BILL ANALYSIS SENATE COMMITTEE ON BANKING, FINANCE, AND INSURANCE Senator Ronald Calderon, Chair AB 1268 (Gaines) Hearing Date: June 22, 2009 As Amended: May 11, 2009 Fiscal: Yes Urgency: No SUMMARY Would reorganize and consolidate provisions of the Financial Code administered by the Department of Financial Institutions (DFI), by moving the powers and authority of the Commissioner of Financial Institutions (Commissioner) into one chapter of the Financial Code and consolidating other laws that are applicable to all of DFI's licensees into one body of law. DIGEST Existing law 1. Establishes Divisions 1, 2, 5, 7, 15, and 16 of the Financial Code, and gives the Commissioner jurisdiction over banks, industrial banks, trust companies, transmitters of money abroad, traveler's check issuers, savings associations, credit unions, industrial loan companies, business and development corporations, and sellers of payment instruments (money orders); 2. Contains numerous code sections that specify the powers of the Commissioner in relation to his or her regulatory oversight over state licensees. This bill would enact numerous technical and nonsubstantive changes to the provisions of the Financial Code administered by DFI, by consolidating all of the powers of the Commissioner into one portion of the Financial Code (Section 220 et seq.); creating single articles within the Financial Code providing the rules for enforcement (Article 7), liquidation and conservation (Article 8), and voluntary liquidation (Article 9); and deleting provisions of individual licensing laws rendered obsolete by the aforementioned changes. COMMENTS AB 1268 (Gaines), Page 2 1. Purpose of the bill To continue the process of modernizing the sections of the Financial Code that are administered by the Commissioner, by moving the powers and authority of the Commissioner that are applicable to all licensees into one chapter of the Financial Code and consolidating other laws that are applicable to all of DFI's licensees into one body of law. 2. Background The need for this bill, and the two modernization bills that came before it during the prior Legislative Session (AB 1301 and AB 2749) stems from the age of the laws over which the Commissioner has jurisdiction and the fractured way in which they were enacted and changed over the years. The Commissioner's powers over each of his or her licensees are similar in nature, yet each of the six divisions of the Financial Code administered by the Commissioner has slightly different provisions, which were added at different times by different authors. The net result is a group of laws with similar intent, yet with different wording and uneven requirements. The powers of the Commissioner are express in some divisions and implied in others. In the background information provided to this Committee, DFI notes that, common to all of its licensees, the commissioner may approve or deny an application for licensure, suspend or revoke a license, examine the books and records of a licensee, collect assessments and fees, compel corrective action by a licensee that has been determined by the Commissioner to be operating in violation of applicable law(s) or to be in an unsafe and unsound condition, and take possession of and provide for the orderly liquidation or conservation of a licensee. This bill will streamline the Financial Code and provide more efficient and effective regulatory oversight by consolidating similar provisions found in licensee laws into one chapter of the Financial Code and making the provisions in the chapter applicable to all of the Department's licensees. This proposal would repeal duplicative language currently contained in Division 1, Banks; Division 5, Credit Unions; Division 15, Business and Industrial Loan Corporations; and Division 16, Payment Instruments. 3. Support . DFI is sponsoring AB 1268 for the reasons stated above. AB 1268 (Gaines), Page 3 4. Opposition None received. 5. Prior Legislation a. AB 1301 (Gaines), Chapter 125, Statutes of 2008: One of the two prior DFI-sponsored bills to update and modernize sections of the Financial Code administered by DFI; b. AB 2749 (Gaines), Chapter 501, Statutes of 2008: The second of two prior DFI-sponsored bills to update and modernize sections of the Financial Code administered by DFI. 6. Suggested Amendments a. AB 1268 amends two sections of the Financial Code (1889 and 34109) that are also amended by AB 1059 (Silva), a measure which passed the Senate Judiciary Committee on consent. AB 1059 was moved by its author to the Senate inactive file, to allow Assemblyman Silva to resolve conflicts with other bills. Before AB 1268 is sent to the Governor, it should be amended to double-joint it with AB 1059. POSITIONS Support Department of Financial Institutions (sponsor) Oppose None received Consultant: Eileen Newhall (916) 651-4102