FINANCE CODE
CHAPTER 184. INVESTMENTS, LOANS, AND DEPOSITS
SUBCHAPTER A. ACQUISITION AND OWNERSHIP OF TRUST COMPANY FACILITIES
AND OTHER REAL PROPERTY
§ 184.001. DEFINITION. In this subchapter, "state
trust company facility" means real property, including an
improvement, that a state trust company owns or leases, to the
extent the lease or the leasehold improvement is capitalized, for
the purpose of:
(1) providing space for state trust company employees
to perform their duties and for state trust company employees and
customers to park;
(2) conducting trust business, including meeting the
reasonable needs and convenience of the public and the state trust
company's clients, computer operations, document and other item
processing, maintenance, and record retention and storage;
(3) holding, improving, and occupying as an incident
to future expansion of the state trust company's facilities; or
(4) conducting another activity authorized by rules
adopted under this subtitle.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.002. INVESTMENT IN STATE TRUST COMPANY
FACILITIES. (a) Without the prior written approval of the
banking commissioner, a state trust company may not directly or
indirectly invest an amount in excess of 60 percent of its
restricted capital in state trust company facilities, furniture,
fixtures, and equipment. Except as otherwise provided by rules
adopted under this subtitle, in computing the limitation provided
by this subsection a state trust company:
(1) shall include:
(A) its direct investment in state trust company
facilities;
(B) an investment in equity or investment
securities of a company holding title to a facility used by the
state trust company for the purposes specified by Section 184.001;
(C) a loan made by the state trust company to or
on the security of equity or investment securities issued by a
company holding title to a facility used by the state trust company;
and
(D) any indebtedness incurred on state trust
company facilities by a company:
(i) that holds title to the facility;
(ii) that is an affiliate of the state trust
company; and
(iii) in which the state trust company 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 any lease of a facility from the company
holding title to the facility is capitalized on the books of the
state trust company.
(b) Real property described by Subsection 184.001(3) and
not improved and occupied by the state trust company ceases to be a
state trust company facility on the third anniversary of the date of
its acquisition unless the banking commissioner on application
grants written approval to further delay in the improvement and
occupation of the property by the state trust company.
(c) A state trust company shall comply with regulatory
accounting principles in accounting for its investment in and
depreciation of state trust company facilities, furniture,
fixtures, and equipment.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.003. OTHER REAL PROPERTY. (a) A state trust
company may not invest its restricted capital in real property
except:
(1) as permitted by this subtitle or rules adopted
under this subtitle; or
(2) as necessary to avoid or minimize a loss on a loan
or investment previously made in good faith.
(b) With the prior written approval of the banking
commissioner, a state trust company may:
(1) exchange real property for other real property or
personal property;
(2) invest additional money in or improve real
property acquired under this subsection or Subsection (a); or
(3) acquire additional real property to avoid or
minimize loss on real property acquired as permitted by Subsection
(a).
(c) A state trust company shall dispose of any real property
subject to Subsection (a) not later than:
(1) the fifth anniversary of the date the real
property:
(A) was acquired, except as otherwise provided by
rules adopted under this subtitle; or
(B) ceases to be used as a state trust company
facility; or
(2) the second anniversary of the date the real
property ceases to be a state trust company facility as provided by
Section 184.002(b).
(d) The banking commissioner on application may grant one or
more extensions of time for disposing of real property under
Subsection (c) if the banking commissioner determines that:
(1) the state trust company has made a good faith
effort to dispose of the real property; or
(2) disposal of the real property would be detrimental
to the state trust company.
(e) Subject to the exercise of prudent judgment, a state
trust company may invest its secondary capital in real property.
The factors to be considered by a state trust company in exercise of
prudent judgment include the factors contained in Section
184.101(f).
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
SUBCHAPTER B. INVESTMENTS
§ 184.101. SECURITIES. (a) A state trust company may
invest its restricted capital in any type or character of equity or
investment securities under the limitations provided by this
section.
(b) Unless the banking commissioner in writing approves
maintenance of a lesser amount, a state trust company must invest
and maintain an amount equal to at least 40 percent of the state
trust company's restricted capital under Section 182.008 in
investment securities that are readily marketable and can be
converted to cash within four business days.
(c) Subject to Subsection (d), the total investment of its
restricted capital in equity and investment securities of any one
issuer, obligor, or maker, and the total investment of its
restricted capital in mutual funds, held by the state trust company
for its own account, may not exceed an amount equal to 15 percent of
the state trust company's restricted 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
trust company is not adversely affected.
(d) Notwithstanding Subsection (c), a state trust company
may invest its restricted capital, without limit subject to the
exercise of prudent judgment, in:
(1) bonds and other legally created general
obligations of a state, an agency or political subdivision of a
state, the United States, or an agency or instrumentality of the
United States;
(2) obligations that this state, an agency or
political subdivision of this state, the United States, or an
agency or instrumentality of the United States has unconditionally
agreed to purchase, insure, or guarantee;
(3) securities that are offered and sold under 15
U.S.C. Section 77d(5);
(4) mortgage related securities or small business
related securities, as those terms are defined by 15 U.S.C. Section
78c(a);
(5) mortgages, obligations, or other securities that
are or ever have been sold by the Federal Home Loan Mortgage
Corporation under Section 305 or 306, Federal Home Loan Mortgage
Corporation Act (12 U.S.C. Sections 1434 and 1455);
(6) obligations, participations, or other instruments
of or issued by the Federal National Mortgage Association or the
Government National Mortgage Association;
(7) obligations issued by the Federal Agricultural
Mortgage Corporation, the Federal Farm Credit Banks Funding
Corporation, or a Federal Home Loan Bank;
(8) obligations of the Federal Financing Bank or the
Environmental Financing Authority;
(9) obligations or other instruments or securities of
the Student Loan Marketing Association; or
(10) qualified Canadian government obligations, as
defined by 12 U.S.C. Section 24.
(e) In the exercise of prudent judgment, a state trust
company shall, at a minimum:
(1) exercise care and caution to make and implement
investment and management decisions for the entire investment
portfolio, taking into consideration the safety and soundness of
the state trust company;
(2) pursue an overall investment strategy to enable
management to make appropriate present and future decisions; and
(3) consider, to the extent relevant to the decision
or action:
(A) the size, diversification, and liquidity of
its corporate assets;
(B) the general economic conditions;
(C) the possible effect of inflation or
deflation;
(D) the expected tax consequences of the
investment decisions or strategies;
(E) the role that each investment or course of
action plays within the investment portfolio; and
(F) the expected total return of the portfolio.
(f) A state trust company may invest its secondary capital
in any type or character of equity or investment securities subject
to the exercise of prudent judgment according to the standards
provided by Subsection (f).
(g) The finance commission may adopt rules to administer and
carry out this section, including rules to:
(1) establish limits, requirements, or exemptions
other than those specified by this section for particular classes
or categories of investment; or
(2) limit or expand investment authority for state
trust companies for particular classes or categories of securities
or other property.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 528, § 23, eff. Sept.
1, 2001.
§ 184.102. TRANSACTIONS IN STATE TRUST COMPANY SHARES OR
PARTICIPATION SHARES. Except with the prior written approval of
the banking commissioner:
(1) a state trust company may not acquire its own
shares or participation shares unless the amount of its undivided
profits is sufficient to fully absorb the acquisition of the shares
or participation shares under regulatory accounting principles;
and
(2) a state trust company may not acquire a lien on its
own shares or participation shares unless the amount of
indebtedness secured is less than the amount of the state trust
company's undivided profits.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.103. STATE TRUST COMPANY
SUBSIDIARIES. (a) Except as otherwise provided by this subtitle
or rules adopted under this subtitle, and subject to the exercise of
prudent judgment, a state trust company may invest its secondary
capital to acquire or establish one or more subsidiaries to conduct
any activity that may lawfully be conducted through the form of
organization chosen for the subsidiary. The factors to be
considered by a state trust company in exercise of prudent judgment
include the factors contained in Section 184.101(e).
(b) A state trust company that intends to acquire,
establish, or perform new activities through a subsidiary shall
submit a letter to the banking commissioner describing in detail
the proposed activities of the subsidiary.
(c) The state trust company may acquire or establish a
subsidiary or begin performing new activities in an existing
subsidiary on the 31st day after the date the banking commissioner
receives the state trust company's letter, unless the banking
commissioner specifies an earlier or later date. The banking
commissioner may extend the 30-day period on a determination that
the state trust company's letter raises issues that require
additional information or additional time for analysis. If the
period is extended, the state trust company may acquire or
establish the subsidiary, or perform new activities in an existing
subsidiary, only on prior written approval of the banking
commissioner.
(d) A subsidiary of a state trust company is subject to
regulation by the banking commissioner to the extent provided by
this subtitle or rules adopted under this section. In the absence
of limiting rules, the banking commissioner may regulate a
subsidiary as if it were a state trust company.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 528, § 24, eff. Sept.
1, 2001.
§ 184.104. OTHER INVESTMENT PROVISIONS. (a) Without
the prior written approval of the banking commissioner, a state
trust company may not make any investment of its secondary capital
in any investment that incurs or may incur, under regulatory
accounting principles, a liability or contingent liability for the
state trust company.
(b) The banking commissioner may, on a case-by-case basis,
require a state trust company to dispose of any investment of its
secondary capital, if the banking commissioner finds that the
divestiture of the asset is necessary to protect the safety and
soundness of the state trust company. The banking commissioner in
the exercise of discretion under this subsection shall consider
safety and soundness factors, including those contained in Section
182.008(b). The proposed effective date of an order requiring a
state trust company to dispose of an asset must be stated in the
order and must be on or after the 21st day after the date the
proposed order is mailed or delivered. Unless the state trust
company requests a hearing before the banking commissioner in
writing before the effective date of the proposed order, the order
becomes effective and is final and nonappealable.
(c) Subject to Subsections (a) and (b), to Section 184.105,
and to the exercise of prudent judgment, a state trust company may
invest its secondary capital in any type or character of investment
for the purpose of generating income or profit. The factors to be
considered by a state trust company in exercise of prudent judgment
include the factors contained in Section 184.101(e).
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 528, § 25, eff. Sept.
1, 2001.
§ 184.105. ENGAGING IN COMMERCE
PROHIBITED. (a) Except as otherwise provided by this subtitle or
rules adopted under this subtitle, a state trust company may not
invest its funds in trade or commerce by buying, selling, or
otherwise dealing goods or by owning or operating a business not
part of the state trust business, except as necessary to fulfill a
fiduciary obligation to a client.
(b) Under this section, engaging in an approved financial
activity or an activity incidental or complementary to a financial
activity, whether as principal or agent, is not considered to be
engaging in commerce.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999. Amended by Acts 2001, 77th Leg., ch. 528, § 26, eff. Sept.
1, 2001.
SUBCHAPTER C. LOANS
§ 184.201. LENDING LIMITS. (a) A state trust
company's total outstanding loans and extensions of credit to a
person other than an insider may not exceed an amount equal to 15
percent of the state trust company's restricted capital.
(b) The aggregate loans and extensions of credit
outstanding at any time to insiders of the state trust company may
not exceed an amount equal to 15 percent of the state trust
company's restricted capital. All covered transactions between an
insider and a state trust company must be engaged in only on terms
and under circumstances, including credit standards, that are
substantially the same as those for comparable transactions with a
person other than an insider.
(c) The finance commission may adopt rules to administer
this section, including rules to:
(1) establish limits, requirements, or exemptions
other than those specified by this section for particular classes
or categories of loans or extensions of credit; and
(2) establish collective lending and investment
limits.
(d) The banking commissioner may determine whether a loan or
extension of credit putatively made to a person will be attributed
to another person for purposes of this section.
(e) A state trust company may not lend trust deposits,
except that a trustee may make a loan to a beneficiary of the trust
if the loan is expressly authorized or directed by the instrument or
transaction establishing the trust.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.202. VIOLATION OF LENDING LIMIT. (a) An
officer, director, manager, managing participant, or employee of a
state trust company who approves or participates in the approval of
a loan with actual knowledge that the loan violates Section 184.201
is jointly and severally liable to the state trust company for the
lesser of the amount by which the loan exceeded applicable lending
limits or the state trust company's actual loss. The person remains
liable for that amount until the loan and all prior indebtedness of
the borrower to the state trust company have been fully repaid.
(b) The state trust company may initiate a proceeding to
collect an amount due under this section at any time before the date
the borrower defaults on the subject loan or any prior indebtedness
or before the fourth anniversary of that date.
(c) A person who is liable for and pays amounts to the state
trust company under this section is entitled to an assignment of the
state trust company's claim against the borrower to the extent of
the payments.
(d) For purposes of this section, an officer, director,
manager, managing participant, or employee of a state trust company
is presumed to know the amount of the state trust company's lending
limit under Section 184.201 and the amount of the borrower's
aggregate outstanding indebtedness to the state trust company
immediately before a new loan or extension of credit to that
borrower.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.203. LEASE FINANCING TRANSACTION. (a) Subject
to rules adopted under this subtitle, a state trust company may
become the owner and lessor of tangible personal property for lease
financing transactions on a net lease basis on the specific request
and for the use of a client. Without the written approval of the
banking commissioner to continue holding property acquired for
leasing purposes under this subsection, the state trust company may
not hold the property more than six months after the date of
expiration of the original or any extended or renewed lease period
agreed to by the client for whom the property was acquired or by a
subsequent lessee.
(b) A rental payment received by the state trust company in
a lease financing transaction under this section is considered to
be rent and not interest or compensation for the use, forbearance,
or detention of money. However, a lease financing transaction is
considered to be a loan or extension of credit for purposes of
Sections 184.201 and 184.202.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.204. GENERAL BANKING PRIVILEGES NOT
CONFERRED. This subchapter does not confer general banking
privileges on a state trust company.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
SUBCHAPTER D. TRUST DEPOSITS
§ 184.301. TRUST DEPOSITS. (a) A state trust company
may deposit trust funds with itself as an investment if:
(1) the deposit is authorized by the settlor or
beneficiary;
(2) the state trust company maintains as security for
the deposit a separate fund of securities, legal for trust
investments, under control of a federal reserve bank or a clearing
corporation, as defined by Section 8.102, Business & Commerce Code,
within or outside this state;
(3) the total market value of the security is at all
times at least equal to the amount of the deposit; and
(4) the separate fund is designated as a separate
fund.
(b) A state trust company may make periodic withdrawals from
or additions to a securities fund required by Subsection (a) as long
as the required value is maintained. Income from the securities in
the fund belongs to the state trust company.
(c) Security for a deposit under this section is not
required for a deposit under Subsection (a) to the extent the
deposit is insured by the Federal Deposit Insurance Corporation or
its successor.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.302. GENERAL BANKING PRIVILEGES NOT
CONFERRED. This subchapter does not confer general banking
privileges on a state trust company.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
SUBCHAPTER E. LIABILITIES AND PLEDGE OF ASSETS
§ 184.401. BORROWING LIMIT. Except with the prior
written approval of the banking commissioner, a state trust company
may not have outstanding liabilities, excluding trust deposit
liabilities arising under Section 184.301, that exceed an amount
equal to five times its restricted capital.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
§ 184.402. PLEDGE OF ASSETS. (a) A state trust company
may not pledge or create a lien on any of its assets except to
secure:
(1) the repayment of money borrowed;
(2) trust deposits as specifically authorized or
required by:
(A) Section 184.301;
(B) Title 9, Property Code; or
(C) rules adopted under this chapter; or
(3) deposits made by:
(A) the United States;
(B) a state, county, or municipality; or
(C) an agency of the United States or a state,
county, or municipality.
(b) An act, deed, conveyance, pledge, or contract in
violation of this section is void.
Added by Acts 1999, 76th Leg., ch. 62, § 7.16(a), eff. Sept. 1,
1999.
