BILL ANALYSIS �
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.