FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE A. BANKS
CHAPTER 31. GENERAL PROVISIONS
SUBCHAPTER A. GENERAL PROVISIONS
§ 31.001. SHORT TITLE. This subtitle may be cited as
the Texas Banking Act.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.002. DEFINITIONS. (a) In this subtitle:
(1) "Affiliate" means a company that directly or
indirectly controls, is controlled by, or is under common control
with a bank or other company.
(2) "Bank" means a state or national bank. If the
context requires, the term includes a bank as defined by Section
201.002(a)(4) that is organized under the laws of another state or
country.
(3) "Bank holding company" has the meaning assigned by
the Bank Holding Company Act of 1956 (12 U.S.C. Section 1841 et
seq.) or a successor to that Act.
(4) "Banking" means the performance of the exclusive
depository institution functions of accepting deposits and
discounting loans and the performance of related activities that
are not exclusive to banks or other depository institutions,
including paying drafts or checks, lending money, and providing
related financial services authorized by this subtitle.
(5) "Banking association" means a state bank that is
organized under this subtitle as a corporation, authorized to issue
shares of stock, and controlled by its shareholders.
(6) "Banking commissioner" means the banking
commissioner of Texas or a person designated by the banking
commissioner and acting under the banking commissioner's direction
and authority.
(7) "Board" means the board of directors, managers, or
managing participants of, or a person or group of persons acting in
a comparable capacity for, a state bank or other entity.
(8) "Branch" means a location of a bank, other than the
bank's home office, at which the bank engages the public in the
business of banking. The term does not include:
(A) a drive-in facility located not more than
2,000 feet from the nearest wall of the home office or an approved
branch office of the bank;
(B) a night depository;
(C) an electronic terminal;
(D) a loan production office as described by
Section 32.204;
(E) a state or federally licensed armored car
service or other courier service transporting items for deposit or
payment, unless:
(i) the risk of loss of items in the custody
of the service is borne by the employing bank; or
(ii) the items in the custody of the service
are considered to be in customer accounts at the employing bank or
federally insured through the employing bank;
(F) a location at which the bank offers
exclusively nondepository financial products or services to the
public, including financial, investment, or economic advisory
services;
(G) a location that combines permissible
non-branch functions or facilities; or
(H) another office or facility as provided by
this subtitle or a rule adopted under this subtitle.
(9) "Capital" means:
(A) the sum of:
(i) the par value of all shares or
participation shares of the state bank having a par value that have
been issued;
(ii) the consideration set by the board in
the manner provided by the Texas Business Corporation Act for all
shares or participation shares of the state bank without par value
that have been issued, except a part of that consideration that:
(a) has been actually received;
(b) is less than all of that
consideration; and
(c) the board, by resolution adopted
not later than the 60th day after the date of issuance of those
shares, has allocated to surplus with the prior approval of the
banking commissioner; and
(iii) an amount not included in
Subparagraphs (i) and (ii) that has been transferred to capital of
the state bank, on the payment of a share dividend or on adoption by
the board of a resolution directing that all or part of surplus be
transferred to capital, minus each reduction made as permitted by
law; less
(B) all amounts otherwise included in Paragraphs
(A)(i) and (ii) that are attributable to the issuance of securities
by the state bank and that the banking commissioner determines,
after notice and an opportunity for hearing, should be classified
as debt rather than equity securities.
(10) "Certified surplus" means the part of surplus
designated by a vote of the board of a state bank under Section
33.105(b) and recorded in the board minutes as certified.
(11) "Company" includes a bank, trust company,
corporation, partnership, association, business trust, or another
trust.
(12) "Conservator" means the banking commissioner or
an agent of the banking commissioner exercising the powers and
duties provided by Subchapter B, Chapter 35.
(13) "Control" means:
(A) the ownership of or ability or power to vote,
directly, acting through one or more other persons, or otherwise
indirectly, 25 percent or more of the outstanding shares of a class
of voting securities of a bank or other company;
(B) the ability to control the election of a
majority of the board of a bank or other company;
(C) the power to exercise, directly or
indirectly, a controlling influence over the management or policies
of the bank or other company as determined by the banking
commissioner after notice and an opportunity for hearing; or
(D) the conditioning of the transfer of 25
percent or more of the outstanding shares or participation shares
of a class of voting securities of a bank or other company on the
transfer of 25 percent or more of the outstanding shares of a class
of voting securities of another bank or other company.
(14) "Department" means the Texas Department of
Banking.
(15) "Deposit" means the establishment of a
debtor-creditor relationship represented by the agreement of the
deposit debtor to act as a holding, paying, or disbursing agent for
the deposit creditor. The term:
(A) includes:
(i) an unpaid balance of money that is
received by the deposit debtor in the usual course of business in
exchange for conditional or unconditional credit to a commercial,
checking, savings, or time account of the deposit creditor or the
creditor's designee, or that is evidenced by a certificate of
deposit or similar instrument, a certified check or draft drawn
against a deposit account, or a letter of credit or traveler's check
on which the deposit debtor is primarily liable, but excluding an
obligation arising under Chapter 152;
(ii) money or credit given for money
received by the deposit debtor in the usual course of business for a
special purpose, including money:
(a) held as escrow money, as security
for an obligation due to the deposit debtor or another person, or as
security for a loan;
(b) left with a deposit debtor by a
deposit creditor to meet maturing obligations that are not yet due;
and
(c) held by the deposit debtor to meet
an acceptance or letter of credit;
(iii) an outstanding draft, cashier's
check, money order, or other officer's check issued by the deposit
debtor in the usual course of business for any purpose, including
payment for services, dividends, or purchases; and
(iv) an obligation that the finance
commission by rule defines as a deposit liability, except that the
term may not include money received for immediate application to
reduction of an indebtedness; and
(B) does not include an obligation that this
subtitle or finance commission rule determines not to be a deposit
liability.
(16) "Depository institution" means an entity with the
power to accept deposits under applicable law.
(17) "Discount" means the retention by a lender of
advance interest from loan proceeds. The term does not include the
purchase of a promissory note or similar instrument at less than its
face value unless the party selling the note is liable on the note
as a maker, endorser, or guarantor.
(18) "Drive-in facility" means a facility offering one
or more banking services other than originating or establishing a
lending or deposit relationship solely to persons who remain
outside the facility.
(19) "Electronic terminal" means an electronic
device, other than a telephone or modem operated by a customer of a
depository institution, through which a person may initiate an
electronic fund transfer, as defined by 15 U.S.C. Section 1693a(6).
The term includes a point-of-sale terminal, automated teller
machine, or cash dispensing machine.
(20) "Equity capital" means the amount by which the
total assets of a state bank exceed the total liabilities of the
bank.
(21) "Equity security" means:
(A) stock, other than adjustable rate preferred
stock and money market (auction rate) preferred stock;
(B) a certificate of interest or participation in
a profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share or
participation share, investment contract, voting-trust
certificate, or partnership interest;
(C) a security immediately convertible at the
option of the holder without payment of substantial additional
consideration into a security described by this subdivision;
(D) a security carrying a warrant or right to
subscribe to or purchase a security described by this subdivision;
and
(E) a certificate of interest or participation
in, temporary or interim certificate for, or receipt for a security
described by this subdivision that evidences an existing or
contingent equity ownership interest.
(22) "Federal savings association" means a savings and
loan association organized under federal law.
(23) "Federal savings bank" means a savings bank
organized under federal law.
(24) "Finance commission" means the Finance
Commission of Texas.
(25) "Financial institution" means a bank, savings
association, or savings bank maintaining an office, branch, or
agency office in this state.
(26), (27) Repealed by Acts 1999, 76th Leg., ch. 344, §
9.002(1), eff. May 29, 1999.
(28) "Full liability participant" means a participant
who agrees under the terms of a participation agreement to be liable
under a judgment, decree, or order of court for all debts,
obligations, or liabilities of a limited banking association.
(29) "Hazardous condition" means:
(A) a refusal by a state bank to permit
examination of its books, papers, accounts, records, or affairs by
the banking commissioner;
(B) a circumstance or condition in which an
unreasonable risk of substantial loss is threatened to the
depositors, creditors, shareholders, or participants of a state
bank, including a circumstance or condition in which a state bank:
(i) has inadequate equity capital, or the
adequacy of its equity capital is threatened;
(ii) has concentrated an excessive or
unreasonable portion of its assets in a type or character of loan or
investment;
(iii) violates or refuses to comply with
this subtitle, another statute or rule applicable to state banks,
or a final and enforceable order of the banking commissioner;
(iv) is in a condition that renders the
continuation of a particular business practice hazardous to the
public or to its depositors and creditors;
(v) conducts business in an unsafe and
unsound manner; or
(vi) is insolvent; or
(C) a violation by a state bank of a condition of
its chartering or an agreement entered into between the bank and the
banking commissioner or the department.
(30) "Home office" means a location registered with
the banking commissioner as the bank's home office at which:
(A) the bank does business with the public;
(B) the bank keeps its corporate books and
records; and
(C) at least one officer of the bank maintains an
office.
(31) "Insolvent" means a circumstance or condition in
which a state bank:
(A) is unable or lacks the means to meet its
current obligations as they come due in the regular and ordinary
course of business, even if the value of its assets exceeds its
liabilities;
(B) has equity capital equal to two percent or
less of its assets, as determined under regulatory accounting
principles;
(C) fails to maintain deposit insurance with the
Federal Deposit Insurance Corporation or its successor if the
banking commissioner determines that deposit insurance is
necessary for the safe and sound operation of the bank;
(D) sells or attempts to sell substantially all
of its assets or merges or attempts to merge substantially all of
its assets or business with another entity other than as provided by
Chapter 32; or
(E) attempts to dissolve or liquidate other than
as provided by Chapter 36.
(32) "Investment security" means a marketable
obligation evidencing indebtedness of a person in the form of a
bond, note, debenture, or commonly known as an investment security,
subject to further definition by rule adopted under this subtitle.
(33) "Limited banking association" means a state bank
that is organized under this subtitle as a limited liability
company, authorized to issue participation shares, and controlled
by its participants.
(34) "Loans and extensions of credit" means direct or
indirect advances of money by a state bank to a person that are
conditioned on the obligation of the person to repay the money or
that are repayable from specific property pledged by or on behalf of
the person. The term includes a contractual liability of a state
bank to advance money to or on behalf of a person, indebtedness
evidenced by a lease financing transaction in which the bank is
lessor, an overdraft funded by the bank on behalf of a person except
for an intraday or daylight overdraft, or another indebtedness not
otherwise classified as an investment security. The term does not
include accrued and unpaid interest or discounted interest.
(35) "Manager" means a person elected to the board of a
limited banking association.
(36) "Managing participant" means a participant in a
limited banking association in which management has been retained
by the participants.
(37) "National bank" means a banking association
organized under 12 U.S.C. Section 21.
(38) "Officer" means the presiding officer of the
board, the principal executive officer, or another officer
appointed by the board of a state bank or other company, or a person
or group of persons acting in a comparable capacity for the state
bank or other company.
(39) "Operating subsidiary" means a company for which
a state bank has the ownership, ability, or power to vote, directly,
acting through one or more other persons, or otherwise indirectly,
more than 50 percent of the outstanding shares of each class of
voting securities or its equivalent of the company.
(40) "Participant" means an owner of a participation
share in a limited banking association.
(41) "Participant-transferee" means a transferee of a
participation share who has not received the consent of all
participants to be a participant, or who becomes a
participant-transferee under Subchapter C, Chapter 33.
(42) "Participation agreement" means the instrument
stating the agreement among the participants of a limited banking
association relating to the rights and duties of the participants
and participant-transferees, including:
(A) allocations of income, loss, deduction,
credit, distributions, liquidation rights, redemption rights,
liabilities of participants, priority rights of
participant-transferees to transfer participation shares, and
rights of participants to purchase participation shares of
participant-transferees;
(B) procedures for elections and voting by
participants; and
(C) any other matter not prohibited by or
inconsistent with this subtitle.
(43) "Participation shares" means the units into which
the proprietary interests of a limited banking association are
divided or subdivided by means of classes, series, relative rights,
or preferences.
(44) "Principal shareholder" means a person who owns
or has the ability or power to vote, directly, acting through one or
more other persons, or otherwise indirectly, 10 percent or more of
the outstanding shares or participation shares of any class of
voting securities of a bank or other company.
(45) "Regulatory accounting principles" means
generally accepted accounting principles as modified by rules
adopted under:
(A) this subtitle; or
(B) an applicable federal statute or regulation.
(46) "Savings association" means a state or federal
savings association.
(47) "Savings bank" means a state or federal savings
bank.
(48) "Shareholder" means an owner of a share in a
banking association.
(49) "Shares" means the units into which the
proprietary interests of a banking association are divided or
subdivided by means of classes, series, relative rights, or
preferences.
(50) "State bank" means a banking association or
limited banking association organized or reorganized under this
subtitle, including an association organized under the laws of this
state before September 1, 1995, with the express power to receive
and accept deposits and possessing other rights and powers granted
by this subtitle expressly or by implication. The term does not
include a savings association, savings bank, or credit union. If
the context requires, the term includes a bank as defined by Section
201.002(a)(4) that is organized under the laws of another state or
country.
(51) "State savings association" means a savings and
loan association organized under the laws of this state.
(52) "State savings bank" means a savings bank
organized under or subject to Subtitle C. If the context requires,
the term includes a savings bank organized under the laws of another
state.
(53) "Subsidiary" means a bank or company that is
controlled by another person. The term includes a subsidiary of a
subsidiary.
(54) "Supervisor" means the banking commissioner or an
agent of the banking commissioner exercising the powers and duties
specified in Subchapter B, Chapter 35.
(55) "Surplus" means the amount by which the assets of
a state bank exceed its liabilities, capital, and undivided
profits.
(56) "Unauthorized activity" means an act or practice
in this state by a person without a charter, license, permit,
registration, or other authority issued or granted by the banking
commissioner or other appropriate regulatory authority for which
such a charter, license, permit, registration, or other authority
is required.
(57) "Undivided profits" means the part of equity
capital of a state bank equal to the balance of its net profits,
income, gains, and losses since the date of its formation, minus
subsequent distributions to shareholders or participants and
transfers to surplus or capital under share dividends or
appropriate board resolutions. The term includes amounts allocated
to undivided profits as a result of a merger.
(58) "Voting security" means a share, participation
share, or other evidence of proprietary interest in a state bank or
other company that has as an attribute the right to vote or
participate in the election of the board of the state bank or other
company, regardless of whether the right is limited to the election
of fewer than all of the board members. The term includes a
security that is convertible or exchangeable into a voting security
and a nonvoting participation share of a managing participant.
(b) The definitions shall be liberally construed to
accomplish the purposes of this subtitle.
(c) The finance commission by rule may adopt other
definitions to accomplish the purposes of this subtitle.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.002, 9.002, eff. Sept. 1,
1999; Acts 2001, 77th Leg., ch. 528, § 1, eff. Sept. 1, 2001.
§ 31.003. BANKING RULES. (a) The finance commission
may adopt rules to accomplish the purposes of this subtitle and
Chapters 11, 12, and 13, including rules necessary or reasonable
to:
(1) implement and clarify this subtitle and Chapters
11, 12, and 13;
(2) preserve or protect the safety and soundness of
state banks;
(3) grant at least the same rights and privileges to
state banks that are or may be granted to national banks domiciled
in this state;
(4) recover the cost of maintaining and operating the
department and the cost of enforcing this subtitle and other
applicable law by imposing and collecting ratable and equitable
fees for notices, applications, and examinations; and
(5) facilitate the fair hearing and adjudication of
matters before the banking commissioner and the finance commission.
(b) In adopting rules, the finance commission shall
consider the need to:
(1) promote a stable banking environment;
(2) provide the public with convenient, safe, and
competitive banking services;
(3) preserve and promote the competitive position of
state banks with regard to national banks and other depository
institutions in this state consistent with the safety and soundness
of state banks and the state bank system; and
(4) allow for economic development in this state.
(c) The presence or absence in this subtitle or Chapter 11,
12, or 13 of a specific reference to rules regarding a particular
subject does not enlarge or diminish the rulemaking authority
provided by this section.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 528, § 2, eff. Sept. 1, 2001.
§ 31.004. UNAUTHORIZED BANKING. (a) Except as
otherwise provided by law, a person other than a depository
institution authorized to conduct business in this state may not
conduct the business of banking or represent to the public that it
is conducting the business of banking in this state.
(b) This section does not prohibit the continued operation
of a bank, trust company, bank and trust company, or savings bank
by:
(1) a person, partnership, trustee, or trustee
operating under a common law declaration of trust who:
(A) was actively engaged in the operation of the
institution on June 13, 1923; or
(B) operated the institution for any period of at
least 20 years before June 13, 1923, and resumed operations of the
institution not later than June 13, 1924; or
(2) a legal representative or successor of a person or
entity described by Subdivision (1).
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.005. IMPLYING THAT PERSON IS BANK. (a) A person
may not use the term "bank," "bank and trust," or a similar term or a
character, ideogram, phonogram, phrase, or foreign language word in
its name, stationery, or advertising in a manner that would imply to
the public that the person is engaged in the business of banking in
this state.
(b) Subsection (a) does not apply to a depository
institution or other entity organized under the laws of this state,
another state, the United States, or a foreign sovereign state to
the extent that the depository institution or other entity is:
(1) authorized under its charter or the laws of this
state or the United States to use a term, word, character, ideogram,
phonogram, or phrase prohibited by Subsection (a); and
(2) authorized by the laws of this state or the United
States to conduct the activities in which it is engaged in this
state.
(c) A person violating this section is subject to an
enforcement action initiated by the banking commissioner under
Subchapter C, Chapter 35, except that the maximum administrative
penalty under Section 35.211 for violation involving only
Subsection (a) is $500 for each day the violation continues.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.003, eff. Sept. 1, 1999.
§ 31.006. LIABILITY OF DEPOSITORY INSTITUTION DIRECTORS
AND PERSONNEL. (a) The provisions of the Texas Business
Corporation Act regarding liability, defenses, and indemnification
of a director, officer, agent, or employee of a corporation apply to
a director, officer, agent, or employee of a depository institution
in this state. Except as limited by those provisions, a
disinterested director, manager, managing participant, officer, or
employee of a depository institution may not be held personally
liable in an action seeking monetary damages arising from the
conduct of the depository institution's affairs unless the damages
resulted from the gross negligence or wilful or intentional
misconduct of the person during the person's term of office or
service with the depository institution.
(b) A director, manager, managing participant, officer, or
employee of a depository institution is disinterested with respect
to a decision or transaction if:
(1) the person fully discloses any interest in the
decision or transaction and does not participate in the decision or
transaction; or
(2) the decision or transaction does not involve any
of the following:
(A) personal profit for the person through
dealing with the depository institution or usurping an opportunity
of the depository institution;
(B) buying or selling an asset of the depository
institution in a transaction in which the person has a direct or
indirect pecuniary interest;
(C) dealing with another depository institution
or other person in which the person is a director, manager, managing
participant, officer, or employee or otherwise has a significant
direct or indirect financial interest; or
(D) dealing with a family member of the person.
(c) A director, manager, managing participant, or officer
who, in performing the person's duties and functions, acts in good
faith and reasonably believes that reliance is warranted is
entitled to rely on information, including an opinion, report,
financial statement or other type of statement or financial data,
decision, judgment, or performance, prepared, presented, made, or
rendered by:
(1) one or more directors, managers, managing
participants, officers, or employees of the depository
institution, or of an entity under joint or common control with the
depository institution, who the director, manager, managing
participant, or officer reasonably believes merit confidence;
(2) legal counsel, a public accountant, or another
person who the director, manager, managing participant, or officer
reasonably believes merits confidence; or
(3) a committee of the board of which the director,
manager, or managing participant is not a member.
(d) In this section, "family member" means a person's:
(1) spouse;
(2) minor child; or
(3) adult child who resides in the person's home.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.007. EXEMPTION OF BANK DIRECTORS AND PERSONNEL FROM
SECURITIES LAW. (a) An officer, director, manager, managing
participant, or employee of a bank that has its main office or a
branch located in this state with fewer than 500 shareholders or
participants or of a bank holding company with fewer than 500
shareholders or participants that controls a bank that has its main
office or a branch located in this state is exempt from the
registration and licensing provisions of The Securities Act
(Article 581-1 et seq., Vernon's Texas Civil Statutes) with respect
to that person's participation in a transaction, including a sale,
involving securities issued by:
(1) the bank or bank holding company of which that
person is an officer, director, manager, managing participant, or
employee;
(2) a bank holding company that controls the bank of
which that person is an officer, director, manager, managing
participant, or employee; or
(3) a bank controlled by the bank holding company of
which that person is an officer, director, manager, managing
participant, or employee.
(b) A person may not be compensated for services performed
under the exemption provided by this section.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.004, eff. Sept. 1, 1999.
SUBCHAPTER B. REGULATION OF BANKING BY BANKING COMMISSIONER
§ 31.101. GENERAL DUTIES OF BANKING COMMISSIONER. The
banking commissioner shall:
(1) supervise and regulate, as provided by this
subtitle, Subtitles F and G, and Chapter 12, state banks, trust
companies, and state-licensed foreign bank branches, agencies, and
representative offices;
(2) administer and enforce this subtitle, Subtitles F
and G, and Chapter 12 in person, through a deputy banking
commissioner or another officer or employee of the department, or
through a supervisor, conservator, or other agent; and
(3) administer and enforce laws other than this
subtitle, Subtitles F and G, and Chapter 12 as directed by those
other laws.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 62, § 7.50, eff. Sept. 1, 1999; Acts
2001, 77th Leg., ch. 412, § 2.01, eff. Sept. 1, 2001.
§ 31.102. ISSUANCE OF INTERPRETIVE
STATEMENTS. (a) The banking commissioner may issue interpretive
statements containing matters of general policy to guide the public
and state banks, and may amend or repeal a published interpretive
statement by issuing an amended statement or notice of repeal of a
statement.
(b) An interpretive statement may be disseminated by
newsletter, via an electronic medium such as the internet, in a
volume of statutes or related materials published by the banking
commissioner or others, or by other means reasonably calculated to
notify persons affected by the interpretive statement. Notice of
an amended or withdrawn statement must be disseminated in a
substantially similar manner as the affected statement was
originally disseminated.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.005, eff. Sept. 1, 1999.
§ 31.103. ISSUANCE OF OPINION. (a) In response to a
specific request from a member of the public or the banking
industry, the banking commissioner may issue an opinion directly or
through a deputy banking commissioner or department attorney.
(b) If the banking commissioner determines that the opinion
is useful for the general guidance of the public, state banks, or
trust companies, the commissioner may disseminate the opinion by
newsletter, via an electronic medium such as the internet, in a
volume of statutes or related materials published by the banking
commissioner or others, or by other means reasonably calculated to
notify persons affected by the opinion. A published opinion must be
redacted to preserve the confidentiality of the requesting party
unless the requesting party consents to be identified in the
published opinion.
(c) The banking commissioner may amend or repeal a published
opinion by issuing an amended opinion or notice of repeal of an
opinion and disseminating the opinion or notice in a substantially
similar manner as the affected statement or opinion was originally
disseminated. The requesting party, however, may rely on the
original opinion if:
(1) all material facts were originally disclosed to
the banking commissioner;
(2) the safety and soundness of the affected bank will
not be affected by further reliance on the original opinion; and
(3) the text and interpretation of relevant, governing
provisions of this subtitle or Chapter 12 have not been changed by
legislative or judicial action.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 1999, 76th Leg., ch. 344, § 2.005, eff. Sept. 1, 1999;
Acts 2001, 77th Leg., ch. 412, § 2.02, eff. Sept. 1, 2001.
§ 31.104. EFFECT OF INTERPRETIVE STATEMENT OR
OPINION. An interpretive statement or opinion issued under this
subchapter does not have the force of law and is not a rule for the
purposes of Chapter 2001, Government Code, unless adopted by the
finance commission as provided by Chapter 2001, Government Code.
An interpretive statement or opinion is an administrative
construction of this subtitle or Chapter 12 entitled to great
weight if the construction is reasonable and does not conflict with
this subtitle or Chapter 12.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.105. EXAMINATION REQUIRED. (a) The banking
commissioner shall examine each state bank 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.
(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.
(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.
(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.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 412, § 2.03, eff. Sept. 1, 2001.
§ 31.106. COST OF REGULATION. Each state bank shall
pay, through the imposition and collection of fees established by
the finance commission under Section 31.003(a)(4):
(1) the cost of examination;
(2) the equitable or proportionate cost of maintenance
and operation of the department; and
(3) the cost of enforcement of this subtitle and
Chapter 12.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.107. REGULATION AND EXAMINATION OF RELATED
ENTITIES. (a) The banking commissioner may regulate and examine,
to the same extent as if the services or activities were performed
by a state bank on its own premises:
(1) the activities of a state bank affiliate; and
(2) the performance of data processing, electronic
fund transfers, or other bank services on behalf of a state bank by
a third-party contractor, other than a national bank.
(b) The banking commissioner may collect a fee from an
examined contractor or affiliate in connection with each
examination to cover the cost of the examination or may collect that
fee from the state banks that use the examined contractor.
(c) For purposes of this section, a state bank affiliate
does not include a company in which ownership or membership is
limited to individuals and conditioned by law on the existence and
maintenance of professional licensing.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.108. CALL REPORT; PENALTY. (a) A state bank
shall file with the banking commissioner a copy of its call report
stating the bank's financial condition and results of operation.
(b) The finance commission by rule may:
(1) require call reports to be filed with the banking
commissioner at the intervals the commission determines;
(2) specify the form of a call report, including the
confidential and public information to be in the call report; and
(3) require public information in call reports of
state banks to be published at the times and in the publications and
locations the commission determines.
(c) A state bank that fails to timely file its call report as
required by this section is subject to a penalty not exceeding $500
a day to be collected by suit by the attorney general on behalf of
the banking commissioner.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER C. ADMINISTRATIVE PROCEDURE
§ 31.201. BANKING COMMISSIONER HEARING. (a) The
banking commissioner may convene a hearing to receive evidence and
argument regarding any matter within the jurisdiction of and before
the banking commissioner for decision or review. The hearing must
be conducted under Chapter 2001, Government Code. A matter made
confidential by law must be considered by the banking commissioner
in a closed hearing.
(b) A hearing before the banking commissioner that is
required or authorized by law may be conducted by a hearing officer
on behalf of the banking commissioner.
(c) This section does not grant a right to hearing to a
person that is not otherwise granted by governing law.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 412, § 2.04, eff. Sept. 1, 2001.
§ 31.202. APPEAL OF BANKING COMMISSIONER DECISION OR
ORDER. Except as expressly provided otherwise by this subtitle, an
appellant may appeal a decision or order of the banking
commissioner made under this subtitle or Chapter 12 after hearing
directly to the District Court of Travis County as provided by
Section 31.204 or, at the option of the appellant, to the finance
commission for review.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.203. APPEAL TO FINANCE COMMISSION. (a) In an
appeal to the finance commission, the finance commission shall
consider the questions raised by the application for review and may
also consider additional matters pertinent to the appeal.
(b) An order of the banking commissioner continues in effect
pending review unless the order is stayed by the finance
commission. The finance commission may impose any condition before
granting a stay of the appealed order. The finance commission may
not be required to accept additional evidence or hold an
evidentiary hearing if a hearing was held and a record made before
the banking commissioner. The finance commission shall remand the
proceeding to the banking commissioner for the purpose of receiving
any additional evidence the finance commission chooses to consider.
A matter made confidential by law must be considered by the finance
commission in a closed hearing.
(c) A hearing before the finance commission may be conducted
by a hearing officer on behalf of the finance commission.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.204. DIRECT APPEAL TO COURT OR APPEAL OF FINANCE
COMMISSION ORDER. A person affected by a final order of the
banking commissioner who elects to appeal directly to district
court, or a person affected by a final order of the finance
commission under this chapter, may appeal the final order by filing
a petition for judicial review in the District Court of Travis
County as provided by Chapter 2001, Government Code. A petition for
judicial review filed in the district court does not stay or vacate
the appealed order unless the court, after notice and hearing,
expressly stays or vacates the order.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
SUBCHAPTER D. CONFIDENTIALITY OF INFORMATION
§ 31.301. DISCLOSURE BY DEPARTMENT
PROHIBITED. (a) Except as expressly provided otherwise by this
subtitle, Chapter 11 or 12, or a rule adopted under this subtitle,
the following are confidential and may not be disclosed by the
banking commissioner or an employee of the department:
(1) information directly or indirectly obtained by the
department in any manner, including an application or examination,
concerning the financial condition or business affairs of a
financial institution or a present, former, or prospective
shareholder, participant, officer, director, manager, affiliate,
or service provider of a financial institution, other than
information in a published statement or in the public portion of a
call report or profit and loss statement; and
(2) all related files and records of the department.
(b) Information obtained by the department from a federal or
state regulatory agency that is confidential under federal or state
law may not be disclosed except as provided by federal or state law.
(c) The banking commissioner or an officer or employee of
the department commits an offense if the person:
(1) discloses information or permits access to a file
or record of the department; and
(2) knows at the time of disclosure or permission that
the disclosure or permission violates this subchapter.
(d) An offense under this section is a Class A misdemeanor.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 412, § 2.05, eff. Sept. 1, 2001.
§ 31.302. DISCLOSURE TO FINANCE
COMMISSION. Confidential information may not be disclosed to a
member of the finance commission, and a member of the commission may
not be given access to the files and records of the department
except that the banking commissioner may disclose to the commission
information, files, and records pertinent to a hearing or matter
pending before the commission.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.303. DISCLOSURE TO OTHER AGENCIES. (a) For
purposes of this section:
(1) "Affiliated group" means two or more persons
affiliated through common ownership or a contractual common
undertaking involving the sharing of customer information among
those persons.
(2) "Agency" means a department or agency of this
state, another state, the United States, or a foreign government
with whom the United States currently maintains diplomatic
relations, or any related agency or instrumentality.
(3) "Functional regulatory agency" means an agency
that regulates and charters, licenses, or registers persons engaged
in financial activities or activities incidental or complimentary
to financial activities, including activities related to banking,
insurance, or securities, within the jurisdiction of the agency.
(4) "Privilege" includes any work-product,
attorney-client, or other privilege recognized under federal or
state law.
(b) The banking commissioner may, as the commissioner
considers necessary or proper to the enforcement of the laws of this
state, another state, the United States, or a foreign sovereign
state with whom the United States currently maintains diplomatic
relations, or in the best interest of the public, disclose
information in the possession of the department to another agency.
The banking commissioner may not disclose information under this
section that is confidential under applicable state or federal law
unless:
(1) the recipient agency agrees to maintain the
confidentiality and take all reasonable steps to oppose an effort
to secure disclosure of the information from the agency; or
(2) the banking commissioner determines in the
exercise of discretion that the interest of law enforcement
outweighs and justifies the potential for disclosure of the
information by the recipient agency.
(c) The banking commissioner by agreement may establish an
information sharing and exchange program with a functional
regulatory agency that has overlapping regulatory jurisdiction
with the department, with respect to all or part of an affiliated
group that includes a financial institution, to reduce the
potential for duplicative and burdensome filings, examinations,
and other regulatory activities. Each agency party to the
agreement must agree to maintain confidentiality of information
that is confidential under applicable state or federal law and take
all reasonable steps to oppose any effort to secure disclosure of
the information from the agency. An agreement may also specify
procedures regarding use and handling of confidential information
and identify types of information to be shared and procedures for
sharing on a recurring basis.
(d) 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, whether or not the disclosure is
governed by a confidentiality agreement.
(e) Notwithstanding other law, an agency of this state:
(1) may execute, honor, and comply with an agreement
to maintain confidentiality and oppose disclosure of information
obtained from the banking commissioner as provided in this section;
and
(2) shall treat as confidential any information
obtained from the banking commissioner that is entitled to
confidential treatment under applicable state or federal law and
take all reasonable steps to oppose an effort to secure disclosure
of the information from the agency.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 528, § 3, eff. Sept. 1, 2001.
§ 31.304. OTHER DISCLOSURE PROHIBITED;
PENALTY. (a) Confidential information that is provided to a
financial institution, affiliate, or service provider of a
financial institution, whether in the form of a report of
examination or otherwise, is the confidential property of the
department. The information may not be made public or disclosed by
the recipient or by an officer, director, manager, employee, or
agent of the recipient to a person not officially connected to the
recipient as officer, director, employee, attorney, auditor, or
independent auditor except as authorized by rules adopted under
this subtitle.
(b) A person commits an offense if the person discloses or
uses information in violation of this section. An offense under
this section is punishable as if it were an offense under Section
37.10, Penal Code.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.305. CIVIL DISCOVERY. Civil discovery of
confidential information from a person subject to Section 31.304
under subpoena or other legal process must comply with rules
adopted under this subtitle and other applicable law. The rules
may:
(1) restrict release of confidential information to
the portion directly relevant to the legal dispute at issue; and
(2) require that a protective order, in form and under
circumstances specified by the rules, be issued by a court before
release of the confidential information.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997. Amended
by Acts 2001, 77th Leg., ch. 412, § 2.06, eff. Sept. 1, 2001.
§ 31.306. INVESTIGATIVE INFORMATION. Notwithstanding
any other law, the banking commissioner may refuse to release
information or records in the custody of the department if, in the
opinion of the commissioner, release of the information or records
might jeopardize an ongoing investigation of potentially unlawful
activities.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.307. EMPLOYMENT INFORMATION. (a) A person may
provide employment information concerning the known or suspected
involvement of a present or former employee, officer, or director
of a financial institution in a violation of a state or federal law,
rule, or regulation that has been reported to appropriate state or
federal authorities to:
(1) the financial institution; or
(2) a person providing employment information to the
financial institution.
(b) A person may not be held liable for providing
information under Subsection (a) unless the information provided is
false and the person provided the information with disregard for
the truth.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
§ 31.308. SHAREHOLDER INSPECTION
RIGHTS. (a) Notwithstanding Article 2.44, Texas Business
Corporation Act, a shareholder or participant of a state bank may
not examine:
(1) a report of examination or other confidential
property of the department that is in the possession of the state
bank; or
(2) a book or record of the state bank that directly or
indirectly pertains to financial or other information maintained by
the bank on behalf of its customers, including a specific item in
the minutes of the board or a committee of the board regarding loan
review and approval or a loan delinquency report that would tend to
identify the bank's customer.
(b) This section does not affect a right of a shareholder or
participant of a state bank acting in another capacity.
Acts 1997, 75th Leg., ch. 1008, § 1, eff. Sept. 1, 1997.
