BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1784|
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CONSENT
Bill No: AB 1784
Author: Dababneh (D), et al.
Amended: 8/1/16 in Senate
Vote: 21
SENATE BANKING & F.I. COMMITTEE: 7-0, 6/15/16
AYES: Glazer, Vidak, Galgiani, Hall, Hueso, Lara, Morrell
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 4/14/16 (Consent) - See last page for
vote
SUBJECT: State banks
SOURCE: California Bankers Association
DIGEST: This bill 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.
ANALYSIS:
Existing law:
1)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
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regulation (Financial Code Section 1070).
2)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).
3)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).
This bill:
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 all of the following
conditions are met:
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
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.
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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.
3)Provides that a bank, which participates in a financial
education program at a school, as specified, is liable for all
deposits made on the premises of, or at a facility used by the
school as if the deposit was made directly at a branch office
of the bank.
Background
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.
School-based savings programs 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 bill. 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 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.
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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
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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified7/22/16)
California Bankers Association (source)
California Community Banking Network
OPPOSITION: (Verified7/22/16)
None received
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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."
ASSEMBLY FLOOR: 76-0, 4/14/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,
Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth
Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper,
Roger Hernández, Holden, Jones, Jones-Sawyer, Kim, Lackey,
Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty,
Medina, Mullin, Obernolte, O'Donnell, Olsen, Patterson, Quirk,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Rendon
NO VOTE RECORDED: Irwin, Levine, Melendez, Nazarian
Prepared by:Eileen Newhall / B. & F.I. / (916) 651-4102
8/3/16 18:49:57
**** END ****
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