TITLE 7. BANKING AND SECURITIES

PART 2. TEXAS DEPARTMENT OF BANKING

CHAPTER 12. LOANS AND INVESTMENTS

SUBCHAPTER D. INVESTMENTS

7 TAC §12.91

The Finance Commission of Texas (the commission), on behalf of the Texas Department of Banking (the department), adopts amendments to §12.91, concerning other real estate owned (OREO) by state banks. The amendments are adopted without changes to the proposed text as published in the July 3, 2020, issue of the Texas Register (45 TexReg 4437). The amended rule will not be republished.

REASONED JUSTIFICATION

These amendments extend the initial appraisal deadline to within 90 days of OREO acquisition by state banks and enable the Texas Banking Commissioner (commissioner) to extend this deadline and the three-year re-appraisal deadline where appropriate.

The amendments also reduce the scope of the OREO appraisal rule by raising the recorded book value threshold for OREO subject to the rule. Specifically, the amendments only require initial appraisals and three-year re-appraisals for OREO with recorded book values of more than $500,000, raising the existing threshold amount from $250,000.

SUMMARY OF PUBLIC COMMENTS & RESPONSES THERETO

A comment supporting the adoption of the amendments was received from Independent Bankers Association of Texas (IBAT), which represents various state banks. IBAT states that the amendments will provide helpful regulatory relief to state banks and are consistent with changes by federal regulators. In addition, IBAT states that the increase from 60 to 90 days for the time to obtain an appraisal on OREO after acquisition will also be helpful for state banks.

One additional comment regarding the amendments was received from International Bancshares Corporation (IBC), which owns a state bank. IBC supports the amendments because they ease regulatory complexity, foster uniformity among the banking industry, give state banks greater opportunities to serve small businesses, and reduce the risks of transactions of OREO from failing where an appraiser is not available.

However, IBC urges the commission to go further and raise the mandatory OREO appraisal threshold to at least $750,000 or preferably $1,000,000. IBC notes that the National Credit Union Administration raised analogous OREO appraisal thresholds for credit unions relating to commercial real estate transactions to $1,000,000 and argues that further increases to the commission's appraisal would allow Texas state banks to more fairly compete with credit unions.

The department believes that raising the threshold further as proposed by IBC would create undesirable risks for the safety and soundness of state banks. Appraisals by licensed or certified appraisers tend to be more accurate, and accurate valuations of OREO owned by state banks is important for ensuring the financial soundness of those state banks. In addition, increasing the OREO appraisal threshold to $500,000 under the amendments is consistent with recent updates to federal bank regulations at Title 12 of the Code of Federal Regulations, §225.63 and §323.3, which now require state banks to obtain appraisals for commercial real estate loans and other commercial real estate transactions with a transaction value of more than $500,000.

STATUTORY AUTHORITY

The amendments are adopted pursuant to Texas Finance Code (Finance Code), §11.301, which authorizes the commission to adopt rules applicable to state banks, and Finance Code, §31.003, which authorizes the commission to adopt rules necessary to preserve or protect the safety and soundness of state banks.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 21, 2020.

TRD-202003438

Catherine Reyer

General Counsel

Texas Department of Banking

Effective date: September 10, 2020

Proposal publication date: July 3, 2020

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


PART 4. DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 76. MISCELLANEOUS

SUBCHAPTER F. FEES AND CHARGES

7 TAC §76.98

The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (department), adopts amendments to Title 7, Texas Administrative Code (TAC), Part 4, Chapter 76, Subchapter F, §76.98. The rule is adopted with changes to the text published in the July 3, 2020 issue of the Texas Register (45 TexReg 4439) and is republished to reflect such changes. The changes regulate no new parties and affect no new subjects of regulation. As a result, the rule will not be republished as a proposed rule for comment.

Explanation of and justification for the rule

7 TAC Chapter 76 contains the department's rules concerning charges and fees imposed on regulated state savings banks. Existing §76.98 imposes an annual assessment fee on state savings banks to fund the operations of the department and provide for the supervision and examination of state savings banks by the department. Under the requirements of existing §76.98, regulated state savings banks are assessed a fee that is based on their size as reflected by their total assets. By assessing a fee based on asset size, a state savings bank is meant to pay an assessment fee proportionate to the cost of its required supervision and examination. The amendments allow the department to also consider a state savings bank's total risk-weighted assets as a basis on which to establish the amount of its assessment fee. A risk-weighted asset approach takes into consideration not only the state savings bank's asset size, but also the character of its operations as revealed by its investment positions and associated risk profile. The department asserts a risk-weighted asset approach promotes more equitable fees for state savings banks. A state savings bank taking riskier investment positions is more likely to raise safety and soundness concerns, and typically requires closer supervision and additional scrutiny during examination, leading to increases in attendant costs disproportionate to a similarly-sized state savings bank with equivalent total assets but more conservative investment positions. As a result, the requirements of the existing rule have the tendency to distort the actual costs required for the supervision and examination of regulated state savings banks, and in some instances resulting in inflated assessment fees outsizing the actual cost of regulation. The department anticipates that administering and enforcing the amended rule will result in reduced assessment fees for regulated state savings banks overall. Existing §76.98 has been in place and stood largely unchanged since its adoption in 2012. The underlying requirements of the rule have been in place since 1993 when they were initially adopted by the department (at that time, the Texas Savings and Loan Department; 7 TAC §76.98; 18 TexReg 6100). With the advent of modern capital requirements based on risk weighting, the department has ready access to data for most state savings banks with which to apply a risk-weighted asset approach in assessing fees. Specifically, implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 at the federal level (Public Law No. 111-203, 124 Stat. 1376, 1435-38 (2010)) and application of the Basel III standards of the Basel Committee for Banking Supervision in federal law means many state savings banks already regularly report data concerning their total risk-weighted assets for purposes of their minimum capital requirements. Such data may be easily repurposed by the department for use in assessing fees on a risk-weighted asset basis. In consideration of the foregoing, the department determined that assessments based on total risk-weighted assets would result in fees that are more equitable and better reflect the true cost of regulation. The amendments to §76.98 effectuate such change.

Summary of public comments

Publication of the department's proposal to amend 7 TAC §76.98 recited a deadline of 30 days to receive public comments, or August 2, 2020. A public hearing in accordance with Government Code §2001.029 was not required. The department received one comment made on behalf of the Texas Bankers Association (TBA) indicating it was in favor of the amendments as initially proposed.

Statutory Authority

Amended 7 TAC §76.98 is adopted under the authority of Finance Code §91.007(1)(A), which requires the commission to adopt rules for fees and charges related to the supervision and examination of state savings banks. Amended 7 TAC §76.98 is further adopted under the authority of Finance Code §16.003(c), which provides that the department may set the amounts of fees, penalties, charges, and revenues as necessary for the purpose of carrying out the functions of the department.

The adoption of amended 7 TAC §76.98 affects the statutes administered and enforced by the department's commissioner with respect to state savings banks, contained in Finance Code, Subtitle C.

§76.98.Annual Assessments.

(a) Annual assessment. All savings banks chartered under the laws of the state and all foreign savings banks organized under the laws of another state of the United States holding a certificate of authority to do business in this state shall pay to the department an annual assessment fee in an amount determined by the commissioner as provided by subsection (c) of this section in accordance with the rate requirements set by the Finance Commission of Texas, and subject to the maximum assessment rates established by subsection (d) of this section. The department will maintain on its website information concerning current rate requirements.

(b) Payment of Assessment. The annual assessment shall be paid in quarterly installments. Upon receipt of a written invoice from the department, the savings bank shall pay the assessment fee by electronic/ACH payment, or by another method, if directed to do so by the department.

(c) Determination of assessment. The assessment shall be determined based on either the total assets, or total risk-weighted assets of the savings bank, whichever results in the lowest fee being assessed. The valuation of assets shall be determined as of the close of the calendar quarter immediately preceding the effective date of the assessment. A savings bank's total assets or total risk-weighted assets shall be derived from the savings bank's Federal Financial Institutions Examination Council (FFIEC) consolidated report of condition and income (call report), filed in accordance with federal law. If a savings bank is not required by applicable federal law to disclose its total risk-weighted assets in the call report, the savings bank may voluntarily report to the commissioner information concerning its total risk-weighted assets for purposes of calculating its assessment, which shall be provided to the commissioner in the manner and within the time prescribed by the commissioner; otherwise, the assessment will be based on the savings bank's total assets.

(d) Maximum Assessment Rates. The assessment rates set by the Finance Commission of Texas shall not exceed the maximum rates established in the following rate schedule:

Figure: 7 TAC §76.98(d) (.pdf)

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 24, 2020.

TRD-202003461

Iain A. Berry

Associate General Counsel

Department of Savings and Mortgage Lending

Effective date: September 13, 2020

Proposal publication date: July 3, 2020

For further information, please call: (512) 475-1535


PART 5. OFFICE OF CONSUMER CREDIT COMMISSIONER

CHAPTER 85. PAWNSHOPS AND CRAFTED PRECIOUS METAL DEALERS

SUBCHAPTER B. RULES FOR CRAFTED PRECIOUS METAL DEALERS

7 TAC §85.1012

The Finance Commission of Texas (commission) adopts the repeal of §85.1012 (relating to Registration System Transition), in 7 TAC, Chapter 85, Subchapter B, concerning Rules for Crafted Precious Metal Dealers.

The commission adopts the repeal of §85.1012 without changes to the proposed text as published in the July 3, 2020, issue of the Texas Register (45 TexReg 4449). The repeal will not be republished.

The commission received no written comments on the proposal.

In general, the purpose of the proposed repeal in 7 TAC Chapter 85, Subchapter B is to implement changes resulting from the commission's review of the chapter under Texas Government Code, §2001.039. Notice of the review of 7 TAC Chapter 85, Subchapter B was published in the Texas Register on March 27, 2020 (45 TexReg 2211). The commission received no comments in response to that notice.

The OCCC distributed an early precomment draft of the proposed repeal to interested stakeholders for review, and then held a stakeholder webinar regarding the repeal. The OCCC received no informal precomments on the rule text draft.

The adopted repeal deletes a section of 7 TAC Chapter 85, Subchapter B that expired by its own terms on January 1, 2020. This provision was meant to transition crafted precious metal dealers from a registration system in the Department of Public Safety to one in the OCCC.

The repeal is adopted under Texas Occupations Code, §1956.0611, which authorizes the commission to adopt rules to implement and enforce Texas Occupations Code, Chapter 1956.

The statutory provisions affected by the adoption are contained in Texas Occupations Code, Chapter 1956.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on August 21, 2020.

TRD-202003445

Audrey Spalding

Assistant General Counsel

Office of Consumer Credit Commissioner

Effective date: September 10, 2020

Proposal publication date: July 3, 2020

For further information, please call: (512) 936-7659