CHAPTER 184. INVESTMENTS, LOANS, AND DEPOSITS
FINANCE CODE
TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES
SUBTITLE F. TRUST COMPANIES
CHAPTER 184. INVESTMENTS, LOANS, AND DEPOSITS
SUBCHAPTER A. ACQUISITION AND OWNERSHIP OF TRUST COMPANY
FACILITIES AND OTHER REAL PROPERTY
Sec. 184.001. DEFINITION. In this subchapter, "state trust
company facility" means real property, including an improvement,
that a state trust company owns or leases, to the extent the
lease or the leasehold improvement is capitalized, for the
purpose of:
(1) providing space for state trust company employees to perform
their duties and for state trust company employees and customers
to park;
(2) conducting trust business, including meeting the reasonable
needs and convenience of the public and the state trust company's
clients, computer operations, document and other item processing,
maintenance, and record retention and storage;
(3) holding, improving, and occupying as an incident to future
expansion of the state trust company's facilities; or
(4) conducting another activity authorized by rules adopted
under this subtitle.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.002. INVESTMENT IN STATE TRUST COMPANY FACILITIES. (a)
Without the prior written approval of the banking commissioner,
a state trust company may not directly or indirectly invest an
amount in excess of 60 percent of its restricted capital in state
trust company facilities, furniture, fixtures, and equipment.
Except as otherwise provided by rules adopted under this
subtitle, in computing the limitation provided by this subsection
a state trust company:
(1) shall include:
(A) its direct investment in state trust company facilities;
(B) an investment in equity or investment securities of a
company holding title to a facility used by the state trust
company for the purposes specified by Section 184.001;
(C) a loan made by the state trust company to or on the security
of equity or investment securities issued by a company holding
title to a facility used by the state trust company; and
(D) any indebtedness incurred on state trust company facilities
by a company:
(i) that holds title to the facility;
(ii) that is an affiliate of the state trust company; and
(iii) in which the state trust company is invested in the manner
described by Paragraph (B) or (C); and
(2) may exclude an amount included under Subdivisions (1)(B)-(D)
to the extent any lease of a facility from the company holding
title to the facility is capitalized on the books of the state
trust company.
(b) Real property described by Subsection 184.001(3) and not
improved and occupied by the state trust company ceases to be a
state trust company facility on the third anniversary of the date
of its acquisition unless the banking commissioner on application
grants written approval to further delay in the improvement and
occupation of the property by the state trust company.
(c) A state trust company shall comply with regulatory
accounting principles in accounting for its investment in and
depreciation of state trust company facilities, furniture,
fixtures, and equipment.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.003. OTHER REAL PROPERTY. (a) A state trust company
may not invest its restricted capital in real property except:
(1) as permitted by this subtitle or rules adopted under this
subtitle; or
(2) as necessary to avoid or minimize a loss on a loan or
investment previously made in good faith.
(b) With the prior written approval of the banking commissioner,
a state trust company may:
(1) exchange real property for other real property or personal
property;
(2) invest additional money in or improve real property acquired
under this subsection or Subsection (a); or
(3) acquire additional real property to avoid or minimize loss
on real property acquired as permitted by Subsection (a).
(c) A state trust company shall dispose of any real property
subject to Subsection (a) not later than:
(1) the fifth anniversary of the date the real property:
(A) was acquired, except as otherwise provided by rules adopted
under this subtitle; or
(B) ceases to be used as a state trust company facility; or
(2) the second anniversary of the date the real property ceases
to be a state trust company facility as provided by Section
184.002(b).
(d) The banking commissioner on application may grant one or
more extensions of time for disposing of real property under
Subsection (c) if the banking commissioner determines that:
(1) the state trust company has made a good faith effort to
dispose of the real property; or
(2) disposal of the real property would be detrimental to the
state trust company.
(e) Subject to the exercise of prudent judgment, a state trust
company may invest its secondary capital in real property. The
factors to be considered by a state trust company in exercise of
prudent judgment include the factors contained in Section
184.101(f).
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
SUBCHAPTER B. INVESTMENTS
Sec. 184.101. SECURITIES. (a) A state trust company may invest
its restricted capital in any type or character of equity or
investment securities under the limitations provided by this
section.
(b) Unless the banking commissioner in writing approves
maintenance of a lesser amount, a state trust company must invest
and maintain an amount equal to at least 40 percent of the state
trust company's restricted capital under Section 182.008 in
investment securities that are readily marketable and can be
converted to cash within four business days.
(c) Subject to Subsection (d), the total investment of its
restricted capital in equity and investment securities of any one
issuer, obligor, or maker, and the total investment of its
restricted capital in mutual funds, held by the state trust
company for its own account, may not exceed an amount equal to 15
percent of the state trust company's restricted capital. The
banking commissioner may authorize investments in excess of this
limitation on written application if the banking commissioner
determines that:
(1) the excess investment is not prohibited by other applicable
law; and
(2) the safety and soundness of the requesting state trust
company is not adversely affected.
(d) Notwithstanding Subsection (c), a state trust company may
invest its restricted capital, without limit subject to the
exercise of prudent judgment, in:
(1) bonds and other legally created general obligations of a
state, an agency or political subdivision of a state, the United
States, or an agency or instrumentality of the United States;
(2) obligations that this state, an agency or political
subdivision of this state, the United States, or an agency or
instrumentality of the United States has unconditionally agreed
to purchase, insure, or guarantee;
(3) securities that are offered and sold under 15 U.S.C. Section
77d(5);
(4) mortgage related securities or small business related
securities, as those terms are defined by 15 U.S.C. Section
78c(a);
(5) mortgages, obligations, or other securities that are or ever
have been sold by the Federal Home Loan Mortgage Corporation
under Section 305 or 306, Federal Home Loan Mortgage Corporation
Act (12 U.S.C. Sections 1434 and 1455);
(6) obligations, participations, or other instruments of or
issued by the Federal National Mortgage Association or the
Government National Mortgage Association;
(7) obligations issued by the Federal Agricultural Mortgage
Corporation, the Federal Farm Credit Banks Funding Corporation,
or a Federal Home Loan Bank;
(8) obligations of the Federal Financing Bank or the
Environmental Financing Authority;
(9) obligations or other instruments or securities of the
Student Loan Marketing Association; or
(10) qualified Canadian government obligations, as defined by 12
U.S.C. Section 24.
(e) In the exercise of prudent judgment, a state trust company
shall, at a minimum:
(1) exercise care and caution to make and implement investment
and management decisions for the entire investment portfolio,
taking into consideration the safety and soundness of the state
trust company;
(2) pursue an overall investment strategy to enable management
to make appropriate present and future decisions; and
(3) consider, to the extent relevant to the decision or action:
(A) the size, diversification, and liquidity of its corporate
assets;
(B) the general economic conditions;
(C) the possible effect of inflation or deflation;
(D) the expected tax consequences of the investment decisions or
strategies;
(E) the role that each investment or course of action plays
within the investment portfolio; and
(F) the expected total return of the portfolio.
(f) A state trust company may invest its secondary capital in
any type or character of equity or investment securities subject
to the exercise of prudent judgment according to the standards
provided by Subsection (f).
(g) The finance commission may adopt rules to administer and
carry out this section, including rules to:
(1) establish limits, requirements, or exemptions other than
those specified by this section for particular classes or
categories of investment; or
(2) limit or expand investment authority for state trust
companies for particular classes or categories of securities or
other property.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 23, eff.
Sept. 1, 2001.
Sec. 184.102. TRANSACTIONS IN STATE TRUST COMPANY SHARES OR
PARTICIPATION SHARES. Except with the prior written approval of
the banking commissioner:
(1) a state trust company may not acquire its own shares or
participation shares unless the amount of its undivided profits
is sufficient to fully absorb the acquisition of the shares or
participation shares under regulatory accounting principles; and
(2) a state trust company may not acquire a lien on its own
shares or participation shares unless the amount of indebtedness
secured is less than the amount of the state trust company's
undivided profits.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.103. STATE TRUST COMPANY SUBSIDIARIES. (a) Except as
otherwise provided by this subtitle or rules adopted under this
subtitle, and subject to the exercise of prudent judgment, a
state trust company may invest its secondary capital to acquire
or establish one or more subsidiaries to conduct any activity
that may lawfully be conducted through the form of organization
chosen for the subsidiary. The factors to be considered by a
state trust company in exercise of prudent judgment include the
factors contained in Section 184.101(e).
(b) A state trust company that intends to acquire, establish, or
perform new activities through a subsidiary shall submit a letter
to the banking commissioner describing in detail the proposed
activities of the subsidiary.
(c) The state trust company may acquire or establish a
subsidiary or begin performing new activities in an existing
subsidiary on the 31st day after the date the banking
commissioner receives the state trust company's letter, unless
the banking commissioner specifies an earlier or later date. The
banking commissioner may extend the 30-day period on a
determination that the state trust company's letter raises issues
that require additional information or additional time for
analysis. If the period is extended, the state trust company may
acquire or establish the subsidiary, or perform new activities in
an existing subsidiary, only on prior written approval of the
banking commissioner.
(d) A subsidiary of a state trust company is subject to
regulation by the banking commissioner to the extent provided by
this subtitle or rules adopted under this section. In the absence
of limiting rules, the banking commissioner may regulate a
subsidiary as if it were a state trust company.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 24, eff.
Sept. 1, 2001.
Sec. 184.104. OTHER INVESTMENT PROVISIONS. (a) Without the
prior written approval of the banking commissioner, a state trust
company may not make any investment of its secondary capital in
any investment that incurs or may incur, under regulatory
accounting principles, a liability or contingent liability for
the state trust company.
(b) The banking commissioner may, on a case-by-case basis,
require a state trust company to dispose of any investment of its
secondary capital, if the banking commissioner finds that the
divestiture of the asset is necessary to protect the safety and
soundness of the state trust company. The banking commissioner in
the exercise of discretion under this subsection shall consider
safety and soundness factors, including those contained in
Section 182.008(b). The proposed effective date of an order
requiring a state trust company to dispose of an asset must be
stated in the order and must be on or after the 21st day after
the date the proposed order is mailed or delivered. Unless the
state trust company requests a hearing before the banking
commissioner in writing before the effective date of the proposed
order, the order becomes effective and is final and
nonappealable.
(c) Subject to Subsections (a) and (b), to Section 184.105, and
to the exercise of prudent judgment, a state trust company may
invest its secondary capital in any type or character of
investment for the purpose of generating income or profit. The
factors to be considered by a state trust company in exercise of
prudent judgment include the factors contained in Section
184.101(e).
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 25, eff.
Sept. 1, 2001.
Sec. 184.105. ENGAGING IN COMMERCE PROHIBITED. (a) Except as
otherwise provided by this subtitle or rules adopted under this
subtitle, a state trust company may not invest its funds in trade
or commerce by buying, selling, or otherwise dealing goods or by
owning or operating a business not part of the state trust
business, except as necessary to fulfill a fiduciary obligation
to a client.
(b) Under this section, engaging in an approved financial
activity or an activity incidental or complementary to a
financial activity, whether as principal or agent, is not
considered to be engaging in commerce.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999. Amended by Acts 2001, 77th Leg., ch. 528, Sec. 26, eff.
Sept. 1, 2001.
SUBCHAPTER C. LOANS
Sec. 184.201. LENDING LIMITS. (a) A state trust company's
total outstanding loans and extensions of credit to a person
other than an insider may not exceed an amount equal to 15
percent of the state trust company's restricted capital.
(b) The aggregate loans and extensions of credit outstanding at
any time to insiders of the state trust company may not exceed an
amount equal to 15 percent of the state trust company's
restricted capital. All covered transactions between an insider
and a state trust company must be engaged in only on terms and
under circumstances, including credit standards, that are
substantially the same as those for comparable transactions with
a person other than an insider.
(c) The finance commission may adopt rules to administer this
section, including rules to:
(1) establish limits, requirements, or exemptions other than
those specified by this section for particular classes or
categories of loans or extensions of credit; and
(2) establish collective lending and investment limits.
(d) The banking commissioner may determine whether a loan or
extension of credit putatively made to a person will be
attributed to another person for purposes of this section.
(e) A state trust company may not lend trust deposits, except
that a trustee may make a loan to a beneficiary of the trust if
the loan is expressly authorized or directed by the instrument or
transaction establishing the trust.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.202. VIOLATION OF LENDING LIMIT. (a) An officer,
director, manager, managing participant, or employee of a state
trust company who approves or participates in the approval of a
loan with actual knowledge that the loan violates Section 184.201
is jointly and severally liable to the state trust company for
the lesser of the amount by which the loan exceeded applicable
lending limits or the state trust company's actual loss. The
person remains liable for that amount until the loan and all
prior indebtedness of the borrower to the state trust company
have been fully repaid.
(b) The state trust company may initiate a proceeding to collect
an amount due under this section at any time before the date the
borrower defaults on the subject loan or any prior indebtedness
or before the fourth anniversary of that date.
(c) A person who is liable for and pays amounts to the state
trust company under this section is entitled to an assignment of
the state trust company's claim against the borrower to the
extent of the payments.
(d) For purposes of this section, an officer, director, manager,
managing participant, or employee of a state trust company is
presumed to know the amount of the state trust company's lending
limit under Section 184.201 and the amount of the borrower's
aggregate outstanding indebtedness to the state trust company
immediately before a new loan or extension of credit to that
borrower.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.203. LEASE FINANCING TRANSACTION. (a) Subject to
rules adopted under this subtitle, a state trust company may
become the owner and lessor of tangible personal property for
lease financing transactions on a net lease basis on the specific
request and for the use of a client. Without the written approval
of the banking commissioner to continue holding property acquired
for leasing purposes under this subsection, the state trust
company may not hold the property more than six months after the
date of expiration of the original or any extended or renewed
lease period agreed to by the client for whom the property was
acquired or by a subsequent lessee.
(b) A rental payment received by the state trust company in a
lease financing transaction under this section is considered to
be rent and not interest or compensation for the use,
forbearance, or detention of money. However, a lease financing
transaction is considered to be a loan or extension of credit for
purposes of Sections 184.201 and 184.202.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.204. GENERAL BANKING PRIVILEGES NOT CONFERRED. This
subchapter does not confer general banking privileges on a state
trust company.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
SUBCHAPTER D. TRUST DEPOSITS
Sec. 184.301. TRUST DEPOSITS. (a) A state trust company may
deposit trust funds with itself as an investment if:
(1) the deposit is authorized by the settlor or beneficiary;
(2) the state trust company maintains as security for the
deposit a separate fund of securities, legal for trust
investments, under control of a federal reserve bank or a
clearing corporation, as defined by Section 8.102, Business &
Commerce Code, within or outside this state;
(3) the total market value of the security is at all times at
least equal to the amount of the deposit; and
(4) the separate fund is designated as a separate fund.
(b) A state trust company may make periodic withdrawals from or
additions to a securities fund required by Subsection (a) as long
as the required value is maintained. Income from the securities
in the fund belongs to the state trust company.
(c) Security for a deposit under this section is not required
for a deposit under Subsection (a) to the extent the deposit is
insured by the Federal Deposit Insurance Corporation or its
successor.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.302. GENERAL BANKING PRIVILEGES NOT CONFERRED. This
subchapter does not confer general banking privileges on a state
trust company.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
SUBCHAPTER E. LIABILITIES AND PLEDGE OF ASSETS
Sec. 184.401. BORROWING LIMIT. Except with the prior written
approval of the banking commissioner, a state trust company may
not have outstanding liabilities, excluding trust deposit
liabilities arising under Section 184.301, that exceed an amount
equal to five times its restricted capital.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.
Sec. 184.402. PLEDGE OF ASSETS. (a) A state trust company may
not pledge or create a lien on any of its assets except to
secure:
(1) the repayment of money borrowed;
(2) trust deposits as specifically authorized or required by:
(A) Section 184.301;
(B) Title 9, Property Code; or
(C) rules adopted under this chapter; or
(3) deposits made by:
(A) the United States;
(B) a state, county, or municipality; or
(C) an agency of the United States or a state, county, or
municipality.
(b) An act, deed, conveyance, pledge, or contract in violation
of this section is void.
Added by Acts 1999, 76th Leg., ch. 62, Sec. 7.16(a), eff. Sept.
1, 1999.