BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 664|
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THIRD READING
Bill No: SB 664
Author: Senate Banking and Financial Institutions
Committee
Amended: 4/25/11
Vote: 21
SENATE BANKING & FINANCIAL INST. COMMITTEE : 7-0, 5/4/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla,
Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Financial institutions
SOURCE : Author
DIGEST : This bill renumbers 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.
ANALYSIS :
Existing Law :
1. 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.
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2. 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.
3. Contains numerous code sections that specify the powers
of the Commissioner in relation to his or her regulatory
oversight over state licensees.
This bill:
1. Conforms 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 has
to notify the Commissioner of Financial Institutions
(Commissioner), as specified, within ten days of
establishing, relocating, or redesignating that branch
office in California.
2. Renumbers 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 remains
unchanged; only the code numbers would be revised, and
the code sections reorganized.
Background
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
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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.
This bill 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.
This bill 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, this bill 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 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
JJA:do 5/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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