BILL ANALYSIS Ó
SB 664
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Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
SB 664 (Banking) - As Amended: May 19, 2011
SENATE VOTE : 39-0
SUBJECT : Financial Institutions
SUMMARY : 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. Specifically, this
bill :
1)Provides for conforming changes made necessary by Dodd-Frank,
to 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
re-designating 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 remain unchanged; only the code numbers would be
revised, and the code sections reorganized.
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. (Financial Code)
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. (Financial
SB 664
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Code)
3)Contains numerous code sections that specify the powers of the
Commissioner in relation to his or her regulatory oversight
over state licensees. (Financial Code)
FISCAL EFFECT : Unknown
COMMENTS :
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out of date; reflect numerous changes made to the state General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.
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
SB 664
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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.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081