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).
SB
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.
SB
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
SB
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