TITLE 7. BANKING AND SECURITIES

PART 1. FINANCE COMMISSION OF TEXAS

CHAPTER 3. STATE BANK REGULATION

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to amend §3.4, concerning foreign banking; §3.23, concerning exercise of trust powers; §3.36, concerning annual assessments and specialty examination fees; §3.43, concerning credit balance of funds; §3.44, concerning statements of registration, notices and filings related to foreign bank representative offices; §3.52, concerning general definitions; §3.55, concerning calculation of liabilities; and §3.92, concerning user safety at unmanned teller machines. The proposals remove transitionary provisions that are no longer necessary and correct statutory references and certain scrivener errors.

Section 3.4 cites to 12 U.S.C. §1831 to incorporate the federal definition of "well capitalized." Section 3.4 as amended corrects the statutory reference for the federal definition to 12 U.S.C. §1831o.

Section 3.23 references the filing fee required by §15.2 of this title. Section 3.23 as amended corrects the reference to include the correct title of the section.

Section 3.36 includes a transitionary provision regarding annual assessments established for the fiscal year beginning September 1, 2015. Section 3.36 as amended removes the transitionary provision.

Section 3.43 references §204.104(b), of the Texas Finance Code to control the authorized sources of deposits for foreign bank branches or agencies. Section 3.43 as amended corrects the reference to include the correct section of the Texas Finance Code.

Section 3.44 references the filing fee required by §15.2 of this title. Section 3.44 as amended corrects the reference to include the correct title of the section.

Section 3.52 references the Federal Financial Examination Council. Section 3.52 as amended corrects the reference to include the correct abbreviation of the entity.

Section 3.55 references the Federal Financial Examination Council. Section 3.55 as amended corrects the reference to include the correct abbreviation of the entity.

Section 3.92 describes the conditions for measuring compliance with the standards for lighting at unmanned teller machines. Section 3.92 as amended corrects a misspelling of the unit of measurement.

Robert L. Bacon, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the rules.

Mr. Bacon also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is greater clarity of the rules to which state-chartered banks are subject.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rules as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

• create or eliminate a government program;

• require the creation of new employee positions or the elimination of existing employee positions;

• require an increase or decrease in future legislative appropriations to the agency;

• require an increase or decrease in fees paid to the agency;

• create a new regulation;

• expand, limit or repeal an existing regulation;

• increase or decrease the number of individuals subject to the rule’s applicability; and

• positively or adversely affect this state’s economy.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposals must be submitted no later than 5:00 p.m. on June 4, 2018. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

SUBCHAPTER A. SECURITIES ACTIVITIES AND SUBSIDIARIES

7 TAC §3.4

The amendment to §3.4 is proposed under Finance Code, §31.003(a), which provides that the commission may adopt rules to accomplish the purposes of Title 3, Subtitle A and Chapters 11, 12, and 13 of the Texas Finance Code, including rules necessary or reasonable to:

(1) Implement and clarify this subtitle and Chapters 11, 12, and 13;

(2) Preserve or protect the safety and soundness of state banks;

(3) Grant at least the same rights and privileges to state banks that are or may be granted to national banks domiciled in this state;

(4) Recover the cost of maintaining and operating the department and the cost of enforcing this subtitle and other applicable law by imposing and collecting ratable and equitable fees for notices, applications, and examinations; and

(5) Facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission.

No statute, article or code is affected by the proposed amended section.

§3.4.Foreign Banking.

(a) Any state-chartered bank that is well-capitalized as defined by Section 38, Federal Deposit Insurance Act, 12 United States Code (USC), §1831o [§1831] may file an application with the banking commissioner for permission to exercise, upon such conditions as may be prescribed by the banking commissioner, the following powers:

(1) - (3) (No change.)

(b) - (c) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801731

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301


SUBCHAPTER B. GENERAL

7 TAC §3.23, §3.36

The amendment to §3.23 is proposed under Finance Code, §31.003(a)(2), which authorizes the commission to adopt rules necessary or reasonable to preserve or protect the safety and soundness of state banks. The amendment to §3.36 is proposed under Finance Code, §31.003(a)(4) and §31.106, which authorize the commission to adopt rules necessary or reasonable to recover the cost of supervision and regulation by imposing and collecting ratable and equitable fees.

Finance Code, §32.001 and §32.101, are affected by proposed amended §3.23. Finance Code, §31.106, is affected by proposed amended §3.36.

§3.23.Exercise of Trust Powers.

(a) - (b) (No change.)

(c) A state bank described in subsection (b) of this section that intends to offer and provide trust services shall submit a notice to the banking commissioner describing the proposed trust services and the anticipated date for initiation of such services. In addition, the bank must submit:

(1) - (3) (No change.)

(4) if the bank's certificate of formation does not authorize the bank to exercise the trust powers necessary to provide the proposed trust services, an application for amendment of its certificate of formation pursuant to Finance Code, §32.101, accompanied by the filing fee required by §15.2 of this title (relating to Filing and Investigation Fees) [Fees and Cost Deposits]; and

(5) (No change.)

(d) (No change.)

§3.36.Annual Assessments and Specialty Examination Fees.

(a) - (c) (No change.)

(d) Annual assessment. Effective September 1 of each year, the department will establish the annual assessment for each bank, foreign bank branch, and foreign bank agency under subsections (f) and (g) of this section.

(1) - (3) (No change.)

[(4) Notwithstanding paragraph (1) of this subsection, the annual assessment established for the fiscal year beginning September 1, 2015, must be recalculated for each bank on March 1, 2016, using the revised table in §3.37(a). The two remaining quarterly installments due on or before March 15 and June 15, 2016, must be based on the recalculated assessment. In other words, subject to possible reduction under Subsection (g) of this section, the quarterly installments due on or before March 15 and June 15, 2016, will each be in an amount equal to 25 percent of the assessment as recalculated on March 1, 2016.]

(e) - (i) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801732

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301


SUBCHAPTER C. FOREIGN BANK BRANCHES, AGENCIES AND REPRESENTATIVE OFFICES

7 TAC §3.43, §3.44

The amendments to §3.43 and §3.44 are proposed under Finance Code, §31.003(a), which provides that the commission may adopt rules to accomplish the purposes of Title 3, Subtitle A and Chapters 11, 12, and 13 of the Texas Finance Code, including rules necessary or reasonable to:

(1) Implement and clarify this subtitle and Chapters 11, 12, and 13;

(2) Preserve or protect the safety and soundness of state banks;

(3) Grant at least the same rights and privileges to state banks that are or may be granted to national banks domiciled in this state;

(4) Recover the cost of maintaining and operating the department and the cost of enforcing this subtitle and other applicable law by imposing and collecting ratable and equitable fees for notices, applications, and examinations; and

(5) Facilitate the fair hearing and adjudication of matters before the banking commissioner and the finance commission.

Finance Code, Chapter 204, is affected by the proposed amended sections.

§3.43.Credit Balance of Funds.

(a) A foreign bank branch or agency may not receive deposits except as specifically authorized under the Finance Code, §204.105(b) [§204.104(b)]. A foreign bank branch or agency may receive funds from a person and maintain a credit balance in accordance with the Finance Code, §204.105(b) [§204.104(b)].

(b) - (c) (No change.)

§3.44.Statements of Registration, Notices and Filings Related to Foreign Bank Representative Offices.

(a) - (b) (No change.)

(c) Statement of registration. To establish a representative office in this state, a foreign bank shall file with the banking commissioner a statement of registration on the form prescribed by the department. The statement of registration must:

(1) - (2) (No change.)

(3) be accompanied by the registration fee established in §15.2(b) of this title (relating to Filing and Investigation Fees [Fees and Cost Deposits]).

(d) (No change.)

(e) Separate statement of registration required. A statement of registration must be filed for each representative office a foreign bank establishes in this state. If a foreign bank has established an initial representative office in accordance with this section, the banking commissioner may waive one or more of the informational requirements of the statement of registration form with respect to any additional Texas representative office the foreign bank seeks to establish. However, payment of the registration fee provided for in §15.2(b) of this title (relating to Filing and Investigation Fees [Fees and Cost Deposits]) may not be waived.

(f) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801733

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301


SUBCHAPTER D. PLEDGE AND MAINTENANCE OF ASSETS BY FOREIGN BANK LICENSED TO MAINTAIN TEXAS STATE BRANCH OR AGENCY

7 TAC §3.52, §3.55

The amendments to §3.52 and §3.55 are proposed under Finance Code, §201.003, which authorizes the commission to adopt rules necessary or reasonable to implement and clarify Title 3, Subtitle G of the Finance Code and Finance Code, §204.113 and §204.114, which authorize the commission to adopt rules concerning asset pledge and maintenance requirements applicable to a foreign bank that maintains a Texas state branch or agency.

Finance Code, §204.113 and §204.114, are affected by the proposed amended sections.

§3.52.General Definitions.

Unless defined otherwise in this section, words and terms used in this subchapter that are defined in Finance Code, §31.002, have the same meanings as defined in the Finance Code. The following words and terms, when used in this subchapter, have the following meanings unless the context clearly indicates otherwise:

(1) (No change.)

(2) Call Report--The FFIEC [FFEIC] quarterly, consolidated report of assets and liabilities of United States branches and agencies of foreign banks, currently reported on FFIEC 002.

(3) - (10) (No change.)

§3.55.Calculation of Liabilities.

(a) Calculation of liabilities in accordance with Call Report. For purposes of §3.53(b), and except as otherwise provided in this subchapter, a foreign bank must:

(1) calculate the nonrelated deposit liabilities and nonrelated other liabilities of its Texas state branch or agency in accordance with the instructions in the FFIEC [FFEIC] Call Report; and

(2) (No change.)

(b) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801734

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301


SUBCHAPTER E. BANKING HOUSE AND OTHER FACILITIES

7 TAC §3.92

The amendments to §3.92 are proposed under Finance Code, §59.310, which authorizes the commission to adopt rules to implement Subchapter D of the Finance Code, Chapter 59 (§§59.301 - 59.310).

Finance Code, §59.310, is affected by the proposed amended section.

§3.92.User Safety at Unmanned Teller Machines.

(a) (No change.)

(b) Measurement of candlefoot [candle foot] power. For purposes of measuring compliance with the Finance Code, §59.307, candlefoot [candle foot] power should be determined under normal, dry weather conditions, without complicating factors such as fog, rain, snow, sand or dust storm, or other similar condition.

(c) - (h) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801736

Catherine Reyer

General Counsel

Finance Commission of Texas

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301


PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 33. MONEY SERVICES BUSINESSES

7 TAC §§33.23, 33.31, 33.35, 33.51

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), proposes to amend §33.23, concerning additional provisions that apply to permissible investments; §33.31, concerning record retention relating to currency exchange transactions; §33.35, concerning record retention relating to money transmission transactions; and §33.51, concerning providing information to customers on how to file a complaint. The amended rules are proposed to provide clarity with respect to existing policies and mirror applicable federal regulation.

Section 33.23 discusses the permissible investment requirement for a money transmitter under §151.309 of the Texas Finance Code. Section 33.23 as amended clarifies the department’s interpretation of an existing permissible investment under the statute to allow a money transmitter to include the appropriate assets in meeting its statutory requirements.

Section 33.31 explains what records a currency exchanger must retain with respect a currency exchange transaction. Section 33.31 as amended clarifies the documentation an alien may use to provide customer information. This change mirrors the federal requirements as clarified in FINCEN Ruling FIN-2014-R003.

Section 33.35 pertains to record retention requirements relating to money transmission transactions. Section 33.35 as amended includes a reference to digital wallets as a stored value product and removes a provision that refers to to-be-adopted federal rules that were subsequently adopted. The change in subsection (d)(1) does not expand the existing regulation, it merely clarifies the department’s interpretation of digital wallets/e-wallets as "stored value products." Subsection (d)(3) is being deleted because the Department of Treasury adopted specific recordkeeping requirements for stored value transactions subsequent to the adoption of §33.35 of this title.

Section 33.51 addresses when and how a money services business must provide customers with the information necessary to file a complaint with the department. Section 33.51 as amended clarifies when a money services business license holder is required to include the consumer complaint notice on its website.

Stephanie Newberg, Deputy Commissioner, Texas Department of Banking, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for state government or for local government as a result of enforcing or administering the proposed rules.

Ms. Newberg also has determined that, for each year of the first five years the rules as proposed are in effect, the public benefit anticipated as a result of enforcing the rules is greater clarity of the rules to which money services businesses are subject.

For each year of the first five years that the rules will be in effect, there will be no economic costs to persons required to comply with the rules as proposed.

For each year of the first five years that the rules will be in effect, the rules will not:

• create or eliminate a government program;

• require the creation of new employee positions or the elimination of existing employee positions;

• require an increase or decrease in future legislative appropriations to the agency;

• require an increase or decrease in fees paid to the agency;

• create a new regulation;

• expand, limit or repeal an existing regulation;

• increase or decrease the number of individuals subject to the rule’s applicability; and

• positively or adversely affect this state’s economy.

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities. There will be no difference in the cost of compliance for these entities.

To be considered, comments on the proposals must be submitted no later than 5:00 p.m. on June 4, 2018. Comments should be addressed to General Counsel, Texas Department of Banking, Legal Division, 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294. Comments may also be submitted by email to legal@dob.texas.gov.

The amendments are proposed under Finance Code, §151.102, which authorizes the commission to adopt rules to administer and enforce Texas Finance Code, Chapter 151.

Finance Code, Chapter 151, is affected by the proposed amended sections.

§33.23.What Additional Provisions Apply to Permissible Investments?

(a) - (e) (No change.)

(f) For the purpose of satisfying a license holder’s permissible investments requirement under Tex. Fin. Code Ann. §151.309, the Department interprets "cash in demand or interest-bearing accounts with a federally insured depository institution" to include funds held by a license holder’s depository institution after being withdrawn from the license holder’s account for transmission to satisfy the license holder’s outstanding money transmission obligation.

§33.31.What Records Must I Keep Related to Currency Exchange Transactions?

(a) - (b) (No change.)

(c) What specific records must I keep related to currency exchange?

(1) With respect to currency exchange transactions in an amount in excess of $1,000, you must keep a record for each transaction that contains:

(A) the customer and transaction information required under 31 CFR §1022.410(b)(3), provided that, if your customer does not have a taxpayer identification number (e.g., social security, employee identification number) or passport number and is an alien, you may provide the number and description of an alternate valid entry document issued by a U.S. Federal or state government, such as a border crossing card [use the number of an alien identification card or other official document evidencing your customer’s foreign nationality or residence, such as foreign driver’s license or foreign voter registration card]; and

(B) - (H) (No change.)

(2) - (3) (No change.)

(d) (No change.)

§33.35.What Records Must I Keep Related to Money Transmission Transactions?

(a) - (c) (No change.)

(d) What specific records must I keep related to the issuance and sale of stored value products?

(1) This subsection applies to transactions in which you issue or sell, as a license holder or the authorized delegate of a license holder, as applicable, stored value products (e.g., cards, devices, services, digital wallets/e-wallets) in any amount for currency or an instrument payable in currency.

(2) You must maintain transaction records regarding each stored value transaction that are appropriate for your business activities and the type of stored value product you issue or sell. The records must be sufficient to enable the department to determine the volume of your stored value transactions and the amount of your outstanding stored value liability.

[(3) The BSA and 31 CFR Chapter X impose certain requirements upon money services businesses that issue, sell and redeem stored value products. As of the effective date of this section, however, the United States Department of Treasury has not adopted specific recordkeeping requirements for stored value transactions. You must comply with applicable BSA and other federal recordkeeping requirements when and as such requirements are adopted by the Department of Treasury.]

(e) - (g) (No change.)

§33.51.How do I Provide Information to My Customers about How to File a Complaint?

(a) - (d) (No change.)

(e) How and where must I provide the required notice?

(1) (No change.)

(2) If you maintain a website by which a customer may remit money for transmission, complete a depository agent services transaction or obtain information about [you or] the customer’s transaction or an existing account, you must include the required notice on your website. The notice must be prominently displayed on the initial page the customer uses to initiate the remittance, transaction or access the information, or on a page available no more than one link from the initial page. The link must clearly describe the information available by clicking the link, e.g., "Texas customers click here for information about filing complaints about our money transmission or currency exchange product or service" or "Customers click here for information about filing complaints about our depository agent services."

(3) - (4) (No change.)

(f) - (h) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on April 20, 2018.

TRD-201801730

Catherine Reyer

General Counsel

Texas Department of Banking

Earliest possible date of adoption: June 3, 2018

For further information, please call: (512) 475-1301