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