1-1 By: Averitt (Senate Sponsor - Sibley) H.B. No. 2155
1-2 (In the Senate - Received from the House May 11, 2001;
1-3 May 11, 2001, read first time and referred to Committee on Business
1-4 and Commerce; May 11, 2001, reported favorably by the following
1-5 vote: Yeas 4, Nays 0; May 11, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the operation of state banks, state trust companies,
1-9 and certain financial holding companies in the financial services
1-10 industry.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Sections 31.002(a)(5), (8), (32), and (33),
1-13 Finance Code, are amended to read as follows:
1-14 (5) "Banking association" means a state bank that is
1-15 organized under this subtitle as a corporation [banking
1-16 association], authorized to issue shares of stock, and controlled
1-17 by its shareholders.
1-18 (8) "Branch" means a location of a bank, other than
1-19 the bank's home office, at which the bank engages the public in the
1-20 business of banking. The term does not include:
1-21 (A) a drive-in facility located not more than
1-22 2,000 feet from the nearest wall of the home office or an approved
1-23 branch office of the bank;
1-24 (B) a night depository;
1-25 (C) an electronic terminal [subject to Section
1-26 59.201];
1-27 (D) a loan production office as described by
1-28 [subject to] Section 32.204;
1-29 (E) a state or federally licensed armored car
1-30 service or other courier service transporting items for deposit or
1-31 payment, unless:
1-32 (i) the risk of loss of items in the
1-33 custody of the service is borne by the employing bank; or
1-34 (ii) the items in the custody of the
1-35 service are considered to be in customer accounts at the employing
1-36 bank or federally insured through the employing bank;
1-37 (F) a location at which the bank offers
1-38 exclusively nondepository financial products or services to the
1-39 public, including financial, investment, or economic advisory
1-40 services [a bank acting as an agent for another depository
1-41 institution as provided by Section 59.005(a)]; [or]
1-42 (G) a location that combines permissible
1-43 non-branch functions or facilities; or
1-44 (H) another office or facility as provided by
1-45 this subtitle or a rule adopted under this subtitle [other offices
1-46 as determined by rule].
1-47 (32) "Investment security" means a marketable
1-48 obligation evidencing indebtedness of a person in the form of a
1-49 bond, note, debenture, or commonly known as an investment security,
1-50 subject to further definition by rule adopted under this subtitle
1-51 [other debt instrument not otherwise classified as a loan or
1-52 extension of credit].
1-53 (33) "Limited banking association" means a state bank
1-54 that is organized under this subtitle as a limited liability
1-55 company [banking association], authorized to issue participation
1-56 shares, and controlled by its participants.
1-57 SECTION 2. Sections 31.003(a) and (b), Finance Code, are
1-58 amended to read as follows:
1-59 (a) The finance commission may adopt rules to accomplish the
1-60 purposes of this subtitle and Chapters 11, 12, and 13, including
1-61 rules necessary or reasonable to:
1-62 (1) implement and clarify this subtitle and Chapters
1-63 11, 12, and 13;
1-64 (2) preserve or protect the safety and soundness of
2-1 state banks;
2-2 (3) grant at least the same rights and privileges to
2-3 state banks that are or may be granted to national banks domiciled
2-4 in this state;
2-5 (4) recover the cost of maintaining and operating the
2-6 department and the cost of enforcing this subtitle and other
2-7 applicable law [Chapters 11, 12, and 13] by imposing and collecting
2-8 ratable and equitable fees for notices, applications, and
2-9 examinations; and
2-10 (5) facilitate the fair hearing and adjudication of
2-11 matters before the banking commissioner and the finance commission.
2-12 (b) In adopting rules, the finance commission shall consider
2-13 the need to:
2-14 (1) promote a stable banking environment;
2-15 (2) provide the public with convenient, safe, and
2-16 competitive banking services;
2-17 (3) preserve and promote the competitive position
2-18 [parity] of state banks with regard to national banks and other
2-19 depository institutions in this state consistent with the safety
2-20 and soundness of state banks and the state bank system; and
2-21 (4) allow for economic development in this state.
2-22 SECTION 3. Section 31.303, Finance Code, is amended to read
2-23 as follows:
2-24 Sec. 31.303. DISCLOSURE TO OTHER AGENCIES. (a) For purposes
2-25 of this section:
2-26 (1) "Affiliated group" means two or more persons
2-27 affiliated through common ownership or a contractual common
2-28 undertaking involving the sharing of customer information among
2-29 those persons.
2-30 (2) "Agency" means a department or agency of this
2-31 state, another state, the United States, or a foreign government
2-32 with whom the United States currently maintains diplomatic
2-33 relations, or any related agency or instrumentality.
2-34 (3) "Functional regulatory agency" means an agency
2-35 that regulates and charters, licenses, or registers persons engaged
2-36 in financial activities or activities incidental or complimentary
2-37 to financial activities, including activities related to banking,
2-38 insurance, or securities, within the jurisdiction of the agency.
2-39 (4) "Privilege" includes any work-product,
2-40 attorney-client, or other privilege recognized under federal or
2-41 state law [On request and on execution of an appropriate
2-42 confidentiality agreement approved by the banking commissioner, the
2-43 commissioner may:]
2-44 [(1) disclose to a federal banking regulatory agency
2-45 confidential information concerning a financial institution within
2-46 the agency's jurisdiction or an affiliate or service provider of
2-47 the financial institution; and]
2-48 [(2) permit the agency access to files and records or
2-49 reports concerning the financial institution or its affiliate or
2-50 service provider].
2-51 (b) The banking commissioner may, as the commissioner
2-52 considers necessary or proper to the enforcement of the laws of
2-53 this state, another state, the United States, or a foreign
2-54 sovereign state with whom the United States currently maintains
2-55 diplomatic relations, or in the best interest of the public,
2-56 disclose [or authorize release of confidential] information in the
2-57 possession of the department to another [department of this state,
2-58 another state, the United States, a foreign sovereign state, or any
2-59 related] agency [or instrumentality]. The banking commissioner may
2-60 not disclose information under this section that is confidential
2-61 under applicable state or federal law unless:
2-62 (1) the recipient agency agrees to maintain the
2-63 confidentiality and take all reasonable steps to oppose an effort
2-64 to secure disclosure of the information from the agency; or
2-65 (2) the banking commissioner determines in the
2-66 exercise of discretion that the interest of law enforcement
2-67 outweighs and justifies the potential for disclosure of the
2-68 information by the recipient agency.
2-69 (c) The banking commissioner by agreement may establish an
3-1 information sharing and exchange program with a functional
3-2 regulatory agency that has overlapping regulatory jurisdiction with
3-3 the department, with respect to all or part of an affiliated group
3-4 that includes a financial institution, to reduce the potential for
3-5 duplicative and burdensome filings, examinations, and other
3-6 regulatory activities. Each agency party to the agreement must
3-7 agree to maintain confidentiality of information that is
3-8 confidential under applicable state or federal law and take all
3-9 reasonable steps to oppose any effort to secure disclosure of the
3-10 information from the agency. An agreement may also specify
3-11 procedures regarding use and handling of confidential information
3-12 and identify types of information to be shared and procedures for
3-13 sharing on a recurring basis.
3-14 (d) Disclosure of information by or to the banking
3-15 commissioner under this section does not constitute a waiver of or
3-16 otherwise affect or diminish an evidentiary privilege to which the
3-17 information is otherwise subject, whether or not the disclosure is
3-18 governed by a confidentiality agreement.
3-19 (e) Notwithstanding other law, an agency of this state:
3-20 (1) may execute, honor, and comply with an agreement
3-21 to maintain confidentiality and oppose disclosure of information
3-22 obtained from the banking commissioner as provided in this section;
3-23 and
3-24 (2) shall treat as confidential any information
3-25 obtained from the banking commissioner that is entitled to
3-26 confidential treatment under applicable state or federal law and
3-27 take all reasonable steps to oppose an effort to secure disclosure
3-28 of the information from the agency.
3-29 SECTION 4. Section 32.001, Finance Code, is amended by
3-30 amending Subsections (b), (c), and (e), and by adding Subsection
3-31 (f) to read as follows:
3-32 (b) A state bank may:
3-33 (1) receive and pay deposits with or without interest,
3-34 discount and negotiate promissory notes, borrow or lend money with
3-35 or without security or interest, invest and deal in securities, buy
3-36 and sell exchange, coin, and bullion, and exercise incidental
3-37 powers as necessary to carry on the business of banking as provided
3-38 by this subtitle;
3-39 (2) act as agent, or in a substantially similar
3-40 capacity, with respect to a financial activity or an activity
3-41 incidental or complementary to a financial activity [including a
3-42 fiscal agent, registrar, or transfer agent, and in that capacity
3-43 receive and disburse money and transfer securities];
3-44 (3) act in a fiduciary capacity, without giving bond,
3-45 as guardian, receiver, executor, administrator, or trustee,
3-46 including a mortgage or indenture trustee; [and]
3-47 (4) provide financial, investment, or economic
3-48 advisory services;
3-49 (5) issue or sell instruments representing pools of
3-50 assets in which a bank may invest directly;
3-51 (6) with prior written approval of the banking
3-52 commissioner, engage in a financial activity or an activity that is
3-53 incidental or complementary to a financial activity; and
3-54 (7) engage in any other activity, directly or through
3-55 a subsidiary, authorized by this subtitle or rules adopted under
3-56 this subtitle [or determined by the banking commissioner to be
3-57 closely related to banking].
3-58 (c) For purposes of other state law, a banking association
3-59 is considered a corporation and a limited banking association is
3-60 considered a limited liability company. To the extent consistent
3-61 with this subtitle [Subject to Section 32.008], a banking
3-62 association [state bank] may exercise the powers of a Texas
3-63 business corporation and a limited banking association may exercise
3-64 the powers of a Texas limited liability company as reasonably
3-65 necessary to enable exercise of [its] specific powers under this
3-66 subtitle.
3-67 (e) A state bank may be organized or reorganized as a
3-68 community development financial institution or may serve as a
3-69 community development partner, as those terms are defined by the
4-1 Riegle Community Development and Regulatory Improvement Act of 1994
4-2 (Pub. L. No. 103-325).
4-3 (f) In the exercise of discretion consistent with the
4-4 purposes of this subtitle, the banking commissioner may require a
4-5 state bank to conduct an otherwise authorized activity through a
4-6 subsidiary.
4-7 SECTION 5. Section 32.003(b), Finance Code, is amended to
4-8 read as follows:
4-9 (b) The banking commissioner shall grant a state bank
4-10 charter only if the commissioner determines that the organizers
4-11 have established that public convenience and advantage will be
4-12 promoted by the establishment of the state bank. In determining
4-13 whether public convenience and advantage will be promoted, the
4-14 banking commissioner shall consider the convenience of the public
4-15 to be served and whether:
4-16 (1) [a public necessity exists for the bank;]
4-17 [(2)] the organizational and capital structure and
4-18 amount of initial capitalization is adequate for the business plan
4-19 [and location];
4-20 (2) [(3)] the anticipated volume and nature of
4-21 business indicates a reasonable probability of success and
4-22 profitability based on the market sought to be served [profitable
4-23 operation];
4-24 (3) [(4)] the officers, directors, managers, and
4-25 managing participants as a group have sufficient banking
4-26 experience, ability, standing, competence, trustworthiness, and
4-27 integrity to justify a belief that the bank will operate in
4-28 compliance with law and that success of the bank is probable;
4-29 (4) [(5)] each principal shareholder or participant
4-30 has sufficient experience, ability, standing, competence,
4-31 trustworthiness, and integrity to justify a belief that the bank
4-32 will be free from improper or unlawful influence or interference
4-33 with respect to the bank's operation in compliance with law; and
4-34 (5) [(6)] the organizers are acting in good faith.
4-35 SECTION 6. Section 32.008, Finance Code, is amended to read
4-36 as follows:
4-37 Sec. 32.008. APPLICATION OF [LAWS RELATING TO] GENERAL
4-38 CORPORATE LAW [BUSINESS CORPORATION]. (a) The Texas Business
4-39 Corporation Act and the Texas Miscellaneous Corporation Laws Act
4-40 (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes) apply to
4-41 a banking association, and the Texas Limited Liability Company Act
4-42 (Article 1528n, Vernon's Texas Civil Statutes) applies to a limited
4-43 banking association, [state bank] to the extent not inconsistent
4-44 with this subtitle or the proper business of a state bank, except
4-45 that:
4-46 (1) a reference in those Acts to the secretary of
4-47 state means the banking commissioner unless the context requires
4-48 otherwise; and
4-49 (2) the right of shareholders or participants to
4-50 cumulative voting in the election of directors or managers exists
4-51 only if granted by the bank's articles of association.
4-52 (b) The finance commission may adopt rules to limit or
4-53 refine the applicability of the laws listed by Subsection (a) to a
4-54 state bank or to alter or supplement the procedures and
4-55 requirements of those laws [the Texas Business Corporation Act]
4-56 applicable to an action taken under this chapter.
4-57 (c) Unless expressly authorized by this subtitle or a rule
4-58 adopted under this subtitle, a state bank may not take an action
4-59 authorized by a law listed by Subsection (a) [the Texas Business
4-60 Corporation Act] regarding its corporate status, its capital
4-61 structure, or a matter of corporate governance, of the type for
4-62 which those laws [the Texas Business Corporation Act] would require
4-63 a filing with the secretary of state if the bank were a business
4-64 corporation, without submitting the filing to the banking
4-65 commissioner and obtaining the banking commissioner's prior written
4-66 approval of the action.
4-67 SECTION 7. Sections 32.010(a) and (b), Finance Code, are
4-68 amended to read as follows:
4-69 (a) Notwithstanding another law, a Texas state bank may
5-1 perform an act, own property, or offer a product or service that is
5-2 at the time permissible within the United States for a depository
5-3 institution organized under federal law or the law of this state or
5-4 another state, if the banking commissioner approves the exercise of
5-5 the power as provided by this section, subject to the same
5-6 limitations and restrictions applicable to the other depository
5-7 institution by pertinent law, except to the extent the limitations
5-8 and restrictions are modified by rules adopted under Subsection
5-9 (e). This section may not be used by a Texas state bank to alter
5-10 or negate the application of the laws of this state with respect
5-11 to:
5-12 (1) establishment and maintenance of a branch in this
5-13 state or another state or country;
5-14 (2) [sale of insurance products and services in this
5-15 state;]
5-16 [(3)] permissible interest rates and loan fees
5-17 chargeable in this state;
5-18 (3) [(4)] fiduciary duties owed to a client or
5-19 customer by the bank in its capacity as fiduciary in this state;
5-20 (4) [(5)] consumer protection laws applicable to
5-21 transactions in this state; or
5-22 (5) licensing and regulatory requirements administered
5-23 by a functional regulatory agency in this state, as defined by
5-24 Section 31.303, including licensing and regulatory requirements
5-25 pertaining to:
5-26 (A) insurance activities;
5-27 (B) securities activities; and
5-28 (C) [(6)] real estate development, marketing,
5-29 and sales activities [in this state].
5-30 (b) A state bank that intends to exercise a power, directly
5-31 or through a subsidiary, granted by Subsection (a) that is not
5-32 otherwise authorized for state banks under the statutes of this
5-33 state shall submit a letter to the banking commissioner describing
5-34 in detail the power that the bank proposes to exercise and the
5-35 specific authority of another depository institution to exercise
5-36 the power. The bank shall attach copies, if available, of relevant
5-37 law, regulations, and interpretive letters. The bank may begin to
5-38 exercise the proposed power after the 30th day after the date the
5-39 banking commissioner receives the bank's letter unless the banking
5-40 commissioner specifies an earlier or later date or prohibits the
5-41 activity. The banking commissioner may prohibit the bank from
5-42 exercising the power only if the banking commissioner finds that:
5-43 (1) specific authority does not exist for another
5-44 depository institution to exercise the proposed power;
5-45 (2) if the state bank is insured by the Federal
5-46 Deposit Insurance Corporation, the state bank is prohibited from
5-47 exercising the power pursuant to Section 24, Federal Deposit
5-48 Insurance Act (12 U.S.C. Section 1831a), [as amended,] and related
5-49 regulations [12 C.F.R. Part 362]; or
5-50 (3) the exercise of the power by the bank would
5-51 adversely affect the safety and soundness of the bank.
5-52 SECTION 8. Subchapter A, Chapter 32, Finance Code, is amended
5-53 by adding Section 32.011 to read as follows:
5-54 Sec. 32.011. FINANCIAL ACTIVITIES. (a) The finance
5-55 commission by rule may determine that an activity not otherwise
5-56 approved or authorized for a state bank under this subtitle or
5-57 other law is:
5-58 (1) a financial activity;
5-59 (2) incidental to a financial activity; or
5-60 (3) complementary to a financial activity.
5-61 (b) In adopting a rule under Subsection (a), the finance
5-62 commission shall consider:
5-63 (1) the purposes of this subtitle and the
5-64 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
5-65 (2) changes or reasonably expected changes in the
5-66 marketplace in which state banks compete;
5-67 (3) changes or reasonably expected changes in the
5-68 technology for delivering financial services;
5-69 (4) whether the activity is necessary or appropriate
6-1 to allow a state bank to:
6-2 (A) compete effectively with another company
6-3 seeking to provide financial services;
6-4 (B) efficiently deliver information and services
6-5 that are financial in nature through the use of technological
6-6 means, including an application necessary to protect the security
6-7 or efficacy of systems for the transmission of data or financial
6-8 transactions; or
6-9 (C) offer customers available or emerging
6-10 technological means for using financial services or for the
6-11 document imaging of data;
6-12 (5) whether the activity would pose a substantial risk
6-13 to the safety or soundness of a state bank or the financial system
6-14 generally;
6-15 (6) if otherwise determined to be permissible, whether
6-16 the conduct of the activity by a state bank should be qualified
6-17 through the imposition of reasonable and necessary conditions to
6-18 protect the public and require appropriate regard for safety and
6-19 soundness of the bank and the financial system generally; and
6-20 (7) whether a state bank would be permitted to engage
6-21 in the activity under applicable federal law, including 12 U.S.C.
6-22 Section 1831a, and related regulations.
6-23 (c) A rule adopted by the finance commission under this
6-24 section does not alter or negate applicable licensing and
6-25 regulatory requirements administered by a functional regulatory
6-26 agency of this state, as defined by Section 31.303, including
6-27 licensing and regulatory requirements pertaining to:
6-28 (1) insurance activities;
6-29 (2) securities activities; and
6-30 (3) real estate development, marketing, and sales
6-31 activities.
6-32 SECTION 9. Section 34.101, Finance Code, is amended to read
6-33 as follows:
6-34 Sec. 34.101. SECURITIES. (a) A state bank may purchase and
6-35 sell [equity and investment] securities without recourse solely on
6-36 the order and for the account of a customer.
6-37 (b) Except as otherwise provided by this subtitle or rules
6-38 adopted under this subtitle, a [A] state bank may not:
6-39 (1) underwrite an issue of securities; or
6-40 (2) [except as otherwise provided by this subtitle or
6-41 rules adopted under this subtitle.]
6-42 [(c) Except as otherwise provided by this subtitle or rules
6-43 adopted under this subtitle, a state bank may not] invest its money
6-44 in equity securities except as necessary to avoid or minimize a
6-45 loss on a loan or investment previously made in good faith.
6-46 (c) [(d)] A state bank may purchase investment securities
6-47 for its own account under limitations and restrictions prescribed
6-48 by rules adopted under this subtitle. Except as otherwise provided
6-49 by this section, the amount of the investment securities of any one
6-50 obligor or maker held by the bank for its own account may not
6-51 exceed an amount equal to the lesser of 15 percent of the bank's
6-52 capital and certified surplus or the bank's total equity capital.
6-53 The banking commissioner may authorize investments in excess of
6-54 this limitation on written application if the banking commissioner
6-55 determines that:
6-56 (1) the excess investment is not prohibited by other
6-57 applicable law; and
6-58 (2) the safety and soundness of the requesting state
6-59 bank is not adversely affected.
6-60 (d) [(e)] Notwithstanding Subsections (a)-(c) [(a)-(d)], a
6-61 state bank may, without limit and subject to the exercise of [with]
6-62 prudent banking judgment, deal in, underwrite, or purchase for its
6-63 own account:
6-64 (1) bonds and other legally created general
6-65 obligations of a state, an agency or political subdivision of a
6-66 state, the United States, or an instrumentality of the United
6-67 States;
6-68 (2) obligations [investment securities] that this
6-69 state, an agency or political subdivision of this state, the United
7-1 States, or an instrumentality of the United States has
7-2 unconditionally agreed to purchase, insure, or guarantee;
7-3 (3) securities that are offered and sold under 15
7-4 U.S.C. Section 77d(5);
7-5 (4) mortgage related securities or small business
7-6 related securities, as those terms are defined by 15 U.S.C. Section
7-7 78c(a)[, except that notwithstanding Section 347 of the Riegle
7-8 Community Development and Regulatory Improvement Act of 1994 (Pub.
7-9 L. 103-325) a note or obligation that is secured by a first lien on
7-10 one or more parcels of real property on which is located one or
7-11 more commercial structures is subject to the limitations of
7-12 Subsection (d)];
7-13 (5) mortgages, obligations, or other securities that
7-14 are or ever have been sold [investment securities issued or
7-15 guaranteed] by the Federal Home Loan Mortgage Corporation under 12
7-16 U.S.C. Sections 1434 and 1455;
7-17 (6) obligations, participation, or other instruments
7-18 of or issued by[,] the Federal National Mortgage Association or[,]
7-19 the Government National Mortgage Association;
7-20 (7) obligations issued by [,] the Federal Agricultural
7-21 Mortgage Corporation, [or] the Federal Farm Credit Banks Funding
7-22 Corporation, or a Federal Home Loan Bank;
7-23 (8) obligations of the Federal Financing Bank or the
7-24 Environmental Financing Authority;
7-25 (9) obligations or other instruments or securities of
7-26 the Student Loan Marketing Association;
7-27 (10) qualified Canadian government obligations, as
7-28 defined by 12 U.S.C. Section 24; or
7-29 (11) if the state bank is well capitalized, as defined
7-30 by Section 38, Federal Deposit Insurance Act (12 U.S.C. Section
7-31 1831o), obligations, including limited obligation bonds, revenue
7-32 bonds, and obligations that satisfy the requirements of 26 U.S.C.
7-33 Section 142(b)(1), issued by or on behalf of a state or a political
7-34 subdivision of a state, including a municipal corporate
7-35 instrumentality of one or more states or a public agency or
7-36 authority of a state or political subdivision of a state.
7-37 (e) Notwithstanding Subsections (a) and (b), subject to the
7-38 exercise of prudent banking judgment, a state bank may deal in,
7-39 underwrite, or purchase for its own account, including for purposes
7-40 of Subsection (c) obligations as to which the bank is under
7-41 commitment, the following:
7-42 (1) obligations [(6) investment securities] issued
7-43 [or guaranteed] by a development bank, corporation, or other entity
7-44 created by international agreement if the United States is a member
7-45 and a capital stock shareholder;
7-46 (2) obligations issued by a state or political
7-47 subdivision or an agency of a state or political subdivision for
7-48 housing, university, or dormitory purposes, that are at the time
7-49 eligible for purchase by a state bank for its own account [the
7-50 North American Development Bank]; or
7-51 (3) bonds, notes, and other obligations issued by the
7-52 Tennessee Valley Authority or by the United States Postal Service
7-53 [(7) securities issued by a Federal Home Loan Bank].
7-54 (f) [Subsection (b) does not apply to an obligation issued
7-55 by a state or an agency or political subdivision of a state for
7-56 housing, higher education, health care, or public welfare purposes
7-57 if, before dealing in, underwriting, or purchasing the obligation,
7-58 the bank evaluates the obligation to determine whether the
7-59 obligation is of sufficient investment quality and marketability
7-60 for investment by the bank and whether the obligation has been
7-61 issued for the appropriate purpose by a qualifying issuer. A bank
7-62 that has made a firm commitment to underwrite an obligation is
7-63 considered to hold the obligation for purposes of the limitations
7-64 of Subsection (d).]
7-65 [(g) Notwithstanding 15 U.S.C. Section 77r-1(c), Subsection
7-66 (d) applies to investments in small business related securities as
7-67 defined by 15 U.S.C. Section 78c(a).]
7-68 [(h)] A state bank may not invest more than an amount equal
7-69 to the lesser of 25 percent of the bank's [its] capital and
8-1 certified surplus or the bank's total equity capital in investment
8-2 grade adjustable rate preferred stock and money market (auction
8-3 rate) preferred stock.
8-4 (g) [(i)] A state bank may deposit money in a federally
8-5 insured financial institution, a Federal Reserve Bank, or a Federal
8-6 Home Loan Bank without limitation.
8-7 (h) [(j)] The finance commission may adopt rules to
8-8 administer and carry out this section, including rules to:
8-9 (1) define or further define terms used by this
8-10 section;
8-11 (2) establish limits, requirements, or exemptions
8-12 other than those specified by this section for particular classes
8-13 or categories of [investment] securities; and [or]
8-14 (3) limit or expand investment authority for state
8-15 banks for particular classes or categories of [investment]
8-16 securities.
8-17 SECTION 10. Sections 34.103(a)-(d), Finance Code, are amended
8-18 to read as follows:
8-19 (a) Subject to this section and except [Except] as otherwise
8-20 provided by this subtitle or rules adopted under this subtitle, a
8-21 state bank may conduct any activity or make any investment through
8-22 an operating subsidiary that a state bank or a bank holding
8-23 company, including a financial holding company, is authorized to
8-24 conduct or make under [the laws of this] state or federal law if
8-25 the operating subsidiary is adequately empowered and appropriately
8-26 licensed to conduct its business.
8-27 (b) Except for investment in a subsidiary engaging solely in
8-28 activities that may be engaged in directly by the bank and that are
8-29 conducted on the same terms and conditions that govern the conduct
8-30 of the activities by the bank, a state bank without the prior
8-31 written approval of the banking commissioner may not invest more
8-32 than an amount equal to 10 percent of the lesser of its capital and
8-33 certified surplus or the bank's total equity capital in a single
8-34 subsidiary [and may not invest more than the amount of its equity
8-35 capital in all subsidiaries]. For purposes of this subsection, the
8-36 [The] amount of a state bank's investment in a subsidiary is the
8-37 sum of the amount of the bank's investment in [equity or
8-38 investment] securities issued by the subsidiary and any loans and
8-39 extensions of credit from the bank to the subsidiary.
8-40 (c) A state bank may not establish or acquire a subsidiary
8-41 or a controlling interest in a subsidiary that engages in
8-42 activities as principal in which [as provided by 12 C.F.R. Section
8-43 337.4 to conduct securities activities that] the bank is prohibited
8-44 from engaging [conducting] directly unless:
8-45 (1) the state bank's investment in the subsidiary has
8-46 been approved by the Federal Deposit Insurance Corporation under
8-47 Section 24, Federal Deposit Insurance Act (12 U.S.C. Section
8-48 1831a); or
8-49 (2) with respect to a subsidiary engaged in activities
8-50 as principal that a national bank may conduct only through a
8-51 financial subsidiary, including firm underwriting of equity
8-52 securities other than as permitted by Section 34.101, and not
8-53 otherwise engaged in activities as principal that are impermissible
8-54 for a state bank or a financial subsidiary of a national bank, the
8-55 subsidiary's activities and the bank's investment are in compliance
8-56 with the restrictions and requirements of Section 46, Federal
8-57 Deposit Insurance Act (12 U.S.C. Section 1831w).
8-58 (d) Except as otherwise provided by this subtitle or a rule
8-59 adopted under this subtitle, a state bank may not make a
8-60 non-controlling minority investment in equity securities of a
8-61 company unless:
8-62 (1) the investment or company is described by
8-63 Subsection (c)(2) or Section 34.104 or 34.105;
8-64 (2) the company engages solely in activities that are
8-65 part of or incidental to the permissible business of a state bank
8-66 under this subtitle and:
8-67 (A) the state bank is adequately empowered to
8-68 prevent the company from engaging in activities not part of or
8-69 incidental to the permissible business of a state bank or, as a
9-1 practical matter, is otherwise enabled to withdraw or liquidate its
9-2 investment in the company in such an event;
9-3 (B) as a legal and accounting matter, the loss
9-4 exposure of the state bank with respect to the activities of the
9-5 company is limited and does not include any open-ended liability
9-6 for an obligation of the company; and
9-7 (C) the investment is convenient or useful to
9-8 the state bank in carrying out its business and is not a mere
9-9 passive investment unrelated to the bank's banking business; or
9-10 (3) the investment is made indirectly through an
9-11 operating subsidiary in equity securities issued by [of]:
9-12 (A) [(1)] another bank;
9-13 (B) [(2)] a company that engages solely in an
9-14 activity that is permissible for a bank service corporation or a
9-15 bank holding company subsidiary; or
9-16 (C) [(3)] a company that engages solely in
9-17 activities as agent or trustee or in a brokerage, custodial,
9-18 advisory, or administrative capacity, or in a substantially similar
9-19 capacity.
9-20 SECTION 11. Section 34.107, Finance Code, is amended to read
9-21 as follows:
9-22 Sec. 34.107. ENGAGING IN COMMERCE PROHIBITED. (a) A state
9-23 bank may not buy, sell, or otherwise deal in goods in trade or
9-24 commerce or own or operate a business not part of the business of
9-25 banking except:
9-26 (1) as necessary to avoid or minimize a loss on a loan
9-27 or investment previously made in good faith; or
9-28 (2) as otherwise provided by this subtitle or rules
9-29 adopted under this subtitle.
9-30 (b) Engaging in an approved activity, directly or through a
9-31 subsidiary, that is a financial activity or incidental or
9-32 complementary to a financial activity, whether as principal or
9-33 agent, is not considered to be engaging in commerce.
9-34 SECTION 12. Section 34.201(a), Finance Code, is amended to
9-35 read as follows:
9-36 (a) Without the prior written approval of the banking
9-37 commissioner, the total loans and extensions of credit by a state
9-38 bank to a person outstanding at one time may not exceed an amount
9-39 equal to 25 percent of the lesser of the bank's capital and
9-40 certified surplus or the bank's total equity capital. This
9-41 limitation does not apply to:
9-42 (1) liability as endorser or guarantor of commercial
9-43 or business paper discounted by or assigned to the bank by its
9-44 owner who has acquired it in the ordinary course of business;
9-45 (2) indebtedness evidenced by bankers' acceptances as
9-46 described by 12 U.S.C. Section 372 and issued by other banks;
9-47 (3) indebtedness secured by a bill of lading,
9-48 warehouse receipt, or similar document transferring or securing
9-49 title to readily marketable goods, except that:
9-50 (A) the goods must be insured if it is customary
9-51 to insure those goods; and
9-52 (B) the aggregate indebtedness of a person under
9-53 this subdivision may not exceed an amount equal to 50 percent of
9-54 the lesser of the bank's capital and certified surplus or the
9-55 bank's total equity capital;
9-56 (4) indebtedness evidenced by notes or other paper
9-57 secured by liens on agricultural products in secure and properly
9-58 documented storage in bonded warehouses or elevators if the value
9-59 of the collateral is not less than 125 percent of the amount of the
9-60 indebtedness and the bank's interest in the collateral is
9-61 adequately insured against loss, except that the aggregate
9-62 indebtedness of a person under this subdivision may not exceed an
9-63 amount equal to 50 percent of the lesser of the bank's capital and
9-64 certified surplus or the bank's total equity capital;
9-65 (5) indebtedness of another depository institution
9-66 arising out of loans with settlement periods of less than one week;
9-67 (6) indebtedness arising out of the daily transaction
9-68 of the business of a clearinghouse association in this state;
9-69 (7) liability under an agreement by a third party to
10-1 repurchase from the bank an investment security listed in Section
10-2 34.101(d) [34.101(e)] to the extent that the agreed repurchase
10-3 price does not exceed the original purchase price to the bank or
10-4 the market value of the investment security;
10-5 (8) the portion of an indebtedness that this state, an
10-6 agency or political subdivision of this state, the United States,
10-7 or an instrumentality of the United States has unconditionally
10-8 agreed to repay, purchase, insure, or guarantee;
10-9 (9) indebtedness secured by [investment] securities
10-10 listed in Section 34.101(d) [34.101(e)] to the extent that the
10-11 market value of the [investment] securities equals or exceeds the
10-12 indebtedness;
10-13 (10) the portion of an indebtedness that is fully
10-14 secured by a segregated deposit account in the lending bank;
10-15 (11) loans and extensions of credit arising from the
10-16 purchase of negotiable or nonnegotiable installment consumer paper
10-17 that carries a full recourse endorsement or unconditional guarantee
10-18 by the person transferring the paper if:
10-19 (A) the bank's files or the knowledge of its
10-20 officers of the financial condition of each maker of the consumer
10-21 paper is reasonably adequate; and
10-22 (B) an officer of the bank designated for that
10-23 purpose by the board certifies in writing that the bank is relying
10-24 primarily on the responsibility of each maker for payment of the
10-25 loans or extensions of credit and not on a full or partial recourse
10-26 endorsement or guarantee by the transferor;
10-27 (12) the portion of an indebtedness in excess of the
10-28 limitation of this subsection that is fully secured by marketable
10-29 securities or bullion with a market value at least equal to the
10-30 amount of the overage, as determined by reliable and continuously
10-31 available price quotations, except that the exempted indebtedness
10-32 or overage of a person under this subdivision may not exceed an
10-33 amount equal to 15 percent of the lesser of the bank's capital and
10-34 certified surplus or the bank's total equity capital;
10-35 (13) indebtedness of an affiliate of the bank if the
10-36 transaction with the affiliate is subject to the restrictions and
10-37 limitations of 12 U.S.C. Section 371c;
10-38 (14) indebtedness of an operating subsidiary of the
10-39 bank other than a subsidiary described by Section 34.103(c)(2); and
10-40 (15) the portion of the indebtedness of a person
10-41 secured in good faith by a purchase money lien taken by the bank in
10-42 exchange for the sale of real or personal property owned by the
10-43 bank if the sale is in the best interest of the bank.
10-44 SECTION 13. Sections 34.204(a) and (b) , Finance Code, are
10-45 amended to read as follows:
10-46 (a) [A state bank may purchase or construct a public
10-47 facility and, as holder of legal title, lease the facility to a
10-48 public authority having sufficient resources to pay all rentals as
10-49 they become due. A lease under this subsection must provide that
10-50 legal title to the property transfers to the lessee on consummation
10-51 and expiration of the lease.]
10-52 [(b)] Subject to rules adopted under this subtitle, a state
10-53 bank may, directly or indirectly through an operating subsidiary,
10-54 provide the equivalent of a financing transaction by acting as
10-55 lessor under a lease for the benefit [become the owner and lessor
10-56 of tangible personal property for lease financing transactions on a
10-57 net lease basis on the specific request and for the use] of a
10-58 customer.
10-59 (b) Without the written approval of the banking commissioner
10-60 to continue holding property acquired for leasing purposes under
10-61 this subsection, the bank may not hold personal [the] property more
10-62 than six months or real property more than two years after the date
10-63 of expiration of the original or any extended or renewed lease
10-64 period agreed to by the customer for whom the property was acquired
10-65 or by a subsequent lessee.
10-66 SECTION 14. Section 59.005, Finance Code, is amended to read
10-67 as follows:
10-68 Sec. 59.005. AGENCY ACTIVITIES. (a) A financial institution
10-69 [state bank] may[, on compliance with this section, agree to]
11-1 receive deposits, renew time deposits, close loans, service loans,
11-2 receive payments on loans and other obligations, and perform other
11-3 services[, with the prior approval of the banking commissioner,] as
11-4 an agent for another financial institution under a written agency
11-5 agreement.
11-6 (b) [A state bank that proposes to enter into an agency
11-7 agreement under this section shall file a letter with the banking
11-8 commissioner, not later than 30 days before the effective date of
11-9 the agreement, setting forth:]
11-10 [(1) a notice of intention to enter into an agency
11-11 agreement with a financial institution;]
11-12 [(2) a description of the services proposed to be
11-13 performed under the agency agreement;]
11-14 [(3) a copy of the agency agreement; and]
11-15 [(4) other information the banking commissioner
11-16 requests.]
11-17 [(c) If a proposed service is not specifically designated in
11-18 Subsection (a) and has not previously been approved by rule or in
11-19 an opinion or interpretation issued by the banking commissioner,
11-20 the banking commissioner shall decide whether to approve the
11-21 offering of the service on or before the 30th day after the date of
11-22 receipt of the notice required by Subsection (b). In deciding
11-23 whether to approve a proposed service that is not specifically
11-24 designated by Subsection (a) or in a rule or prior opinion or
11-25 interpretation, the banking commissioner shall consider whether the
11-26 service would be consistent with applicable federal and state law
11-27 and the safety and soundness of the principal and agent.]
11-28 [(d) A proposed service subject to Subsection (c) is
11-29 considered approved if the banking commissioner does not take
11-30 action on the notice required by Subsection (b) within the time
11-31 limits specified by Subsection (c). The banking commissioner may
11-32 extend the 30-day period on a determination that the bank's letter
11-33 raises issues that require additional information or additional
11-34 time for analysis. If the period is extended, the bank may engage
11-35 in the proposed service only on prior written approval of the
11-36 banking commissioner.]
11-37 [(e)] A financial institution [state bank] may not under an
11-38 agency agreement:
11-39 (1) conduct an activity as agent that it would be
11-40 prohibited from conducting as a principal under applicable state or
11-41 federal law; or
11-42 (2) have an agent conduct an activity that the bank as
11-43 principal would be prohibited from conducting under applicable
11-44 state or federal law.
11-45 (c) [(f)] The banking commissioner may order a state bank or
11-46 another financial institution subject to the banking commissioner's
11-47 enforcement powers to cease acting as an agent or principal under
11-48 an agency agreement in a manner that the banking commissioner finds
11-49 to be inconsistent with safe and sound banking practices or
11-50 governing law.
11-51 (d) [(g)] Notwithstanding another law, a financial
11-52 institution [state bank] acting as an agent for another [a]
11-53 financial institution in accordance with this section is not
11-54 considered to be a branch of the [that] institution acting as
11-55 principal[, and a financial institution acting as an agent for a
11-56 state bank in accordance with this section is not considered to be
11-57 a branch of the state bank].
11-58 (e) [(h)] This section does not affect:
11-59 (1) authority under another law for a financial
11-60 [depository] institution to act as an agent on behalf of another
11-61 person or to act as a principal in employing another person as
11-62 agent; or
11-63 (2) whether an agent's activities on behalf of a
11-64 financial [depository] institution under another law would cause
11-65 the agent to be considered a branch of the financial [depository]
11-66 institution.
11-67 SECTION 15. Section 59.006(a), Finance Code, is amended to
11-68 read as follows:
11-69 (a) This section provides the exclusive method for compelled
12-1 discovery of a record of a financial institution relating to one or
12-2 more customers but[. This section] does not create a right of
12-3 privacy in a record. This section [and] does not apply to and does
12-4 not require or authorize a financial institution to give a customer
12-5 notice of:
12-6 (1) a demand or inquiry from a state or federal
12-7 government agency authorized by law to conduct an examination of
12-8 the financial institution;
12-9 (2) a record request from a state or federal
12-10 government agency or instrumentality under statutory or
12-11 administrative authority that provides for, or is accompanied by, a
12-12 specific mechanism for discovery and protection of a customer
12-13 record of a financial institution, including a record request from
12-14 a federal agency subject to the Right to Financial Privacy Act of
12-15 1978 (12 U.S.C. Section 3401 et seq.), as amended, or from the
12-16 Internal Revenue Service under Section 1205, Internal Revenue Code
12-17 of 1986;
12-18 (3) a record request from or report to a government
12-19 agency arising out of the investigation or prosecution of a
12-20 criminal offense;
12-21 (4) a record request in connection with a garnishment
12-22 proceeding in which the financial institution is garnishee and the
12-23 customer is debtor;
12-24 (5) a record request by a duly appointed receiver for
12-25 the customer;
12-26 (6) an investigative demand or inquiry from a state
12-27 legislative investigating committee;
12-28 (7) an investigative demand or inquiry from the
12-29 attorney general of this state as authorized by law other than the
12-30 procedural law governing discovery in civil cases; or
12-31 (8) the voluntary use or disclosure of a record by a
12-32 financial institution subject to other applicable state or federal
12-33 law.
12-34 SECTION 16. Subchapter A, Chapter 59, Finance Code, is
12-35 amended by adding Section 59.010 to read as follows:
12-36 Sec. 59.010. CONFIDENTIALITY OF ADMINISTRATIVE SUBPOENA. (a)
12-37 Except to the extent disclosure is necessary to locate and produce
12-38 responsive records, an administrative subpoena that meets the
12-39 requirements of Subsection (b) and is served on a financial
12-40 institution may provide that the financial institution to whom the
12-41 subpoena is directed may not:
12-42 (1) disclose that the subpoena has been issued;
12-43 (2) identify or describe any records requested in the
12-44 subpoena; or
12-45 (3) disclose whether records have been furnished in
12-46 response to the subpoena.
12-47 (b) The government agency issuing the subpoena may prohibit
12-48 the disclosure of information described in Subsection (a) only if
12-49 the agency finds, and the subpoena states the agency's finding
12-50 that:
12-51 (1) the records relate to an ongoing criminal
12-52 investigation by the agency; and
12-53 (2) the disclosure could significantly impede or
12-54 jeopardize the investigation.
12-55 (c) For purposes of this section, "administrative subpoena"
12-56 means a valid and enforceable subpoena requesting customer records,
12-57 issued under the laws of this state by a government agency
12-58 exercising investigatory or adjudicative functions with respect to
12-59 a matter within the agency's jurisdiction.
12-60 SECTION 17. Sections 181.002(a)(1), (9), (10), (18), (26),
12-61 (27), (48), and (50), Finance Code, are amended to read as follows:
12-62 (1) "Account" means the client relationship
12-63 established with a trust institution [company] involving the
12-64 transfer of funds or property to the trust institution [company],
12-65 including a relationship in which the trust institution [company]
12-66 acts as trustee, executor, administrator, guardian, custodian,
12-67 conservator, receiver, registrar, or agent.
12-68 (9) "Charter" means a [corporate] charter issued under
12-69 this subtitle to engage in a trust business.
13-1 (10) "Client" means a person to whom a trust
13-2 institution [company] owes a duty or obligation under a trust or
13-3 other account administered by the trust institution [company],
13-4 regardless of whether the trust institution [company] owes a
13-5 fiduciary duty to the person. The term includes a beneficiary of a
13-6 trust for whom the trust institution [company] acts as trustee and
13-7 a person for whom the trust institution [company] acts as agent,
13-8 custodian, or bailee.
13-9 (18) "Fiduciary record" means a matter written,
13-10 transcribed, recorded, received, or otherwise in the possession of
13-11 a trust institution [company] that is necessary to preserve
13-12 information concerning an act or event relevant to an account of a
13-13 trust institution [company].
13-14 (26) "Investment security" means a marketable
13-15 obligation evidencing indebtedness of a person in the form of a
13-16 bond, note, debenture, or investment security [other debt
13-17 instrument not otherwise classified as a loan or extension of
13-18 credit].
13-19 (27) "Limited trust association" means a state trust
13-20 company organized under this subtitle as a limited liability
13-21 company [trust association], authorized to issue participation
13-22 shares, and controlled by its participants.
13-23 (48) "Trust association" means a trust company
13-24 organized under this subtitle as a corporation [trust association],
13-25 authorized to issue shares of stock, and controlled by its
13-26 shareholders.
13-27 (50) "Trust deposits" means client funds held by a
13-28 [state] trust institution [company] and authorized to be deposited
13-29 with itself as a permanent investment or pending investment,
13-30 distribution, or payment of debts on behalf of the client.
13-31 SECTION 18. Section 181.003(a), Finance Code, is amended to
13-32 read as follows:
13-33 (a) The finance commission may adopt rules to accomplish the
13-34 purposes of this subtitle, including rules necessary or reasonable
13-35 to:
13-36 (1) implement and clarify this subtitle;
13-37 (2) preserve or protect the safety and soundness of
13-38 state trust companies;
13-39 (3) grant the same rights and privileges to state
13-40 trust companies with respect to the exercise of fiduciary powers
13-41 and the conducting of financial activities or activities incidental
13-42 or complementary to financial activities that are or may be granted
13-43 to a trust institution that maintains its principal office or a
13-44 branch or trust office in this state;
13-45 (4) provide for recovery of the cost of maintenance
13-46 and operation of the department and the cost of enforcing this
13-47 subtitle through the imposition and collection of ratable and
13-48 equitable fees for notices, applications, and examinations; and
13-49 (5) facilitate the fair hearing and adjudication of
13-50 matters before the banking commissioner and the finance commission.
13-51 SECTION 19. Section 181.303, Finance Code, is amended to read
13-52 as follows:
13-53 Sec. 181.303. DISCLOSURE TO OTHER AGENCIES. (a) For
13-54 purposes of this section, "affiliated group," "agency," "functional
13-55 regulatory agency," and "privilege" have the meanings assigned by
13-56 Section 31.303 [On request and on execution of an appropriate
13-57 confidentiality agreement approved by the banking commissioner, the
13-58 banking commissioner may:]
13-59 [(1) disclose to a federal banking regulatory agency
13-60 confidential information concerning a state trust company within
13-61 the agency's jurisdiction or an affiliate or service provider of
13-62 the state trust company; and]
13-63 [(2) permit the agency access to files and records or
13-64 reports relating to the state trust company or its affiliate or
13-65 service provider].
13-66 (b) The banking commissioner may, as the banking
13-67 commissioner considers necessary or proper to the enforcement of
13-68 the laws of this state, another state, the United States, or a
13-69 foreign sovereign state with whom the United States currently
14-1 maintains diplomatic relations, or in the best interest of the
14-2 public, disclose [or authorize release of confidential] information
14-3 in the possession of the department to another [department of this
14-4 state, another state, the United States, a foreign sovereign state,
14-5 or any related] agency [or instrumentality]. The banking
14-6 commissioner may not disclose information under this section that
14-7 is confidential under applicable state or federal law unless:
14-8 (1) the recipient agency agrees to maintain the
14-9 confidentiality and take all reasonable steps to oppose an effort
14-10 to secure disclosure of the information from the agency; or
14-11 (2) the banking commissioner determines in the
14-12 exercise of discretion that the interest of law enforcement
14-13 outweighs and justifies the potential for disclosure of the
14-14 information by the recipient agency.
14-15 (c) The banking commissioner by agreement may establish an
14-16 information sharing and exchange program with a functional
14-17 regulatory agency that has overlapping regulatory jurisdiction with
14-18 the department, with respect to all or part of an affiliated group,
14-19 including a financial institution, to reduce the potential for
14-20 duplicative and burdensome filings, examinations, and other
14-21 regulatory activities. Each agency party to the agreement must
14-22 agree to maintain confidentiality of information that is
14-23 confidential under applicable state or federal law and take all
14-24 reasonable steps to oppose any effort to secure disclosure of the
14-25 information from the agency. An agreement may also specify
14-26 procedures regarding use and handling of confidential information
14-27 and identify types of information to be shared and procedures for
14-28 sharing on a recurring basis.
14-29 (d) Disclosure of information by or to the banking
14-30 commissioner under this section does not constitute a waiver of or
14-31 otherwise affect or diminish an evidentiary privilege to which the
14-32 information is otherwise subject, whether or not the disclosure is
14-33 governed by a confidentiality agreement.
14-34 (e) Notwithstanding other law, an agency of this state:
14-35 (1) may execute, honor, and comply with an agreement
14-36 to maintain confidentiality and oppose disclosure of information
14-37 obtained from the banking commissioner as provided in this section;
14-38 and
14-39 (2) shall treat as confidential any information
14-40 obtained from the banking commissioner that is entitled to
14-41 confidential treatment under applicable state or federal law and
14-42 take all reasonable steps to oppose an effort to secure disclosure
14-43 of the information from the agency.
14-44 SECTION 20. Section 182.001, Finance Code, is amended by
14-45 amending Subsections (a)-(c) and adding Subsection (g) to read as
14-46 follows:
14-47 (a) Subject to Subsection (g) and the other provisions of
14-48 this chapter, one or more persons may organize and charter a state
14-49 trust company as a state trust association or a limited trust
14-50 association.
14-51 (b) A state trust company may engage in the trust business
14-52 by:
14-53 (1) acting as trustee under a written agreement;
14-54 (2) receiving money and other property in its capacity
14-55 as trustee for investment in real or personal property;
14-56 (3) acting as trustee and performing the fiduciary
14-57 duties committed or transferred to it by order of a court;
14-58 (4) acting as executor, administrator, or trustee of
14-59 the estate of a deceased person;
14-60 (5) acting as a custodian, guardian, conservator, or
14-61 trustee for a minor or incapacitated person;
14-62 (6) acting as a successor fiduciary to a trust
14-63 institution or other fiduciary;
14-64 (7) receiving for safekeeping personal property;
14-65 (8) acting as custodian, assignee, transfer agent,
14-66 escrow agent, registrar, or receiver;
14-67 (9) acting as investment advisor, agent, or attorney
14-68 in fact according to an applicable agreement;
14-69 (10) with the prior written approval of the banking
15-1 commissioner and to the extent consistent with applicable fiduciary
15-2 principles, engaging in a financial activity or an activity
15-3 incidental or complementary to a financial activity, directly or
15-4 through a subsidiary;
15-5 (11) exercising additional powers expressly conferred
15-6 by rule of the finance commission; and
15-7 (12) [(11)] exercising any incidental power that is
15-8 reasonably necessary to enable it to fully exercise the powers
15-9 expressly conferred according to commonly accepted fiduciary
15-10 customs and usages.
15-11 (c) For purposes of other state law, a trust association is
15-12 considered a corporation and a limited trust association is
15-13 considered a limited liability company. To the extent consistent
15-14 with this subtitle [Subject to Section 182.009], a [state] trust
15-15 association [company] may exercise the powers of a Texas business
15-16 corporation and a limited trust association may exercise the powers
15-17 of a Texas limited liability company as [that are] reasonably
15-18 necessary to enable exercise of [its] specific powers under this
15-19 subtitle.
15-20 (g) In the exercise of discretion consistent with the
15-21 purposes of this subtitle, the banking commissioner may require a
15-22 state trust company to conduct an otherwise authorized activity
15-23 through a subsidiary.
15-24 SECTION 21. Section 182.009, Finance Code, is amended to read
15-25 as follows:
15-26 Sec. 182.009. APPLICATION OF [LAWS RELATING TO] GENERAL
15-27 CORPORATE LAW [BUSINESS CORPORATIONS]. (a) The Texas Business
15-28 Corporation Act and the Texas Miscellaneous Corporation Laws Act
15-29 (Article 1302-1.01 et seq., Vernon's Texas Civil Statutes) are
15-30 incorporated into this chapter and apply to a [state] trust
15-31 association, and the Texas Limited Liability Company Act (Article
15-32 1528n, Vernon's Texas Civil Statutes) applies to a limited trust
15-33 association, [company] as if they were part of this subtitle to the
15-34 extent not inconsistent with this subtitle or the proper business
15-35 of a state trust company, except that:
15-36 (1) a reference to the secretary of state means the
15-37 banking commissioner unless the context requires otherwise; and
15-38 (2) the right of shareholders or participants to
15-39 cumulative voting in the election of directors or managers exists
15-40 only if granted by the state trust company's articles of
15-41 association.
15-42 (b) Unless expressly authorized by this subtitle or a rule
15-43 of the finance commission, a state trust company may not take an
15-44 action authorized by a law listed under Subsection (a) [the Texas
15-45 Business Corporation Act] regarding its corporate status, capital
15-46 structure, or a matter of corporate governance, of the type for
15-47 which a law listed under Subsection (a) [the Texas Business
15-48 Corporation Act] would require a filing with the secretary of state
15-49 if the state trust company were a business corporation or a limited
15-50 liability company, without submitting the filing to the banking
15-51 commissioner for prior written approval of the action.
15-52 (c) The finance commission may adopt rules to alter or
15-53 supplement the procedures and requirements of the laws listed by
15-54 Subsection (a) [Texas Business Corporation Act or the Texas
15-55 Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,
15-56 Vernon's Texas Civil Statutes)] applicable to an action taken under
15-57 this chapter by a state trust company.
15-58 [(d) This chapter may not be construed to mean that a state
15-59 trust company is a corporation incorporated under or governed by
15-60 the Texas Business Corporation Act or the Texas Miscellaneous
15-61 Corporation Laws Act (Article 1302-1.01 et seq., Vernon's Texas
15-62 Civil Statutes).]
15-63 SECTION 22. Subchapter A, Chapter 182, Finance Code, is
15-64 amended by adding Section 182.0105 to read as follows:
15-65 Sec. 182.0105. FINANCIAL ACTIVITIES. (a) The finance
15-66 commission by rule may determine that an activity not otherwise
15-67 approved or authorized for state trust companies is:
15-68 (1) a financial activity;
15-69 (2) incidental to a financial activity; or
16-1 (3) complementary to a financial activity.
16-2 (b) In adopting a rule under Subsection (a), the finance
16-3 commission shall consider:
16-4 (1) the purposes of this subtitle and the
16-5 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
16-6 (2) changes or reasonably expected changes in the
16-7 marketplace in which state trust companies compete;
16-8 (3) changes or reasonably expected changes in the
16-9 technology for delivering fiduciary and financial services;
16-10 (4) whether the activity is necessary or appropriate
16-11 to allow a state trust company to:
16-12 (A) compete effectively with another company
16-13 seeking to provide fiduciary and financial services;
16-14 (B) efficiently deliver information and services
16-15 that are financial in nature through the use of technological
16-16 means, including an application necessary to protect the security
16-17 or efficacy of systems for the transmission of data or financial
16-18 transactions; or
16-19 (C) offer customers available or emerging
16-20 technological means for using fiduciary and financial services or
16-21 for the document imaging of data;
16-22 (5) whether the activity would violate applicable
16-23 fiduciary duties or otherwise pose a substantial risk to the safety
16-24 and soundness of a state trust company or the fiduciary and
16-25 financial system generally; and
16-26 (6) if otherwise determined to be permissible, whether
16-27 the conduct of the activity by a state trust company should be
16-28 qualified through the imposition of reasonable and necessary
16-29 conditions to protect the public and require appropriate regard for
16-30 safety and soundness of the trust company and the fiduciary and
16-31 financial system generally.
16-32 (c) A rule adopted by the finance commission under this
16-33 section does not alter or negate applicable licensing and
16-34 regulatory requirements administered by a functional regulatory
16-35 agency of this state, as defined by Section 31.303, including
16-36 licensing and regulatory requirements pertaining to:
16-37 (1) insurance activities;
16-38 (2) securities activities; and
16-39 (3) real estate development, marketing, and sales
16-40 activities.
16-41 SECTION 23. Sections 184.101(d)-(h), Finance Code, are
16-42 amended to read as follows:
16-43 (d) Notwithstanding Subsection (c), a state trust company
16-44 may invest its restricted capital, without limit [limitation and]
16-45 subject [only] to the exercise of prudent judgment, in:
16-46 (1) bonds and other legally created general
16-47 obligations of a state, an agency or political subdivision of a
16-48 state, the United States, or an agency or instrumentality of the
16-49 United States;
16-50 (2) obligations [investment securities] that this
16-51 state, an agency or political subdivision of this state, the United
16-52 States, or an agency or instrumentality of the United States has
16-53 unconditionally agreed to purchase, insure, or guarantee;
16-54 (3) securities that are offered and sold under 15
16-55 U.S.C. Section 77d(5);
16-56 (4) mortgage related securities or small business
16-57 related securities, as those terms are defined by [in] 15 U.S.C.
16-58 Section 78c(a)[, except that notwithstanding Section 347 of the
16-59 Riegle Community Development and Regulatory Improvement Act of
16-60 1994, a note or obligation that is secured by a first lien on one
16-61 or more parcels of real property on which is located one or more
16-62 commercial structures is subject to the limitations of Subsection
16-63 (c)];
16-64 (5) mortgages, obligations, or other securities that
16-65 are or ever have been sold [investment securities issued or
16-66 guaranteed] by the Federal Home Loan Mortgage Corporation under
16-67 Section 305 or 306, Federal Home Loan Mortgage Corporation Act (12
16-68 U.S.C. Sections 1434 and 1455);
16-69 (6) obligations, participations, or other instruments
17-1 of or issued by[,] the Federal National Mortgage Association or[,]
17-2 the Government National Mortgage Association;
17-3 (7) obligations issued by[,] the Federal Agricultural
17-4 Mortgage Corporation, [or] the Federal Farm Credit Banks Funding
17-5 Corporation, or a Federal Home Loan Bank;
17-6 (8) obligations of the Federal Financing Bank or the
17-7 Environmental Financing Authority;
17-8 (9) obligations or other instruments or securities of
17-9 the Student Loan Marketing Association; or
17-10 (10) qualified Canadian government obligations, as
17-11 defined by 12 U.S.C. Section 24
17-12 [(6) investment securities issued or guaranteed by the
17-13 North American Development Bank; or]
17-14 [(7) securities issued by a Federal Home Loan Bank].
17-15 (e) [Notwithstanding 15 U.S.C. Section 77r-1(c), Subsection
17-16 (c) applies to investments in small business related securities as
17-17 defined by 15 U.S.C. Section 78c(a).]
17-18 [(f)] In the exercise of prudent judgment, a state trust
17-19 company shall, at a minimum:
17-20 (1) exercise care and caution to make and implement
17-21 investment and management decisions for the entire investment
17-22 portfolio, taking into consideration the safety and soundness of
17-23 the state trust company;
17-24 (2) pursue an overall investment strategy to enable
17-25 management to make appropriate present and future decisions; and
17-26 (3) consider, to the extent relevant to the decision
17-27 or action:
17-28 (A) the size, diversification, and liquidity of
17-29 its corporate assets;
17-30 (B) the general economic conditions;
17-31 (C) the possible effect of inflation or
17-32 deflation;
17-33 (D) the expected tax consequences of the
17-34 investment decisions or strategies;
17-35 (E) the role that each investment or course of
17-36 action plays within the investment portfolio; and
17-37 (F) the expected total return of the portfolio.
17-38 (f) [(g)] A state trust company may invest its secondary
17-39 capital in any type or character of [equity or investment]
17-40 securities subject to the exercise of prudent judgment according to
17-41 the standards provided by Subsection (e) [(f)].
17-42 (g) [(h)] The finance commission may adopt rules to
17-43 administer and carry out this section, including rules to:
17-44 (1) establish limits, requirements, or exemptions
17-45 other than those specified by this section for particular classes
17-46 or categories of investment; or
17-47 (2) limit or expand investment authority for state
17-48 trust companies for particular classes or categories of securities
17-49 or other property.
17-50 SECTION 24. Section 184.103(a), Finance Code, is amended to
17-51 read as follows:
17-52 (a) Except as otherwise provided by this subtitle or rules
17-53 adopted under this subtitle, and subject to the exercise of prudent
17-54 judgment, a state trust company may invest its secondary capital to
17-55 acquire or establish one or more subsidiaries to conduct any
17-56 activity that may lawfully be conducted through the form of
17-57 organization chosen for the subsidiary. The factors to be
17-58 considered by a state trust company in exercise of prudent judgment
17-59 include the factors contained in Section 184.101(e) [184.101(f)].
17-60 SECTION 25. Section 184.104(c), Finance Code, is amended to
17-61 read as follows:
17-62 (c) Subject to Subsections (a) and (b), to Section 184.105,
17-63 and to the exercise of prudent judgment, a state trust company may
17-64 invest its secondary capital in any type or character of investment
17-65 for the purpose of generating income or profit. The factors to be
17-66 considered by a state trust company in exercise of prudent judgment
17-67 include the factors contained in Section 184.101(e) [184.101(f)].
17-68 SECTION 26. Section 184.105, Finance Code, is amended to read
17-69 as follows:
18-1 Sec. 184.105. ENGAGING IN COMMERCE PROHIBITED. (a) Except
18-2 as otherwise provided by this subtitle or rules adopted under this
18-3 subtitle, a state trust company may not invest its funds in trade
18-4 or commerce by buying, selling, or otherwise dealing goods or by
18-5 owning or operating a business not part of the state trust
18-6 business, except as necessary to fulfill a fiduciary obligation to
18-7 a client.
18-8 (b) Under this section, engaging in an approved financial
18-9 activity or an activity incidental or complementary to a financial
18-10 activity, whether as principal or agent, is not considered to be
18-11 engaging in commerce.
18-12 SECTION 27. Section 201.002(a), Finance Code, is amended by
18-13 amending Subdivisions (5), (19), (30), and (40), and adding
18-14 Subdivisions (46) and (47) to read as follows:
18-15 (5) "Bank holding company" has the meaning assigned by
18-16 Section 2(a), Bank Holding Company Act (12 U.S.C. Section 1841(a)),
18-17 and includes a financial [Texas bank] holding company[, an
18-18 out-of-state bank holding company, and a foreign bank holding
18-19 company unless the context requires otherwise].
18-20 (19) "Foreign bank holding company" means a bank
18-21 holding company that is organized under the laws of a country other
18-22 than the United States or a territory or possession of the United
18-23 States, and includes a foreign financial holding company.
18-24 (30) "Out-of-state bank holding company" means a bank
18-25 holding company whose home state is another state, and includes an
18-26 out-of-state financial holding company.
18-27 (40) "Texas bank holding company" means a bank holding
18-28 company whose home state is this state and that is not controlled
18-29 by a bank holding company other than a Texas bank holding company,
18-30 and includes a Texas financial holding company.
18-31 (46) "Financial holding company" means a bank holding
18-32 company that has elected to be treated as a financial holding
18-33 company under 12 U.S.C. Section 1843(l).
18-34 (47) "Functional regulatory agency" means a department
18-35 or agency of this state, another state, the United States, or a
18-36 foreign government with whom the United States currently maintains
18-37 diplomatic relations that regulates and charters, licenses, or
18-38 registers persons engaged in financial activities or activities
18-39 incidental or complementary to financial activities, including
18-40 activities related to banking, insurance, or securities.
18-41 SECTION 28. Sections 201.003(a) and (b), Finance Code, are
18-42 amended to read as follows:
18-43 (a) The finance commission may adopt rules to accomplish the
18-44 purposes of this subtitle, including rules necessary or reasonable
18-45 to:
18-46 (1) implement and clarify this subtitle in a manner
18-47 consistent with and to the extent permitted by applicable federal
18-48 law;
18-49 (2) preserve or protect the safety and soundness of
18-50 banking in this state;
18-51 (3) grant at least the same rights and privileges to
18-52 Texas state banks that are or may be granted to other depository
18-53 institutions;
18-54 (4) recover the cost of maintaining and operating the
18-55 department and the cost of enforcing this subtitle by imposing and
18-56 collecting ratable and equitable fees for supervision and
18-57 regulation, including fees for notices, applications, and
18-58 examinations; and
18-59 (5) facilitate the fair hearing and adjudication of
18-60 matters before the commissioner and the finance commission.
18-61 (b) In adopting rules, the finance commission shall consider
18-62 the need to:
18-63 (1) coordinate with applicable federal law;
18-64 (2) promote a stable banking environment;
18-65 (3) provide the public with convenient, safe, and
18-66 competitive banking services;
18-67 (4) preserve and promote the competitive position
18-68 [parity] of Texas state banks with regard to other depository
18-69 institutions consistent with the safety and soundness of Texas
19-1 state banks and the Texas state bank system; and
19-2 (5) allow for economic development in this state.
19-3 SECTION 29. Section 201.005, Finance Code, is amended to read
19-4 as follows:
19-5 Sec. 201.005. COOPERATIVE AGREEMENTS; FEES. (a) To carry
19-6 out the purposes of this subtitle, to the extent permitted by
19-7 federal law, the commissioner may:
19-8 (1) enter into cooperative, coordinating, or
19-9 information sharing agreements with another bank supervisory
19-10 agency, a functional regulatory agency, or an organization
19-11 affiliated with or representing one or more bank supervisory
19-12 agencies;
19-13 (2) with respect to periodic examination or other
19-14 supervision or investigation, accept reports of examination or
19-15 investigation by, and reports submitted to, another bank
19-16 supervisory agency or functional regulatory agency in lieu of
19-17 conducting examinations or investigations or receiving reports as
19-18 might otherwise be required or permissible under this subtitle;
19-19 (3) enter into contracts with another bank supervisory
19-20 agency or functional regulatory agency having concurrent regulatory
19-21 or supervisory jurisdiction to engage the services of the agency
19-22 for reasonable compensation to assist in connection with the
19-23 commissioner's performance of official duties under this subtitle
19-24 or other law, or to provide services to the agency for reasonable
19-25 compensation in connection with the agency's performance of
19-26 official duties under law, except that Chapter 2254, Government
19-27 Code, does not apply to the contracts;
19-28 (4) enter into joint examinations or joint enforcement
19-29 actions with another bank supervisory agency or functional
19-30 regulatory agency having concurrent regulatory or supervisory
19-31 jurisdiction, except that the commissioner may independently take
19-32 action under Section 201.009 if the commissioner determines that
19-33 the action is necessary to carry out the commissioner's
19-34 responsibilities under this subtitle or to enforce compliance with
19-35 the laws of this state; and
19-36 (5) assess supervisory and examination fees to be paid
19-37 by a state bank, state savings bank, bank holding company, or
19-38 foreign bank in connection with the commissioner's performance of
19-39 duties under this subtitle.
19-40 (b) Supervisory or examination fees assessed by the
19-41 commissioner in accordance with this subtitle may be shared with
19-42 another bank supervisory agency, a functional regulatory agency, or
19-43 an organization affiliated with or representing one or more bank
19-44 supervisory agencies in accordance with an agreement between the
19-45 commissioner and the agency or organization. The commissioner may
19-46 also receive a portion of supervisory or examination fees assessed
19-47 by another bank supervisory agency or functional regulatory agency
19-48 in accordance with an agreement between the commissioner and the
19-49 agency.
19-50 SECTION 30. Section 202.004, Finance Code, is amended to read
19-51 as follows:
19-52 Sec. 202.004. NONBANKING ACQUISITION, ELECTION, OR ACTIVITY
19-53 [OF NONBANKING INSTITUTION]. (a) A bank holding company doing
19-54 business in this state that submits an application, election, or
19-55 notice to the Board of Governors of the Federal Reserve System
19-56 under [regarding an acquisition or activity regulated by] Section
19-57 4, Bank Holding Company Act (12 U.S.C. Section 1843), that involves
19-58 or will involve an office location in this state shall submit to
19-59 the commissioner a copy of the application, election, or notice
19-60 when the application, election, or notice is submitted to the board
19-61 of governors, including a notice or application to acquire a
19-62 nonbanking institution, an election to be treated as a financial
19-63 holding company, or a request, proposal, or application to engage
19-64 in an activity that is or may be a financial activity or an
19-65 activity incidental or complementary to a financial activity. The
19-66 bank holding company shall submit other information reasonably
19-67 requested by the commissioner to determine the manner in which the
19-68 acquisition, election, or activity will directly or indirectly
19-69 affect residents of this state.
20-1 (b) To assist in determining whether to disapprove the
20-2 proposed acquisition, election, or activity, the commissioner may
20-3 hold a public hearing as provided by Section 31.201, regardless of
20-4 whether requested to do so by a person, regarding the proposed
20-5 acquisition, election, or activity and its effect on this state.
20-6 The commissioner shall convene a hearing if the bank holding
20-7 company requests a hearing in writing when it submits the
20-8 application, election, or notice to the commissioner.
20-9 (c) The commissioner shall disapprove the proposed
20-10 acquisition, election, or activity if the commissioner determines
20-11 that the acquisition, election, or activity would be detrimental to
20-12 the public interest as a result of probable adverse effects,
20-13 including undue concentration of resources, decreased or unfair
20-14 competition, conflicts of interest, or unsound banking practices.
20-15 (d) If the commissioner determines to disapprove the
20-16 proposed acquisition, election, or activity, the commissioner may
20-17 prepare and file a response to the application, election, or notice
20-18 with the board of governors and may request that a hearing be held.
20-19 If the board of governors grants the request, the commissioner
20-20 shall appear and present evidence at the hearing regarding the
20-21 reasons the proposed acquisition, election, or activity should be
20-22 denied.
20-23 (e) If the board of governors approves a proposed
20-24 acquisition, election, or activity that the commissioner
20-25 disapproved, the commissioner may accept the decision or seek to
20-26 overturn the decision on appeal as provided by Section 9, Bank
20-27 Holding Company Act (12 U.S.C. Section 1848).
20-28 SECTION 31. Chapter 202, Finance Code, is amended by adding
20-29 Section 202.006 to read as follows:
20-30 Sec. 202.006. FINANCIAL ACTIVITIES. (a) A financial holding
20-31 company may engage in a financial activity or an activity
20-32 incidental or complementary to a financial activity if the activity
20-33 has been authorized by:
20-34 (1) the Board of Governors of the Federal Reserve
20-35 System under 12 U.S.C. Section 1843(k); or
20-36 (2) a rule adopted by the finance commission under
20-37 Subsection (b).
20-38 (b) The finance commission by rule may determine that an
20-39 activity not otherwise approved or authorized under this chapter,
20-40 federal law, or other law is:
20-41 (1) a financial activity;
20-42 (2) incidental to a financial activity; or
20-43 (3) complementary to a financial activity.
20-44 (c) In adopting a rule under Subsection (b), the finance
20-45 commission shall consider:
20-46 (1) the purposes of this subtitle and the
20-47 Gramm-Leach-Bliley Act (Pub. L. No. 106-102);
20-48 (2) changes or reasonably expected changes in the
20-49 marketplace in which financial holding companies compete;
20-50 (3) changes or reasonably expected changes in the
20-51 technology for delivering financial services;
20-52 (4) whether the activity is necessary or appropriate
20-53 to allow a financial holding company to:
20-54 (A) compete effectively with another company
20-55 seeking to provide financial services;
20-56 (B) efficiently deliver information and services
20-57 that are financial in nature through the use of technological
20-58 means, including an application necessary to protect the security
20-59 or efficacy of systems for the transmission of data or financial
20-60 transactions; or
20-61 (C) offer customers available or emerging
20-62 technological means for using financial services or for the
20-63 document imaging of data; and
20-64 (5) if otherwise determined to be permissible, whether
20-65 the conduct of the activity by a financial holding company should
20-66 be qualified through the imposition of reasonable and necessary
20-67 conditions to protect the public and require appropriate regard for
20-68 safety and soundness of the holding company's subsidiary banks and
20-69 the financial system generally.
21-1 (d) A determination by the board of governors under federal
21-2 law or by a rule of the finance commission under this section does
21-3 not alter or negate applicable licensing and regulatory
21-4 requirements administered by a functional regulatory agency of this
21-5 state.
21-6 SECTION 32. (a) In accordance with Section 311.031(c),
21-7 Government Code, which gives effect to a substantive amendment
21-8 enacted by the same legislature that codifies the amended statute,
21-9 the text of Sections 181.003(a) and 182.001(b), Finance Code, as
21-10 set out in Sections 18 and 20 of this Act, respectively, give
21-11 effect to the changes made by Chapter 344, Acts of the 76th
21-12 Legislature, Regular Session, 1999.
21-13 (b) To the extent of any conflict, this Act prevails over
21-14 another Act of the 77th Legislature, Regular Session, 2001,
21-15 relating to nonsubstantive additions to and corrections in enacted
21-16 codes.
21-17 SECTION 33. This Act takes effect September 1, 2001.
21-18 * * * * *