HBA-NLM C.S.H.B. 1810 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1810 By: Averitt Financial Institutions 3/17/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Each legislative session, the comptroller of public accounts (comptroller) identifies certain functions of the agency that require statutory changes to update references in the Government Code, clarify statutory intent for application, update compliance with federal law, codify existing practices, or simplify the administration of the agency. C.S.H.B. 1810 updates the state's rating standards to conform with standard language used in interstate branch banking. This bill authorizes the comptroller to invest funds in compliance with federal law and to contract with professional investment managers to assist the comptroller in investing funds. This bill also specifies the amount of collateral that depository banks must pledge to the comptroller and authorizes a federal reserve bank or federal home loan bank to act as a third-party custodian to hold pledged securities for the state. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 404.0212(d), Government Code, to prohibit the comptroller from selecting as a depository a regulated financial institution for which the entire institution has been assigned a rating described by this section. Makes a nonsubstantive change. SECTION 2. Amends Section 404.022, Government Code, as follows: Sec. 404.022. APPLICATIONS. (a) Changes the date to not later than the first business day, rather than on the second Tuesday, in June of each odd-numbered year, that the comptroller of public accounts (comptroller) is required to mail a letter stating the conditions with which applicants must comply. (b) Provides that a statement of the maximum amount of state time deposits, rather than state funds, and the applicant's condition according to the most recent financial statement must be included in the application for designation as a state depository. (c) Requires that an application be received before noon on the first business day of August of the year in which the letter is sent. Authorizes, rather than requires, the comptroller to charge a processing fee described by this section. (d) Makes no changes. (e) Deletes the existing provision that an application for designation as a state depository must include the amount of net proprietorship if the applicant is a private bank. Deletes the provision regarding the prohibition of a grant of an application for state funds due to the applicant's liabilities for borrowed money. (f) Deletes the provision regarding the authority of the comptroller to designate an applicant as a state depository if the applicant has complied with all of the conditions set by the comptroller. (h) Deletes the provision regarding the authority to send all eligible institutions notice for the further acceptance of applications if more depositories are required at any time. Makes nonsubstantive changes. SECTION 3. Amends Section 404.023, Government Code, to require the comptroller to designate one or more state depository banks that have main offices or branches in centrally located cities in this state to be used for clearing checks and other obligations due the state. SECTION 4. Amends Section 404.024, Government Code, by amending Subsection (g) and by adding Subsections (j) and (k), as follows: (g) Requires the comptroller to give preference to banks that have main offices or branch offices in this state when investing in direct security repurchase agreements. Makes a nonsubstantive change. (j) Provides that if the comptroller is required by law to invest funds other than as provided by this section and to the extent that the standards of other law governing that investment do not conflict, the comptroller is required to invest funds under the restrictions and procedures for making the investments in the same manner that persons of ordinary prudence, discretion, and intelligence would follow in the management of personal affairs, not in regard to speculation but in regard to the permanent disposition of funds, considering probable income and safety of capital. (k) Authorizes the comptroller to contract with private professional investment managers to assist the comptroller in investing funds under the care, custody, and control of the comptroller. SECTION 5. Amends Sections 404.031(a) and (f), Government Code, to authorize the comptroller to deposit state funds with a depository only if the depository has pledged with the comptroller acceptable eligible investment securities in an amount not less than the amount of deposits to be secured. Authorizes a state depository to deposit pledged securities with a federal reserve bank or a federal home loan bank, instead of depositing the securities with the comptroller. Deletes references to the Federal Reserve Bank of Dallas or the Federal Home Loan Bank of Dallas. SECTION 6. Effective date: September 1, 1999. SECTION 7. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1810 modifies the original in SECTION 3 to include the words "in this state" in the provision that requires the comptroller to designate one or more state depository banks to be used for clearing checks and other obligations due the state, and makes nonsubstantive changes. C.S.H.B. 1810 modifies the original in SECTION 4 to makes conforming and nonsubstantive changes.