BILL NUMBER: AB 551	CHAPTERED  09/30/02

	CHAPTER  1162
	FILED WITH SECRETARY OF STATE  SEPTEMBER 30, 2002
	APPROVED BY GOVERNOR  SEPTEMBER 30, 2002
	PASSED THE ASSEMBLY  AUGUST 30, 2002
	PASSED THE SENATE  AUGUST 29, 2002
	AMENDED IN SENATE  AUGUST 28, 2002
	AMENDED IN SENATE  AUGUST 22, 2002
	AMENDED IN ASSEMBLY  MAY 7, 2001

INTRODUCED BY   Assembly Member Papan
   (Principal coauthor:  Senator Burton)
   (Coauthor:  Senator Dunn)

                        FEBRUARY 21, 2001

   An act to add Section 701.1 to the Financial Code, relating to
financial institutions.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 551, Papan.  Industrial banks:  acquisition.
   Existing law provides for the regulation of financial
institutions, including industrial banks, by the Commissioner of
Financial Institutions and by various federal agencies.
   This bill would prohibit a person, except as specified, from
acquiring control of an industrial bank unless the person is engaged
only in the activities that are permitted for a financial holding
company as provided in federal law, or the person is a credit union
when the industrial bank is a credit union service organization as
provided in state law.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) The economic strength and general welfare of California
depends on strong and sound financial institutions that command the
highest levels of public confidence among the citizens of this state.

   (b) California financial institutions are highly monitored and
closely supervised by federal and state regulatory agencies that
impose strict compliance standards and conduct regular and frequent
examinations of those institutions.
   (c) The Banking Law, as amended by Chapter 105 of the Statutes of
2000 (Senate Bill 2148), reclassified industrial loan companies as
industrial banks, otherwise subject to all laws and regulations
pertaining to commercial banks, except the prohibition against
offering demand deposits.
   (d) The chairman of the Federal Reserve Board, in congressional
testimony, and many other noted economists, experts, and government
officials have noted the dangers of mixing banking and general
commerce.  Clarification of California public policy with regard to
mixing of banking and commerce and to the acquisition of control of
California industrial banks is desirable to assure continued public
confidence in these institutions.
   (e) It is therefore the intent of the Legislature to address these
concerns by creating more consistency between state and federal law.

  SEC. 2.  Section 701.1 is added to the Financial Code, to read:
   701.1.  Notwithstanding any other provision of this article,
except for those persons approved by the commissioner prior to
September 1, 2002, and for those persons who control industrial banks
as of September 1, 2002, no person may directly or indirectly,
including through any merger, consolidation, or any other type of
business combination, acquire control of an industrial bank, as
defined in Section 105.5, unless the person is engaged only in the
activities permitted for financial holding companies, as provided in
Section 103 of the federal Gramm-Leach-Bliley Act (12 U.S.C. Sec.
1843(k)(1)), or is a credit union, as defined in Section 134.5, when
the industrial bank is a credit union service organization, as
defined in Section 14651.  Nothing in this section shall be construed
to exempt a person seeking to acquire control of a bank that
otherwise qualifies to do so pursuant to this section, from the
requirements of Sections 700 to 711, inclusive.  For the purposes of
this section, the term "control" has the same meaning as in
subdivision (b) of Section 700.