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  H.B. No. 2007
 
AN ACT
relating to modernization of the regulation of banking in this
state.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
       SECTION 1.  Subchapter B, Chapter 12, Finance Code, is
amended by adding Section 12.1085 to read as follows:
       Sec. 12.1085.  FINANCIAL LITERACY PROGRAM.  (a)  The
department shall seek to improve the financial literacy and
education of persons in this state and to encourage access to
mainstream financial products and services by persons who have not
previously participated in the conventional finance system, by:
             (1)  coordinating, encouraging, and aiding banks in the
development and promotion of financial literacy and education
programs and community outreach;
             (2)  serving as a clearinghouse of information about
financial literacy and education programs;
             (3)  creating and maintaining a resource bank of
materials pertaining to financial literacy; and
             (4)  promoting replication of best practices and
exemplary programs that foster financial literacy and education.
       (b)  The department may solicit and accept a gift, grant, or
donation from any source, including a foundation, private entity,
governmental entity, or institution of higher education, to assist
in the implementation of this section.
       SECTION 2.  Section 31.105, Finance Code, is amended to read
as follows:
       Sec. 31.105.  EXAMINATION REQUIRED.  (a)  The banking
commissioner shall examine each state bank annually, or on another
periodic basis as may be required by rule or policy, or [not less
than once during each 12-month period, except that this examination
is required not less than once during each 18-month period if the
state bank:
             [(1)has total assets of less than $250 million;
             [(2)  is well capitalized, as defined by Section 38,
Federal Deposit Insurance Act (12 U.S.C. Section 1831o);
             [(3)  was found to be well managed at its most recent
examination, and its composite condition:
                   [(A)was found to be outstanding; or
                   [(B)  was found to be outstanding or good, in the
case of a state bank that has total assets of not more than $100
million;
             [(4)  is not currently subject to a formal enforcement
proceeding or order by the banking commissioner or by a federal
banking agency; and
             [(5)  was not the subject of a change of control under
Section 33.001 during the 12-month period in which a full-scope,
on-site examination would be required but for Subdivisions (1)-(4).
       [(b)  The banking commissioner may examine a state bank more
often than required by Subsection (a)] as the commissioner
considers necessary to:
             (1)  safeguard the interests of depositors, creditors,
shareholders, participants, and participant-transferees; and
             (2)  efficiently enforce applicable law.
       (b) [(c)  The banking commissioner may defer an examination
for not more than six months if the commissioner considers the
deferment necessary for the efficient enforcement of applicable
law.
       [(d)]  The banking commissioner may:
             (1)  accept an examination of a state bank by a federal
or other governmental agency instead of an examination under this
section; or
             (2)  conduct an examination of a state bank jointly
with a federal or other governmental agency.
       (c) [(e)]  The banking commissioner may administer oaths and
examine persons under oath on any subject that the commissioner
considers pertinent to the financial condition or the safety and
soundness of the activities of a state bank.
       (d) [(f)]  Disclosure of information to the banking
commissioner pursuant to an examination request does not constitute
a waiver of or otherwise affect or diminish an evidentiary
privilege to which the information is otherwise subject. A report
of an examination under this section is confidential and may be
disclosed only under the circumstances provided by this subtitle.
       SECTION 3.  Section 34.002(a), Finance Code, is amended to
read as follows:
       (a)  Without the prior written approval of the banking
commissioner, a state bank may not directly or indirectly invest an
amount in excess of its unimpaired capital and [certified] surplus
in bank facilities, furniture, fixtures, and equipment. Except as
otherwise provided by rules adopted under this subtitle, in
computing this limitation the bank:
             (1)  shall include:
                   (A)  its direct investment in bank facilities;
                   (B)  an investment in equity or investment
securities of a company holding title to a facility used by the bank
for a purpose specified by Section 34.001;
                   (C)  a loan made by the bank to or on the security
of equity or investment securities issued by a company holding
title to a facility used by the bank; and
                   (D)  any indebtedness incurred on bank facilities
by a company:
                         (i)  that holds title to the facility;
                         (ii)  that is an affiliate of the bank; and
                         (iii)  in which the bank is invested in the
manner described by Paragraph (B) or (C); and
             (2)  may exclude an amount included under Subdivisions
(1)(B)-(D) to the extent a lease of a facility from the company
holding title to the facility is capitalized on the books of the
bank.
       SECTION 4.  Subchapter A, Chapter 34, Finance Code, is
amended by adding Section 34.004 to read as follows:
       Sec. 34.004.  PASSIVE INVESTMENT IN MINERAL INTERESTS. (a)
Notwithstanding Section 34.003(a), a state bank may hold nonworking
mineral or royalty interests if:
             (1)  the state bank acquires the interest pursuant to
Section 34.003(a)(3);
             (2)  the interest is not subject to expenses of
exploration, development, production, operation, maintenance, or
abandonment, or any other expense associated with extracting and
marketing the minerals subject to the rights or interest;
             (3)  the interest is reasonably valued on the books of
the state bank for not more than a nominal amount, and the aggregate
amount of earnings from such interests is separately disclosed in
the annual financial statements of the state bank;
             (4)  the state bank does not make any new investments
relating to the rights or interests without the approval of the
banking commissioner; and
             (5)  the banking commissioner determines that the
possession of such rights and interests is not inconsistent with
the safety and soundness of the state bank.
       (b)  The banking commissioner may order a state bank that
holds nonworking mineral or royalty interests to divest such
interests at any time if the banking commissioner determines that
continued ownership of such interests is detrimental to the state
bank.
       (c)  Subject to compliance with this section, nonworking
mineral or royalty interests are not considered to be real property
for purposes of this subtitle.
       SECTION 5.  Sections 34.101(c) and (f), Finance Code, are
amended to read as follows:
       (c)  A state bank may purchase investment securities for its
own account under limitations and restrictions prescribed by rules
adopted under this subtitle. Except as otherwise provided by this
section, the amount of the investment securities of any one obligor
or maker held by the bank for its own account may not exceed an
amount equal to [the lesser of] 15 percent of the bank's unimpaired
capital and [certified] surplus [or the bank's total equity
capital]. The banking commissioner may authorize investments in
excess of this limitation on written application if the banking
commissioner determines that:
             (1)  the excess investment is not prohibited by other
applicable law; and
             (2)  the safety and soundness of the requesting state
bank is not adversely affected.
       (f)  A state bank may not invest more than an amount equal to
[the lesser of] 25 percent of the bank's unimpaired capital and
[certified] surplus [or the bank's total equity capital] in
investment grade adjustable rate preferred stock and money market
(auction rate) preferred stock.
       SECTION 6.  Section 34.103(b), Finance Code, is amended to
read as follows:
       (b)  Except for investment in a subsidiary engaging solely in
activities that may be engaged in directly by the bank and that are
conducted on the same terms and conditions that govern the conduct
of the activities by the bank, a state bank without the prior
written approval of the banking commissioner may not invest more
than an amount equal to 10 percent of [the lesser of] its unimpaired
capital and [certified] surplus [or the bank's total equity
capital] in a single subsidiary. For purposes of this subsection,
the amount of a state bank's investment in a subsidiary is the sum
of the amount of the bank's investment in securities issued by the
subsidiary and any loans and extensions of credit from the bank to
the subsidiary.
       SECTION 7.  Section 34.104(c), Finance Code, is amended to
read as follows:
       (c)  The bank may invest not more than an amount equal to 15
percent of the bank's unimpaired capital and [certified] surplus in
an investment company described by Subsection (a) the portfolio of
which contains an investment or obligation that is subject to the
limitations of Section 34.101(d) or 34.201(a).
       SECTION 8.  Section 34.105(a), Finance Code, is amended to
read as follows:
       (a)  A state bank may purchase for its own account equity
securities of any class issued by:
             (1)  a bank service corporation, except that the bank
may not invest more than an amount equal to 15 percent of the bank's
unimpaired capital and [certified] surplus in a single bank service
corporation or more than an amount equal to five percent of its
assets in all bank service corporations;
             (2)  an agricultural credit corporation, except that
the bank may not invest more than an amount equal to 30 percent of
the bank's unimpaired capital and [certified] surplus in the
agricultural credit corporation unless the bank owns at least 80
percent of the equity securities of the agricultural credit
corporation;
             (3)  a small business investment company if the
aggregate investment does not exceed an amount equal to 10 percent
of the bank's unimpaired capital and [certified] surplus;
             (4)  a banker's bank if the aggregate investment does
not exceed an amount equal to 15 percent of the bank's unimpaired
capital and [certified] surplus or result in the bank acquiring or
retaining ownership, control, or power to vote more than five
percent of any class of voting securities of the banker's bank; or
             (5)  a housing corporation if the sum of the amount of
investment and the amount of loans and commitments for loans to the
housing corporation does not exceed an amount equal to 10 percent of
the bank's unimpaired capital and [certified] surplus.
       SECTION 9.  Section 34.106(d), Finance Code, is amended to
read as follows:
       (d)  A bank's aggregate investments under this section,
including loans and commitments for loans, may not exceed an amount
equal to 10 percent of the bank's unimpaired capital and
[certified] surplus. The banking commissioner may authorize
investments in excess of this limitation in response to a written
application if the banking commissioner concludes that:
             (1)  the excess investment is not precluded by other
applicable law; and
             (2)  the safety and soundness of the requesting bank
would not be adversely affected.
       SECTION 10.  Section 34.201(a), Finance Code, is amended to
read as follows:
       (a)  Without the prior written approval of the banking
commissioner, the total loans and extensions of credit by a state
bank to a person outstanding at one time may not exceed an amount
equal to 25 percent of [the lesser of] the bank's unimpaired capital
and [certified] surplus [or the bank's total equity capital]. This
limitation does not apply to:
             (1)  liability as endorser or guarantor of commercial
or business paper discounted by or assigned to the bank by its owner
who has acquired it in the ordinary course of business;
             (2)  indebtedness evidenced by bankers' acceptances as
described by 12 U.S.C. Section 372 and issued by other banks;
             (3)  indebtedness secured by a bill of lading,
warehouse receipt, or similar document transferring or securing
title to readily marketable goods, except that:
                   (A)  the goods must be insured if it is customary
to insure those goods; and
                   (B)  the aggregate indebtedness of a person under
this subdivision may not exceed an amount equal to 50 percent of
[the lesser of] the bank's unimpaired capital and [certified]
surplus [or the bank's total equity capital];
             (4)  indebtedness evidenced by notes or other paper
secured by liens on agricultural products in secure and properly
documented storage in bonded warehouses or elevators if the value
of the collateral is not less than 125 percent of the amount of the
indebtedness and the bank's interest in the collateral is
adequately insured against loss, except that the aggregate
indebtedness of a person under this subdivision may not exceed an
amount equal to 50 percent of [the lesser of] the bank's unimpaired
capital and [certified] surplus [or the bank's total equity
capital];
             (5)  indebtedness of another depository institution
arising out of loans with settlement periods of less than one week;
             (6)  indebtedness arising out of the daily transaction
of the business of a clearinghouse association in this state;
             (7)  liability under an agreement by a third party to
repurchase from the bank an investment security listed in Section
34.101(d) to the extent that the agreed repurchase price does not
exceed the original purchase price to the bank or the market value
of the investment security;
             (8)  the portion of an indebtedness that this state, an
agency or political subdivision of this state, the United States,
or an instrumentality of the United States has unconditionally
agreed to repay, purchase, insure, or guarantee;
             (9)  indebtedness secured by securities listed in
Section 34.101(d) to the extent that the market value of the
securities equals or exceeds the indebtedness;
             (10)  the portion of an indebtedness that is fully
secured by a segregated deposit account in the lending bank;
             (11)  loans and extensions of credit arising from the
purchase of negotiable or nonnegotiable installment consumer paper
that carries a full recourse endorsement or unconditional guarantee
by the person transferring the paper if:
                   (A)  the bank's files or the knowledge of its
officers of the financial condition of each maker of the consumer
paper is reasonably adequate; and
                   (B)  an officer of the bank designated for that
purpose by the board certifies in writing that the bank is relying
primarily on the responsibility of each maker for payment of the
loans or extensions of credit and not on a full or partial recourse
endorsement or guarantee by the transferor;
             (12)  the portion of an indebtedness in excess of the
limitation of this subsection that is fully secured by marketable
securities or bullion with a market value at least equal to the
amount of the overage, as determined by reliable and continuously
available price quotations, except that the exempted indebtedness
or overage of a person under this subdivision may not exceed an
amount equal to 15 percent of [the lesser of] the bank's unimpaired
capital and [certified] surplus [or the bank's total equity
capital];
             (13)  indebtedness of an affiliate of the bank if the
transaction with the affiliate is subject to the restrictions and
limitations of 12 U.S.C. Section 371c;
             (14)  indebtedness of an operating subsidiary of the
bank other than a subsidiary described by Section 34.103(c)(2); and
             (15)  the portion of the indebtedness of a person
secured in good faith by a purchase money lien taken by the bank in
exchange for the sale of real or personal property owned by the bank
if the sale is in the best interest of the bank.
       SECTION 11.  Section 34.304(b), Finance Code, is amended to
read as follows:
       (b)  A state bank may pledge its assets to secure a deposit
of:
             (1)  any state or an agency, political subdivision, or
instrumentality of any state;
             (2)  the United States or an agency or instrumentality
of the United States;
             (3)  any federally recognized Indian tribe; or
             (4)  another entity to the same extent and subject to
the same limitations as may be authorized by the law of this state
or of the United States for any other depository institution doing
business in this state [this state, an agency or political
subdivision of this state, the United States, or an instrumentality
of the United States].
       SECTION 12.  Chapter 37, Finance Code, is amended by adding
Sections 37.007 and 37.008 to read as follows:
       Sec. 37.007.  TEMPORARY BRANCH OR OFFICE.  (a)  If the
banking commissioner determines that an emergency has affected and
will continue to affect one or more particular bank offices for an
extended period, either as a result of the emergency or subsequent
recovery operations, the banking commissioner may authorize the
bank or banks affected to open temporary branch offices or other
facilities required for bank operations for the purpose of prompt
restoration of access by the public to banking services.
       (b)  A temporary bank office opened under the authority of
Subsection (a) may remain open only for the period specified in the
banking commissioner's order, except that the banking commissioner
may extend the period the office may remain open on a finding that
the conditions requiring the temporary office continue to exist.
The bank may convert a temporary branch office to a permanent bank
location only by obtaining the prior written approval of the
banking commissioner under Section 32.203.
       (c)  If requested by the state bank regulatory agency of
another state that is experiencing an emergency and is contiguous
to this state, the banking commissioner may authorize a bank or
banks located in the state to open temporary offices in this state
for the purpose of prompt restoration of banking services to the
existing customers of the bank or banks, as the circumstances of
such emergency may require. A temporary bank office opened under
the authority of this subsection may remain open only for the period
specified in the banking commissioner's order, except that the
banking commissioner may extend the period the office may remain
open on a finding that the conditions requiring the temporary
office continue to exist. A bank may convert a temporary branch
office to a permanent bank location if permitted by and subject to
the conditions and requirements of Chapter 203.
       Sec. 37.008.  REGULATORY COORDINATION.  (a)  To ensure
effective coordination among and between the department and other
state and federal agencies and the banking industry, and to further
rapid restoration of banking services after an emergency, the
banking commissioner may:
             (1)  enter into cooperative, coordinating, or
information-sharing agreements with other state or federal
agencies or with or through organizations affiliated with or
representing one or more state or federal agencies;
             (2)  enter into cooperative, coordinating, or
information-sharing agreements with banks or banking trade
associations or other organizations affiliated with or
representing one or more banks; and
             (3)  issue interpretive statements or opinions to
temporarily waive or suspend regulatory requirements that threaten
to impede recovery and restoration of financial services.
       (b)  Disclosure of information by or to the banking
commissioner under this section does not constitute a waiver of or
otherwise affect or diminish an evidentiary privilege to which the
information is otherwise subject, regardless of whether the
disclosure is governed by a confidentiality agreement.
Notwithstanding other law, a party to an agreement described by
Subsection (a) may execute, honor, and comply with an agreement to
maintain confidentiality and oppose disclosure of information
obtained from the banking commissioner, and shall treat as
confidential any information obtained from the banking
commissioner that is entitled to confidential treatment under
applicable state or federal law.
       (c)  The banking commissioner shall coordinate and cooperate
with and assist the office of the governor in the performance of
duties under this chapter and other state or federal law as required
by Section 421.071, Government Code.
       SECTION 13.  Section 204.105(b), Finance Code, is amended to
read as follows:
       (b)  Among other exceptions to Subsection (a) that may be
required or authorized by the commissioner provided by this
subchapter or by rules adopted under this subtitle:
             (1)  a Texas state branch may not accept deposits of
less than $100,000 from citizens or residents of the United States,
other than credit balances that are incidental to or arise out of
its exercise of other lawful banking powers, unless the Federal
Deposit Insurance Corporation determines that specific deposit
taking activities in lesser amounts do not constitute domestic
retail deposit activities requiring deposit insurance protection
within the meaning of Section 6, International Banking Act (12
U.S.C. Section 3104);
             (2)  a Texas state agency may not accept deposits from
citizens or residents of the United States, other than credit
balances that are incidental to or arise out of its exercise of
other lawful banking powers, but may accept deposits from persons
who are neither citizens nor residents of the United States; and
             (3)  a limitation or restriction based on the capital
and [certified] surplus of a Texas state bank is considered to
refer, as applied to a Texas state branch or agency, to the dollar
equivalent of the capital and surplus of the foreign bank, and if
the foreign bank has more than one Texas state branch or agency in
this state, the business transacted by all the branches and
agencies must be aggregated in determining compliance with the
limitation.
       SECTION 14.  Sections 31.002(a)(10) and 33.105(b), Finance
Code, are repealed.
       SECTION 15.  This Act takes effect September 1, 2007.
____________________________________________________________
   President of the SenateSpeaker of the House      
       I certify that H.B. No. 2007 was passed by the House on April
12, 2007, by the following vote:  Yeas 145, Nays 0, 1 present, not
voting.
______________________________
Chief Clerk of the House   
       I certify that H.B. No. 2007 was passed by the Senate on May
3, 2007, by the following vote:  Yeas 31, Nays 0.
______________________________
Secretary of the Senate    
APPROVED:  _____________________
APPROVED:  _____________________
                   Date          
 
 
          _____________________
                 Governor