BILL ANALYSIS

H.B. 3574

By: Lambert

Pensions, Investments & Financial Services

Committee Report (Unamended)

BACKGROUND AND PURPOSE

The Texas Department of Banking has identified statutory language that requires technical corrections or updates to address regulatory issues that have come up since the 87th Legislative Session, such as regulatory concerns regarding bank insiders who have engaged in illegal or suspicious activity. H.B. 3574 seeks to address these issues by providing these important corrections and updates, which will add necessary specificity to the Finance Code.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

H.B. 3574 amends the Finance Code to authorize the banking commissioner of Texas, in the event a person currently serving as an officer, director, employee, controlling shareholder, or other position participating in a state bank's affairs refuses to comply with a subpoena, to issue an order on an emergency basis removing the person from the person's position and prohibiting the person from participating in the affairs of the state bank or any other entity chartered, registered, permitted, or licensed by the banking commissioner until the person complies with the subpoena. The bill replaces a provision establishing that a prohibition against implying that a person is engaged in the business of banking in Texas does not apply to certain depository institutions or other entities with a provision establishing that the prohibition does not apply to certain federally insured depository institutions.

H.B. 3574 revises exemptions from statutory provisions prohibiting a person from acquiring a legal or beneficial interest in voting securities of a state bank or an entity owning a state bank's voting securities if, after the acquisition, the person would acquire control of the bank. The bill revises those exemptions in the following manner:

·         with regard to the exemption for an acquisition of voting securities in any class or series by a controlling person, makes a person meeting certain criteria eligible for the exemption unless the banking commissioner provides otherwise in writing and gives the person the option of qualifying for the exemption based on the following criteria, as an alternative to qualifying based on being a controlling person in a state bank in a prior commissioner-approved application:

o   the person has from the date of receipt of approval continuously held power to vote 25 percent or more of any class of the state bank's voting securities; or

o   the person is considered to have from the date of receipt of approval continuously controlled the state bank; and

·         with regard to the exemption for a transaction subject to statutory provisions regarding bank holding companies, removes the requirement that the post-transaction controlling person has previously complied with and received approval as a controlling person of a state bank.

H.B. 3574 prohibits a bank, without the prior approval of the banking commissioner or other applicable person, from engaging in any activity during a period of supervision determined by the banking commissioner to threaten the safety and soundness of the bank. The bill includes the banking commissioner among the individuals and entities to which a financial institution must provide access to or copies of records relevant to the suspected financial exploitation of a vulnerable adult. The bill specifies that the officers, employees, or directors of a state bank for whom the banking commissioner has grounds to issue a cease and desist order based on certain violations and other actions warranting enforcement are the state bank's current or former officers, employees, or directors. The bill applies only to a violation that occurs on or after the bill's effective date.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2023.