BILL ANALYSIS                                                                                                                                                                                                    Ó






                  SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
                             Senator Juan Vargas, Chair


          SB 664 (Comm. on Banking & Fin. Institutions)Hearing Date:  
          April 27, 2011  

          As Amended: April 25, 2011
          Fiscal:             Yes
          Urgency:       No
          

           SUMMARY    Would renumber sections of the Financial Code to 
          reflect recent Financial Code reorganization and make certain 
          conforming changes to the federal Dodd-Frank Wall Street Reform 
          and Consumer Protection Act.
          
          DESCRIPTION
           
            1.  Would conform California's Banking Law to Section 613 of 
              the federal Dodd-Frank Wall Street Reform and Consumer 
              Protection Act (Dodd-Frank), by authorizing national banks 
              and foreign (out-of-state) banks to branch into California, 
              as if those banks were organized in California.  Pursuant to 
              that conforming change, any bank that establishes a branch 
              office in California in accordance with the changes made by 
              Dodd-Frank to the National Bank Act or Federal Deposit 
              Insurance Act would have to notify the Commissioner of 
              Financial Institutions (Commissioner), as specified, within 
              ten days of establishing, relocating, or redesignating that 
              branch office in California.  

           2.  Would renumber the sections of the Financial Code 
              administered by the Department of Financial Institutions 
              (DFI), to reflect a multi-year Financial Code reorganization 
              initiated by DFI beginning in 2008.  The contents of the 
              Financial Code sections would remain unchanged; only the 
              code numbers would be revised, and the code sections 
              reorganized.

           EXISTING LAW
           
           3.  Prohibits an out-of-state bank from opening a branch in 
              California, without first purchasing a California bank that is 
              at least five years old and merging that California bank into 
              the out-of-state bank (Financial Code Sections 3824 and 3825). 




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          664 (Comm. On B. & F.I.), Page 2




           4.  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.

           5.  Contains numerous code sections that specify the powers of the 
              Commissioner in relation to his or her regulatory oversight over 
              state licensees.  
           






































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          664 (Comm. On B. & F.I.), Page 3



           COMMENTS

          1.  Background and Discussion:    In 2008, DFI commenced a 
              multi-year effort to update and reorganize the laws over 
              which it has jurisdiction.  This reorganization was intended 
              to update laws that had fallen far out of date; reflect 
              numerous changes made to the state General Corporations Law 
              and to federal banking law since the laws overseen by DFI 
              were originally drafted; and clean up various 
              inconsistencies, incorrect code references, and obsolete 
              code sections that had crept into the code over time.  DFI 
              sponsored three pieces of chaptered legislation to 
              accomplish this update, including AB 1301 (Gaines), Chapter 
              125, Statutes of 2008, AB 2749 (Gaines), Chapter 501, 
              Statutes of 2008, and AB 1268 (Gaines), Chapter 532, 
              Statutes of 2010.

          SB 664 finalizes the reorganization process, by renumbering code 
              sections amended by the earlier bills.  This reorganization 
              makes no substantive changes; it merely orders the code 
              sections more logically, and is intended to be easier for 
              licensees to follow and for DFI to administer. 

          SB 664 also updates California's Banking Law to reflect 
              amendments made by Section 613 of Dodd-Frank to the National 
              Bank Act and the Federal Deposit Insurance Act.  These 
              changes (technically referred to as de novo interstate 
              branching amendments) allow state and national banks to 
              branch into any state, as if the state or national bank is 
              organized under the laws of the state into which it 
              branches.  Prior federal law had allowed states to prohibit 
              national and out-of-state banks from branching into their 
              states.  California adopted such a prohibition, forbidding 
              de novo interstate branching, unless the national or 
              out-of-state bank acquired a California bank at least five 
              years old and merged that California bank into its 
              operations.  SB 664 strikes California's prohibition against 
              de novo interstate branching.  Because Dodd-Frank does not 
              require the branching bank to notify the state financial 
              institutions regulator of the state in which the new branch 
              will be established, SB 664 adds a requirement that any bank 
              branching into California notify the DFI commissioner.  

          State banks branching into California will have to follow the 
              same laws that California-chartered banks must follow (just 
              as California-chartered banks branching into another state 




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          664 (Comm. On B. & F.I.), Page 4



              would have to follow the laws of that other state with 
              respect to the branches they open in that state).  National 
              banks branching into California will have to follow the 
              National Bank Act and any California laws that are not 
              pre-empted.  

           2.  Summary of Arguments in Support:   None received.

           3.  Summary of Arguments in Opposition:    None received.

           4.  Prior and Related Legislation:   

               a.     AB 1301 (Gaines), Chapter 125, Statutes of 2008:  
                 The first in a series of bills sponsored by DFI to update 
                 and modernize sections of the Financial Code administered 
                 by that department.  

               b.     AB 2749 (Gaines), Chapter 501, Statutes of 2008:  
                 The second in that series of bills.  

               c.     AB 1268 (Gaines), Chapter 532, Statutes of 2010:  
                 The third in that series of bills.  


           LIST OF REGISTERED SUPPORT/OPPOSITION
          
          Support
           
          None received
           
          Opposition
               
          None received

          Consultant: Eileen Newhall  (916) 651-4102