BILL ANALYSIS Ó
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Steven Glazer, Chair
2015 - 2016 Regular
Bill No: AB 1784 Hearing Date: June 15,
2016
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|Author: |Dababneh |
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|Version: |May 16, 2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Eileen Newhall |
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Subject: State banks
SUMMARY Authorizes banks to participate in school-based financial
education programs, as specified, without classifying the
campuses on which those education programs are located as
branches.
DESCRIPTION
1. Authorizes a bank to participate in a financial education
program that involves receiving deposits or paying
withdrawals on the premises of, or at a facility used by, a
school.
2. Provides that the school premises or facility will not be
considered a branch office of the bank if:
a. The bank does not establish and operate the school
premises or facility in which the program is conducted.
b. Bank employees work at the site only to participate
in the program.
c. The program is provided at the discretion of the
school.
d. The principal purpose of the program is financial
education. A program is educational if it is designed to
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teach students the principles of personal financial
management, banking operations, or the benefits of saving
for the future, and is not designed for the purpose of
profitmaking.
e. No services are provided to the general public.
f. The program is conducted in a manner that is
consistent with safe and sound banking practices and
complies with applicable law.
EXISTING LAW
3. Defines a branch office as any office at which core banking
business is conducted, as specified, and defines core
banking business as the business of receiving deposits,
paying checks, making loans, and other activities that the
Commissioner of Business Oversight (commissioner) may
specify by order or regulation (Financial Code Section
1070).
4. Requires a bank to file a notice with the commissioner
within 10 days of establishing, relocating, or redesignating
an office and to pay an appropriate fee (Financial Code
Section 1076).
5. Authorizes a bank to close or discontinue the operation of
any branch office if, before the closing or discontinuance,
the bank files a notice with the commissioner containing
detailed information supporting the decision to close or
discontinue the office. A branch office closure is deemed
acceptable, if the commissioner issues a "no objection"
letter or does not issue a written objection to the bank's
notice (Financial Code Section 1078).
COMMENTS
1. Purpose: This bill is sponsored by the California Bankers
Association (CBA) to allow state-chartered banks to offer
school-based savings programs, without having the locations
of those programs classified as branches for purposes of the
Banking Law.
2. Background and Discussion: School-based savings programs
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are a collaborative effort between banks and elementary,
middle, and high school administrators and teachers that
provide financial education activities through
presentations, classes and curriculum development.
According to CBA, these programs range from mini-banks that
offer student savings accounts to more complex programs that
offer career-oriented banker training. These programs help
students understand the value of saving by opening and
managing savings accounts.
California law does not currently prohibit the school-based
savings accounts that are the focus of this measure.
However, existing law includes the act of receiving deposits
as one of the activities that is classified as core banking
business, and defines a branch office as any office at which
core banking business is conducted. Existing law contains
several requirements applicable to branch offices, which
would make it cost prohibitive for a bank to establish a
branch office in every school where that bank wished to
offer a school-based savings program. This bill allows
banks to establish school-based savings programs offering
limited banking services, without classifying those school
premises as official branch offices and triggering a myriad
of costly bureaucratic requirements as a result.
California law previously authorized state-chartered banks to
offer school-based savings programs. However, the section
containing that authorization was deleted when the Financial
Code was reorganized and streamlined (former Financial Code
Section 511 was repealed by AB 1301, Gaines, Chapter 125,
Statutes of 2008). In 2008, the then-Department of
Financial Institutions was of the opinion that banks could
engage in any activities not otherwise prohibited under the
Financial Code; thus, language giving banks express
authority to offer school-based programs was unnecessary.
Since that time, some have suggested that banks may lack the
authority to offer school-based savings programs, because
the Financial Code no longer expressly authorizes those
activities. This bill will resolve that uncertainty by
expressly authorizing banks to offer school-based savings,
as specified.
The language of this bill is consistent with and tracks federal
guidance encouraging financial institutions to develop youth
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savings programs, which was issued in February 2015 by five
federal financial regulators, including the Board of
Governors of Federal Reserve System, Federal Deposit
Insurance Corporation, National Credit Union Administration,
Office of the Comptroller of the Currency, and the Financial
Crimes Enforcement Network.
3. Summary of Arguments in Support: CBA is sponsoring AB 1784
in response to the February 2015 regulatory guidance cited
above. CBA views the bill as a charter parity measure,
which will allow state-chartered banks to offer the same
types of school-based savings programs as
federally-chartered banks. School-based savings programs
provide a valuable service to the community and help banks
meet their federally mandated Community Reinvestment Act
obligations.
The California Community Banking Network believes that "this
measure will help encourage community banks in their efforts
to increase the financial skills of young people."
4. Summary of Arguments in Opposition: None received.
5. Prior and Related Legislation:
a. AB 1301 (Gaines), Chapter 125, Statutes of 2008; AB
2749 (Gaines), Chapter 501, Statutes of 2008; AB 1268
(Gaines), Chapter 532, Statutes of 2010; and SB 664
(Committee on Banking and Financial Institutions),
Chapter 243, Statutes of 2011: The series of bills that
updated, modernized, and renumbered provisions of the
Financial Code administered by DFI. The provision of the
Banking Law that previously authorized the activities
that AB 1784 would re-authorize was deleted during the
reorganization accomplished by these bills.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
California Bankers Association (sponsor)
California Community Banking Network
Opposition
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None received
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