BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 979 (Vargas) - Financial Institutions
          
          Amended: May 1, 2012            Policy Vote: B&FI 7-0
          Urgency: No                     Mandate: No
          Hearing Date: May 24, 2012      Consultant: Maureen Ortiz
          
          SUSPENSE FILE.


          Bill Summary: SB 979 requires the Department of Financial 
          Institutions (DFI) to post all final orders to modify, rescind, 
          revoke or suspend a license on its Internet Web site, and makes 
          technical changes to the Money Transmitters Law.

          Fiscal Impact:  Potentially more than $150,000 annually to the 
          Financial Institutions Fund.
              $75,000 annually for  PY programmer/specialist to 
              establish and maintain Web site.
              $30,000 - $90,000 annually for hearings based on two - six 
              hearings per year.
              If hearings were highly contested and involve lengthy 
              discovery, costs could be significantly higher.

          Background: The Department of Financial Institutions regulates 
          California chartered banks and credit unions, as well as several 
          other types of financial and money service businesses, such as 
          trust companies and money transmitters.  As part of its 
          regulatory duties, the department conducts regular examinations 
          of its licensees and takes enforcement actions as necessary to 
          ensure that its licensees are operating in a safe and sound 
          manner.  Often times, the department makes informal 
          recommendations to licensees regarding enhancements they can 
          make to their policies, procedures, internal routines, etc.  

          Formal enforcement actions include cease and desist orders 
          (C&Ds), the revocation or suspension of a license, a decision to 
          take possession of the property and business of a licensee, a 
          decision to impose civil penalties, or to refer the licensee to 
          the Attorney General for criminal prosecution.  Cease and desist 
          orders often result from a safety and soundness examination of 
          the licensee where significant issues related to the licensee's 
          financial condition are uncovered.  The C&D outlines the 








          SB 979 (Vargas)
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          relevant issues about the licensee's financial condition and 
          sets forth the terms the licensee must meet in order to return 
          to a safe and sound condition.  Often these terms involve 
          increasing capital to a specific level, or reducing the volume 
          of non-performing assets. Licensees are able to appeal formal 
          enforcement actions and the action does not become final until 
          the licensee either waives his or her right to an appeal or 
          exhausts its administrative appeal rights.  

          Proposed Law: SB 979 will require the DFI to make public all 
          final enforcement actions by posting them on the department's 
          Internet Web site.

          Additionally, SB 979 provides that if the commissioner makes a 
          written determination that the publication of a final order 
          would seriously threaten the safety or soundness of a regulated 
          institution, the commissioner may delay publication of the order 
          or decision for a reasonable time.

          Staff Comments: All of the federal depository institution 
          regulators including the Office of the Comptroller of the 
          Currency, Federal Reserve Board, Federal Deposit Insurance 
          Corporations, and National Credit Union Administration make 
          their final, formal enforcement actions public.  SB 979 will 
          provide the same transparency to state-chartered financial 
          institutions.

          However, it is likely that when formal actions are required to 
          be publicized, more licensees will appeal the decision rather 
          than consenting to it which could result in increased costs to 
          the DFI for administration and hearings.