-6 service would be consistent with applicable federal and state law
27-7 and the safety and soundness of the principal and agent.]
27-8 [(d) A proposed service subject to Subsection (c) is
27-9 considered approved if the banking commissioner does not take
27-10 action on the notice required by Subsection (b) within the time
27-11 limits specified by Subsection (c). The banking commissioner may
27-12 extend the 30-day period on a determination that the bank's letter
27-13 raises issues that require additional information or additional
27-14 time for analysis. If the period is extended, the bank may engage
27-15 in the proposed service only on prior written approval of the
27-16 banking commissioner.]
27-17 [(e)] A financial institution [state bank] may not under an
27-18 agency agreement:
27-19 (1) conduct an activity as agent that it would be
27-20 prohibited from conducting as a principal under applicable state or
27-21 federal law; or
27-22 (2) have an agent conduct an activity that the bank as
27-23 principal would be prohibited from conducting under applicable
27-24 state or federal law.
27-25 (c) [(f)] The banking commissioner may order a state bank or
27-26 another financial institution subject to the banking commissioner's
27-27 enforcement powers to cease acting as an agent or principal under
28-1 an agency agreement in a manner that the banking commissioner finds
28-2 to be inconsistent with safe and sound banking practices or
28-3 governing law.
28-4 (d) [(g)] Notwithstanding another law, a financial
28-5 institution [state bank] acting as an agent for another [a]
28-6 financial institution in accordance with this section is not
28-7 considered to be a branch of the [that] institution acting as
28-8 principal[, and a financial institution acting as an agent for a
28-9 state bank in accordance with this section is not considered to be
28-10 a branch of the state bank].
28-11 (e) [(h)] This section does not affect:
28-12 (1) authority under another law for a financial
28-13 [depository] institution to act as an agent on behalf of another
28-14 person or to act as a principal in employing another person as
28-15 agent; or
28-16 (2) whether an agent's activities on behalf of a
28-17 financial [depository] institution under another law would cause
28-18 the agent to be considered a branch of the financial [depository]
28-19 institution.
28-20 SECTION 15. Section 59.006(a), Finance Code, is amended to
28-21 read as follows:
28-22 (a) This section provides the exclusive method for compelled
28-23 discovery of a record of a financial institution relating to one or
28-24 more customers but[. This section] does not create a right of
28-25 privacy in a record. This section [and] does not apply to and does
28-26 not require or authorize a financial institution to give a customer
28-27 notice of:
29-1 (1) a demand or inquiry from a state or federal
29-2 government agency authorized by law to conduct an examination of
29-3 the financial institution;
29-4 (2) a record request from a state or federal
29-5 government agency or instrumentality under statutory or
29-6 administrative authority that provides for, or is accompanied by, a
29-7 specific mechanism for discovery and protection of a customer
29-8 record of a financial institution, including a record request from
29-9 a federal agency subject to the Right to Financial Privacy Act of
29-10 1978 (12 U.S.C. Section 3401 et seq.), as amended, or from the
29-11 Internal Revenue Service under Section 1205, Internal Revenue Code
29-12 of 1986;
29-13 (3) a record request from or report to a government
29-14 agency arising out of the investigation or prosecution of a
29-15 criminal offense;
29-16 (4) a record request in connection with a garnishment
29-17 proceeding in which the financial institution is garnishee and the
29-18 customer is debtor;
29-19 (5) a record request by a duly appointed receiver for
29-20 the customer;
29-21 (6) an investigative demand or inquiry from a state
29-22 legislative investigating committee;
29-23 (7) an investigative demand or inquiry from the
29-24 attorney general of this state as authorized by law other than the
29-25 procedural law governing discovery in civil cases; or
29-26 (8) the voluntary use or disclosure of a record by a
29-27 financial institution subject to other applicable state or federal
30-1 law.
30-2 SECTION 16. Subchapter A, Chapter 59, Finance Code, is
30-3 amended by adding Section 59.010 to read as follows:
30-4 Sec. 59.010. CONFIDENTIALITY OF ADMINISTRATIVE SUBPOENA. (a)
30-5 Except to the extent disclosure is necessary to locate and produce
30-6 responsive records, an administrative subpoena that meets the
30-7 requirements of Subsection (b) and is served on a financial
30-8 institution may provide that the financial institution to whom the
30-9 subpoena is directed may not:
30-10 (1) disclose that the subpoena has been issued;
30-11 (2) identify or describe any records requested in the
30-12 subpoena; or
30-13 (3) disclose whether records have been furnished in
30-14 response to the subpoena.
30-15 (b) The government agency issuing the subpoena may prohibit
30-16 the disclosure of information described in Subsection (a) only if
30-17 the agency finds, and the subpoena states the agency's finding
30-18 that:
30-19 (1) the records relate to an ongoing criminal
30-20 investigation by the agency; and
30-21 (2) the disclosure could significantly impede or
30-22 jeopardize the investigation.
30-23 (c) For purposes of this section, "administrative subpoena"
30-24 means a valid and enforceable subpoena requesting customer records,
30-25 issued under the laws of this state by a government agency
30-26 exercising investigatory or adjudicative functions with respect to
30-27 a matter within the agency's jurisdiction.
31-1 SECTION 17. Sections 181.002(a)(1), (9), (10), (18), (26),
31-2 (27), (48), and (50), Finance Code, are amended to read as follows:
31-3 (1) "Account" means the client relationship
31-4 established with a trust institution [company] involving the
31-5 transfer of funds or property to the trust institution [company],
31-6 including a relationship in which the trust institution [company]
31-7 acts as trustee, executor, administrator, guardian, custodian,
31-8 conservator, receiver, registrar, or agent.
31-9 (9) "Charter" means a [corporate] charter issued under
31-10 this subtitle to engage in a trust business.
31-11 (10) "Client" means a person to whom a trust
31-12 institution [company] owes a duty or obligation under a trust or
31-13 other account administered by the trust institution [company],
31-14 regardless of whether the trust institution [company] owes a
31-15 fiduciary duty to the person. The term includes a beneficiary of a
31-16 trust for whom the trust institution [company] acts as trustee and
31-17 a person for whom the trust institution [company] acts as agent,
31-18 custodian, or bailee.
31-19 (18) "Fiduciary record" means a matter written,
31-20 transcribed, recorded, received, or otherwise in the possession of
31-21 a trust institution [company] that is necessary to preserve
31-22 information concerning an act or event relevant to an account of a
31-23 trust institution [company].
31-24 (26) "Investment security" means a marketable
31-25 obligation evidencing indebtedness of a person in the form of a
31-26 bond, note, debenture, or investment security [other debt
31-27 instrument not otherwise classified as a loan or extension of
32-1 credit].
32-2 (27) "Limited trust association" means a state trust
32-3 company organized under this subtitle as a limited liability
32-4 company [trust association], authorized to issue participation
32-5 shares, and controlled by its participants.
32-6 (48) "Trust association" means a trust company
32-7 organized under this subtitle as a corporation [trust association],
32-8 authorized to issue shares of stock, and controlled by its
32-9 shareholders.
32-10 (50) "Trust deposits" means client funds held by a
32-11 [state] trust institution [company] and authorized to be deposited
32-12 with itself as a permanent investment or pending investment,
32-13 distribution, or payment of debts on behalf of the client.
32-14 SECTION 18. Section 181.003(a), Finance Code, is amended to
32-15 read as follows:
32-16 (a) The finance commission may adopt rules to accomplish the
32-17 purposes of this subtitle, including rules necessary or reasonable
32-18 to:
32-19 (1) implement and clarify this subtitle;
32-20 (2) preserve or protect the safety and soundness of
32-21 state trust companies;
32-22 (3) grant the same rights and privileges to state
32-23 trust companies with respect to the exercise of fiduciary powers
32-24 and the conducting of financial activities or activities incidental
32-25 or complementary to financial activities that are or may be granted
32-26 to a trust institution that maintains its principal office or a
32-27 branch or trust office in this state;
33-1 (4) provide for recovery of the cost of maintenance
33-2 and operation of the department and the cost of enforcing this
33-3 subtitle through the imposition and collection of ratable and
33-4 equitable fees for notices, applications, and examinations; and
33-5 (5) facilitate the fair hearing and adjudication of
33-6 matters before the banking commissioner and the finance commission.
33-7 SECTION 19. Section 181.303, Finance Code, is amended to read
33-8 as follows:
33-9 Sec. 181.303. DISCLOSURE TO OTHER AGENCIES. (a) For
33-10 purposes of this section, "affiliated group," "agency," "functional
33-11 regulatory agency," and "privilege" have the meanings assigned by
33-12 Section 31.303 [On request and on execution of an appropriate
33-13 confidentiality agreement approved by the banking commissioner, the
33-14 banking commissioner may:]
33-15 [(1) disclose to a federal banking regulatory agency
33-16 confidential information concerning a state trust company within
33-17 the agency's jurisdiction or an affiliate or service provider of
33-18 the state trust company; and]
33-19 [(2) permit the agency access to files and records or
33-20 reports relating to the state trust company or its affiliate or
33-21 service provider].
33-22 (b) The banking commissioner may, as the banking
33-23 commissioner considers necessary or proper to the enforcement of
33-24 the laws of this state, another state, the United States, or a
33-25 foreign sovereign state with whom the United States currently
33-26 maintains diplomatic relations, or in the best interest of the
33-27 public, disclose [or authorize release of confidential] information
34-1 in the possession of the department to another [department of this
34-2 state, another state, the United States, a foreign sovereign state,
34-3 or any related] agency [or instrumentality]. The banking
34-4 commissioner may not disclose information under this section that
34-5 is confidential under applicable state or federal law unless:
34-6 (1) the recipient agency agrees to maintain the
34-7 confidentiality and take all reasonable steps to oppose an effort
34-8 to secure disclosure of the information from the agency; or
34-9 (2) the banking commissioner determines in the
34-10 exercise of discretion that the interest of law enforcement
34-11 outweighs and justifies the potential for disclosure of the
34-12 information by the recipient agency.
34-13 (c) The banking commissioner by agreement may establish an
34-14 information sharing and exchange program with a functional
34-15 regulatory agency that has overlapping regulatory jurisdiction with
34-16 the department, with respect to all or part of an affiliated group,
34-17 including a financial institution, to reduce the potential for
34-18 duplicative and burdensome filings, examinations, and other
34-19 regulatory activities. Each agency party to the agreement must
34-20 agree to maintain confidentiality of information that is
34-21 confidential under applicable state or federal law and take all
34-22 reasonable steps to oppose any effort to secure disclosure of the
34-23 information from the agency. An agreement may also specify
34-24 procedures regarding use and handling of confidential information
34-25 and identify types of information to be shared and procedures for
34-26 sharing on a recurring basis.
34-27 (d) Disclosure of information by or to the banking
35-1 commissioner under this section does not constitute a waiver of or
35-2 otherwise affect or diminish an evidentiary privilege to which the
35-3 information is otherwise subject, whether or not the disclosure is
35-4 governed by a confidentiality agreement.
35-5 (e) Notwithstanding other law, an agency of this state:
35-6 (1) may execute, honor, and comply with an agreement
35-7 to maintain confidentiality and oppose disclosure of information
35-8 obtained from the banking commissioner as provided in this section;
35-9 and
35-10 (2) shall treat as confidential any information
35-11 obtained from the banking commissioner that is entitled to
35-12 confidential treatment under applicable state or federal law and
35-13 take all reasonable steps to oppose an effort to secure disclosure
35-14 of the information from the agency.
35-15 SECTION 20. Section 182.001, Finance Code, is amended by
35-16 amending Subsections (a)-(c) and adding Subsection (g) to read as
35-17 follows:
35-18 (a) Subject to Subsection (g) and the other provisions of
35-19 this chapter, one or more persons may organize and charter a state
35-20 trust company as a state trust association or a limited trust
35-21 association.
35-22 (b) A state trust company may engage in the trust business
35-23 by:
35-24 (1) acting as trustee under a written agreement;
35-25 (2) receiving money and other property in its capacity
35-26 as trustee for investment in real or personal property;
35-27 (3) acting as trustee and performing the fiduciary
36-1 duties committed or transferred to it by order of a court;
36-2 (4) acting as executor, administrator, or trustee of
36-3 the estate of a deceased person;
36-4 (5) acting as a custodian, guardian, conservator, or
36-5 trustee for a minor or incapacitated person;
36-6 (6) acting as a successor fiduciary to a trust
36-7 institution or other fiduciary;
36-8 (7) receiving for safekeeping personal property;
36-9 (8) acting as custodian, assignee, transfer agent,
36-10 escrow agent, registrar, or receiver;
36-11 (9) acting as investment advisor, agent, or attorney
36-12 in fact according to an applicable agreement;
36-13 (10) with the prior written approval of the banking
36-14 commissioner and to the extent consistent with applicable fiduciary
36-15 principles, engaging in a financial activity or an activity
36-16 incidental or complementary to a financial activity, directly or
36-17 through a subsidiary;
36-18 (11) exercising additional powers expressly conferred
36-19 by rule of the finance commission; and
36-20 (12) [(11)] exercising any incidental power that is
36-21 reasonably necessary to enable it to fully exercise the powers
36-22 expressly conferred according to commonly accepted fiduciary
36-23 customs and usages.
36-24 (c) For purposes of other state law, a trust association is
36-25 considered a corporation and a limited trust association is
36-26 considered a limited liability company. To the extent consistent
36-27 with this subtitle [Subject to Section 182.009], a [state] trust
37-1 association [company] may exercise the powers of a Texas business
37-2 corporation and a limited trust association may exercise the powers
37-3 of a Texas limited liability company as [that are] reasonably
37-4 necessary to enable exercise of [its] specific powers under this
37-5 subtitle.
37-6 (g) In the exercise of discretion consistent with the
37-7 purposes of this subtitle, the banking commissioner may require a
37-8 state trust company to conduct an otherwise authorized activity
37-9 through a subsidiary.
37-10 SECTION 21. Section 182.009, Finance Code, is amended to read
37-11 as follows:
37-12 Sec. 182.009. APPLICATION OF [LAWS RELATING TO] GENERAL
37-13 CORPORATE LAW [BUSINESS CORPORATIONS]. (a) The Texas Business
37-14 Corporation Act and the Texas Miscellaneous Corporation Laws Act
37-15 (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes) are
37-16 incorporated into this chapter and apply to a [state] trust
37-17 association, and the Texas Limited Liability Company Act (Article
37-18 1528n, Vernon's Texas Civil Statutes) applies to a limited trust
37-19 association, [company] as if they were part of this subtitle to the
37-20 extent not inconsistent with this subtitle or the proper business
37-21 of a state trust company, except that:
37-22 (1) a reference to the secretary of state means the
37-23 banking commissioner unless the context requires otherwise; and
37-24 (2) the right of shareholders or participants to
37-25 cumulative voting in the election of directors or managers exists
37-26 only if granted by the state trust company's articles of
37-27 association.
38-1 (b) Unless expressly authorized by this subtitle or a rule
38-2 of the finance commission, a state trust company may not take an
38-3 action authorized by a law listed under Subsection (a) [the Texas
38-4 Business Corporation Act] regarding its corporate status, capital
38-5 structure, or a matter of corporate governance, of the type for
38-6 which a law listed under Subsection (a) [the Texas Business
38-7 Corporation Act] would require a filing with the secretary of state
38-8 if the state trust company were a business corporation or a limited
38-9 liability company, without submitting the filing to the banking
38-10 commissioner for prior written approval of the action.
38-11 (c) The finance commission may adopt rules to alter or
38-12 supplement the procedures and requirements of the laws listed by
38-13 Subsection (a) [Texas Business Corporation Act or the Texas
38-14 Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,
38-15 Vernon's Texas Civil Statutes)] applicable to an action taken under
38-16 this chapter by a state trust company.
38-17 [(d) This chapter may not be construed to mean that a state
38-18 trust company is a corporation incorporated under or governed by
38-19 the Texas Business Corporation Act or the Texas Miscellaneous
38-20 Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas
38-21 Civil Statutes).]
38-22 SECTION 22. Subchapter A, Chapter 182, Finance Code, is
38-23 amended by adding Section 182.0105 to read as follows:
38-24 Sec. 182.0105. FINANCIAL ACTIVITIES. (a) The finance
38-25 commission by rule may determine that an activity not otherwise
38-26 approved or authorized for state trust companies is:
38-27 (1) a financial activity;
39-1 (2) incidental to a financial activity; or
39-2 (3) complementary to a financial activity.
39-3 (b) In adopting a rule under Subsection (a), the finance
39-4 commission shall consider:
39-5 (1) the purposes of this subtitle and the
39-6 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
39-7 (2) changes or reasonably expected changes in the
39-8 marketplace in which state trust companies compete;
39-9 (3) changes or reasonably expected changes in the
39-10 technology for delivering fiduciary and financial services;
39-11 (4) whether the activity is necessary or appropriate
39-12 to allow a state trust company to:
39-13 (A) compete effectively with another company
39-14 seeking to provide fiduciary and financial services;
39-15 (B) efficiently deliver information and services
39-16 that are financial in nature through the use of technological
39-17 means, including an application necessary to protect the security
39-18 or efficacy of systems for the transmission of data or financial
39-19 transactions; or
39-20 (C) offer customers available or emerging
39-21 technological means for using fiduciary and financial services or
39-22 for the document imaging of data;
39-23 (5) whether the activity would violate applicable
39-24 fiduciary duties or otherwise pose a substantial risk to the safety
39-25 and soundness of a state trust company or the fiduciary and
39-26 financial system generally; and
39-27 (6) if otherwise determined to be permissible, whether
40-1 the conduct of the activity by a state trust company should be
40-2 qualified through the imposition of reasonable and necessary
40-3 conditions to protect the public and require appropriate regard for
40-4 safety and soundness of the trust company and the fiduciary and
40-5 financial system generally.
40-6 (c) A rule adopted by the finance commission under this
40-7 section does not alter or negate applicable licensing and
40-8 regulatory requirements administered by a functional regulatory
40-9 agency of this state, as defined by Section 31.303, including
40-10 licensing and regulatory requirements pertaining to:
40-11 (1) insurance activities;
40-12 (2) securities activities; and
40-13 (3) real estate development, marketing, and sales
40-14 activities.
40-15 SECTION 23. Sections 184.101(d)-(h), Finance Code, are
40-16 amended to read as follows:
40-17 (d) Notwithstanding Subsection (c), a state trust company
40-18 may invest its restricted capital, without limit [limitation and]
40-19 subject [only] to the exercise of prudent judgment, in:
40-20 (1) bonds and other legally created general
40-21 obligations of a state, an agency or political subdivision of a
40-22 state, the United States, or an agency or instrumentality of the
40-23 United States;
40-24 (2) obligations [investment securities] that this
40-25 state, an agency or political subdivision of this state, the United
40-26 States, or an agency or instrumentality of the United States has
40-27 unconditionally agreed to purchase, insure, or guarantee;
41-1 (3) securities that are offered and sold under 15
41-2 U.S.C. Section 77d(5);
41-3 (4) mortgage related securities or small business
41-4 related securities, as those terms are defined by [in] 15 U.S.C.
41-5 Section 78c(a)[, except that notwithstanding Section 347 of the
41-6 Riegle Community Development and Regulatory Improvement Act of
41-7 1994, a note or obligation that is secured by a first lien on one
41-8 or more parcels of real property on which is located one or more
41-9 commercial structures is subject to the limitations of Subsection
41-10 (c)];
41-11 (5) mortgages, obligations, or other securities that
41-12 are or ever have been sold [investment securities issued or
41-13 guaranteed] by the Federal Home Loan Mortgage Corporation under
41-14 Section 305 or 306, Federal Home Loan Mortgage Corporation Act (12
41-15 U.S.C. Sections 1434 and 1455);
41-16 (6) obligations, participations, or other instruments
41-17 of or issued by[,] the Federal National Mortgage Association or[,]
41-18 the Government National Mortgage Association;
41-19 (7) obligations issued by[,] the Federal Agricultural
41-20 Mortgage Corporation, [or] the Federal Farm Credit Banks Funding
41-21 Corporation, or a Federal Home Loan Bank;
41-22 (8) obligations of the Federal Financing Bank or the
41-23 Environmental Financing Authority;
41-24 (9) obligations or other instruments or securities of
41-25 the Student Loan Marketing Association; or
41-26 (10) qualified Canadian government obligations, as
41-27 defined by 12 U.S.C. Section 24
42-1 [(6) investment securities issued or guaranteed by the
42-2 North American Development Bank; or]
42-3 [(7) securities issued by a Federal Home Loan Bank].
42-4 (e) [Notwithstanding 15 U.S.C. Section 77r-1(c), Subsection
42-5 (c) applies to investments in small business related securities as
42-6 defined by 15 U.S.C. Section 78c(a).]
42-7 [(f)] In the exercise of prudent judgment, a state trust
42-8 company shall, at a minimum:
42-9 (1) exercise care and caution to make and implement
42-10 investment and management decisions for the entire investment
42-11 portfolio, taking into consideration the safety and soundness of
42-12 the state trust company;
42-13 (2) pursue an overall investment strategy to enable
42-14 management to make appropriate present and future decisions; and
42-15 (3) consider, to the extent relevant to the decision
42-16 or action:
42-17 (A) the size, diversification, and liquidity of
42-18 its corporate assets;
42-19 (B) the general economic conditions;
42-20 (C) the possible effect of inflation or
42-21 deflation;
42-22 (D) the expected tax consequences of the
42-23 investment decisions or strategies;
42-24 (E) the role that each investment or course of
42-25 action plays within the investment portfolio; and
42-26 (F) the expected total return of the portfolio.
42-27 (f) [(g)] A state trust company may invest its secondary
43-1 capital in any type or character of [equity or investment]
43-2 securities subject to the exercise of prudent judgment according to
43-3 the standards provided by Subsection (e) [(f)].
43-4 (g) [(h)] The finance commission may adopt rules to
43-5 administer and carry out this section, including rules to:
43-6 (1) establish limits, requirements, or exemptions
43-7 other than those specified by this section for particular classes
43-8 or categories of investment; or
43-9 (2) limit or expand investment authority for state
43-10 trust companies for particular classes or categories of securities
43-11 or other property.
43-12 SECTION 24. Section 184.103(a), Finance Code, is amended to
43-13 read as follows:
43-14 (a) Except as otherwise provided by this subtitle or rules
43-15 adopted under this subtitle, and subject to the exercise of prudent
43-16 judgment, a state trust company may invest its secondary capital to
43-17 acquire or establish one or more subsidiaries to conduct any
43-18 activity that may lawfully be conducted through the form of
43-19 organization chosen for the subsidiary. The factors to be
43-20 considered by a state trust company in exercise of prudent judgment
43-21 include the factors contained in Section 184.101(e) [184.101(f)].
43-22 SECTION 25. Section 184.104(c), Finance Code, is amended to
43-23 read as follows:
43-24 (c) Subject to Subsections (a) and (b), to Section 184.105,
43-25 and to the exercise of prudent judgment, a state trust company may
43-26 invest its secondary capital in any type or character of investment
43-27 for the purpose of generating income or profit. The factors to be
44-1 considered by a state trust company in exercise of prudent judgment
44-2 include the factors contained in Section 184.101(e) [184.101(f)].
44-3 SECTION 26. Section 184.105, Finance Code, is amended to read
44-4 as follows:
44-5 Sec. 184.105. ENGAGING IN COMMERCE PROHIBITED. (a) Except
44-6 as otherwise provided by this subtitle or rules adopted under this
44-7 subtitle, a state trust company may not invest its funds in trade
44-8 or commerce by buying, selling, or otherwise dealing goods or by
44-9 owning or operating a business not part of the state trust
44-10 business, except as necessary to fulfill a fiduciary obligation to
44-11 a client.
44-12 (b) Under this section, engaging in an approved financial
44-13 activity or an activity incidental or complementary to a financial
44-14 activity, whether as principal or agent, is not considered to be
44-15 engaging in commerce.
44-16 SECTION 27. Section 201.002(a), Finance Code, is amended by
44-17 amending Subdivisions (5), (19), (30), and (40), and adding
44-18 Subdivisions (46) and (47) to read as follows:
44-19 (5) "Bank holding company" has the meaning assigned by
44-20 Section 2(a), Bank Holding Company Act (12 U.S.C. Section 1841(a)),
44-21 and includes a financial [Texas bank] holding company[, an
44-22 out-of-state bank holding company, and a foreign bank holding
44-23 company unless the context requires otherwise].
44-24 (19) "Foreign bank holding company" means a bank
44-25 holding company that is organized under the laws of a country other
44-26 than the United States or a territory or possession of the United
44-27 States, and includes a foreign financial holding company.
45-1 (30) "Out-of-state bank holding company" means a bank
45-2 holding company whose home state is another state, and includes an
45-3 out-of-state financial holding company.
45-4 (40) "Texas bank holding company" means a bank holding
45-5 company whose home state is this state and that is not controlled
45-6 by a bank holding company other than a Texas bank holding company,
45-7 and includes a Texas financial holding company.
45-8 (46) "Financial holding company" means a bank holding
45-9 company that has elected to be treated as a financial holding
45-10 company under 12 U.S.C. Section 1843(l).
45-11 (47) "Functional regulatory agency" means a department
45-12 or agency of this state, another state, the United States, or a
45-13 foreign government with whom the United States currently maintains
45-14 diplomatic relations that regulates and charters, licenses, or
45-15 registers persons engaged in financial activities or activities
45-16 incidental or complementary to financial activities, including
45-17 activities related to banking, insurance, or securities.
45-18 SECTION 28. Sections 201.003(a) and (b), Finance Code, are
45-19 amended to read as follows:
45-20 (a) The finance commission may adopt rules to accomplish the
45-21 purposes of this subtitle, including rules necessary or reasonable
45-22 to:
45-23 (1) implement and clarify this subtitle in a manner
45-24 consistent with and to the extent permitted by applicable federal
45-25 law;
45-26 (2) preserve or protect the safety and soundness of
45-27 banking in this state;
46-1 (3) grant at least the same rights and privileges to
46-2 Texas state banks that are or may be granted to other depository
46-3 institutions;
46-4 (4) recover the cost of maintaining and operating the
46-5 department and the cost of enforcing this subtitle by imposing and
46-6 collecting ratable and equitable fees for supervision and
46-7 regulation, including fees for notices, applications, and
46-8 examinations; and
46-9 (5) facilitate the fair hearing and adjudication of
46-10 matters before the commissioner and the finance commission.
46-11 (b) In adopting rules, the finance commission shall consider
46-12 the need to:
46-13 (1) coordinate with applicable federal law;
46-14 (2) promote a stable banking environment;
46-15 (3) provide the public with convenient, safe, and
46-16 competitive banking services;
46-17 (4) preserve and promote the competitive position
46-18 [parity] of Texas state banks with regard to other depository
46-19 institutions consistent with the safety and soundness of Texas
46-20 state banks and the Texas state bank system; and
46-21 (5) allow for economic development in this state.
46-22 SECTION 29. Section 201.005, Finance Code, is amended to read
46-23 as follows:
46-24 Sec. 201.005. COOPERATIVE AGREEMENTS; FEES. (a) To carry
46-25 out the purposes of this subtitle, to the extent permitted by
46-26 federal law, the commissioner may:
46-27 (1) enter into cooperative, coordinating, or
47-1 information sharing agreements with another bank supervisory
47-2 agency, a functional regulatory agency, or an organization
47-3 affiliated with or representing one or more bank supervisory
47-4 agencies;
47-5 (2) with respect to periodic examination or other
47-6 supervision or investigation, accept reports of examination or
47-7 investigation by, and reports submitted to, another bank
47-8 supervisory agency or functional regulatory agency in lieu of
47-9 conducting examinations or investigations or receiving reports as
47-10 might otherwise be required or permissible under this subtitle;
47-11 (3) enter into contracts with another bank supervisory
47-12 agency or functional regulatory agency having concurrent regulatory
47-13 or supervisory jurisdiction to engage the services of the agency
47-14 for reasonable compensation to assist in connection with the
47-15 commissioner's performance of official duties under this subtitle
47-16 or other law, or to provide services to the agency for reasonable
47-17 compensation in connection with the agency's performance of
47-18 official duties under law, except that Chapter 2254, Government
47-19 Code, does not apply to the contracts;
47-20 (4) enter into joint examinations or joint enforcement
47-21 actions with another bank supervisory agency or functional
47-22 regulatory agency having concurrent regulatory or supervisory
47-23 jurisdiction, except that the commissioner may independently take
47-24 action under Section 201.009 if the commissioner determines that
47-25 the action is necessary to carry out the commissioner's
47-26 responsibilities under this subtitle or to enforce compliance with
47-27 the laws of this state; and
48-1 (5) assess supervisory and examination fees to be paid
48-2 by a state bank, state savings bank, bank holding company, or
48-3 foreign bank in connection with the commissioner's performance of
48-4 duties under this subtitle.
48-5 (b) Supervisory or examination fees assessed by the
48-6 commissioner in accordance with this subtitle may be shared with
48-7 another bank supervisory agency, a functional regulatory agency, or
48-8 an organization affiliated with or representing one or more bank
48-9 supervisory agencies in accordance with an agreement between the
48-10 commissioner and the agency or organization. The commissioner may
48-11 also receive a portion of supervisory or examination fees assessed
48-12 by another bank supervisory agency or functional regulatory agency
48-13 in accordance with an agreement between the commissioner and the
48-14 agency.
48-15 SECTION 30. Section 202.004, Finance Code, is amended to read
48-16 as follows:
48-17 Sec. 202.004. NONBANKING ACQUISITION, ELECTION, OR ACTIVITY
48-18 [OF NONBANKING INSTITUTION]. (a) A bank holding company doing
48-19 business in this state that submits an application, election, or
48-20 notice to the Board of Governors of the Federal Reserve System
48-21 under [regarding an acquisition or activity regulated by] Section
48-22 4, Bank Holding Company Act (12 U.S.C. Section 1843), that involves
48-23 or will involve an office location in this state shall submit to
48-24 the commissioner a copy of the application, election, or notice
48-25 when the application, election, or notice is submitted to the board
48-26 of governors, including a notice or application to acquire a
48-27 nonbanking institution, an election to be treated as a financial
49-1 holding company, or a request, proposal, or application to engage
49-2 in an activity that is or may be a financial activity or an
49-3 activity incidental or complementary to a financial activity. The
49-4 bank holding company shall submit other information reasonably
49-5 requested by the commissioner to determine the manner in which the
49-6 acquisition, election, or activity will directly or indirectly
49-7 affect residents of this state.
49-8 (b) To assist in determining whether to disapprove the
49-9 proposed acquisition, election, or activity, the commissioner may
49-10 hold a public hearing as provided by Section 31.201, regardless of
49-11 whether requested to do so by a person, regarding the proposed
49-12 acquisition, election, or activity and its effect on this state.
49-13 The commissioner shall convene a hearing if the bank holding
49-14 company requests a hearing in writing when it submits the
49-15 application, election, or notice to the commissioner.
49-16 (c) The commissioner shall disapprove the proposed
49-17 acquisition, election, or activity if the commissioner determines
49-18 that the acquisition, election, or activity would be detrimental to
49-19 the public interest as a result of probable adverse effects,
49-20 including undue concentration of resources, decreased or unfair
49-21 competition, conflicts of interest, or unsound banking practices.
49-22 (d) If the commissioner determines to disapprove the
49-23 proposed acquisition, election, or activity, the commissioner may
49-24 prepare and file a response to the application, election, or notice
49-25 with the board of governors and may request that a hearing be held.
49-26 If the board of governors grants the request, the commissioner
49-27 shall appear and present evidence at the hearing regarding the
50-1 reasons the proposed acquisition, election, or activity should be
50-2 denied.
50-3 (e) If the board of governors approves a proposed
50-4 acquisition, election, or activity that the commissioner
50-5 disapproved, the commissioner may accept the decision or seek to
50-6 overturn the decision on appeal as provided by Section 9, Bank
50-7 Holding Company Act (12 U.S.C. Section 1848).
50-8 SECTION 31. Chapter 202, Finance Code, is amended by adding
50-9 Section 202.006 to read as follows:
50-10 Sec. 202.006. FINANCIAL ACTIVITIES. (a) A financial holding
50-11 company may engage in a financial activity or an activity
50-12 incidental or complementary to a financial activity if the activity
50-13 has been authorized by:
50-14 (1) the Board of Governors of the Federal Reserve
50-15 System under 12 U.S.C. Section 1843(k); or
50-16 (2) a rule adopted by the finance commission under
50-17 Subsection (b).
50-18 (b) The finance commission by rule may determine that an
50-19 activity not otherwise approved or authorized under this chapter,
50-20 federal law, or other law is:
50-21 (1) a financial activity;
50-22 (2) incidental to a financial activity; or
50-23 (3) complementary to a financial activity.
50-24 (c) In adopting a rule under Subsection (b), the finance
50-25 commission shall consider:
50-26 (1) the purposes of this subtitle and the
50-27 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
51-1 (2) changes or reasonably expected changes in the
51-2 marketplace in which financial holding companies compete;
51-3 (3) changes or reasonably expected changes in the
51-4 technology for delivering financial services;
51-5 (4) whether the activity is necessary or appropriate
51-6 to allow a financial holding company to:
51-7 (A) compete effectively with another company
51-8 seeking to provide financial services;
51-9 (B) efficiently deliver information and services
51-10 that are financial in nature through the use of technological
51-11 means, including an application necessary to protect the security
51-12 or efficacy of systems for the transmission of data or financial
51-13 transactions; or
51-14 (C) offer customers available or emerging
51-15 technological means for using financial services or for the
51-16 document imaging of data; and
51-17 (5) if otherwise determined to be permissible, whether
51-18 the conduct of the activity by a financial holding company should
51-19 be qualified through the imposition of reasonable and necessary
51-20 conditions to protect the public and require appropriate regard for
51-21 safety and soundness of the holding company's subsidiary banks and
51-22 the financial system generally.
51-23 (d) A determination by the board of governors under federal
51-24 law or by a rule of the finance commission under this section does
51-25 not alter or negate applicable licensing and regulatory
51-26 requirements administered by a functional regulatory agency of this
51-27 state.
52-1 SECTION 32. (a) In accordance with Section 311.031(c),
52-2 Government Code, which gives effect to a substantive amendment
52-3 enacted by the same legislature that codifies the amended statute,
52-4 the text of Sections 181.003(a) and 182.001(b), Finance Code, as
52-5 set out in Sections 18 and 20 of this Act, respectively, give
52-6 effect to the changes made by Chapter 344, Acts of the 76th
52-7 Legislature, Regular Session, 1999.
52-8 (b) To the extent of any conflict, this Act prevails over
52-9 another Act of the 77th Legislature, Regular Session, 2001,
52-10 relating to nonsubstantive additions to and corrections in enacted
52-11 codes.
52-12 SECTION 33. This Act takes effect September 1, 2001.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2155 was passed by the House on May
10, 2001, by a non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 2155 was passed by the Senate on May
22, 2001, by the following vote: Yeas 30, Nays 0, 1 present, not
voting.
_______________________________
Secretary of the Senate
APPROVED: __________________________
Date
__________________________
Governor