Budget Hearing

1
Budget Hearing
Senate Finance Committee

• Texas Department of Banking
• Testimony of
• Randall S. James Commissioner
• September 13, 2004

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Statutory Mandates
The Department of Banking is entrusted with
insuring the safety of the publics money held by
institutions that provide financial services. We
charter and/or license the following businesses
Banks
Chapter 31 of the Texas Finance Code requires the
Banking Commissioner to examine each state bank
annually or more often as the Banking
Commissioner considers necessary to safeguard the
interest of depositors, creditors, shareholders,
participants and participant-transferees.
Trust Companies
Chapter 181 of the Texas Finance Code requires
the Banking Commissioner to examine each state
trust company annually or more often as the
Banking Commissioner considers necessary to
safeguard the interest of clients, creditors,
shareholders, participants and participant-transfe
rees.
Offices of Foreign Bank Agencies
Chapter 204 of the Texas Finance Code requires
the Banking Commissioner to examine each Texas
state branch, agency or representative office of
a foreign bank annually or more often as the
Banking Commissioner considers necessary to
determine if the office is operated in a safe and
sound manner.
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Statutory Mandates
Prepaid Funeral Contract Sellers, Perpetual Care
Cemeteries, Currency Exchange Businesses, Sale of
Check Licensees, and Private Child Support
Enforcement Agencies
Chapter 154 of the Texas Finance Code requires
that the Banking Commissioner examine each
prepaid funeral contract seller annually or more
often as deemed necessary to protect the prepaid
funds and to assure that the contracted services
and merchandise are provided at the time of
death. Chapter 712 of the Texas Health and Safety
Code requires that the Banking Commissioner
examine each perpetual care cemetery annually or
more often as deemed necessary to protect and
safeguard the perpetual care trust funds and to
assure that the fund income is used to maintain
and support cemetery maintenance.
Chapter 153 of the Texas Finance Code requires
that the Banking Commissioner examine each
currency exchange, transportation and
transmission licensee annually to protect and
safeguard customer funds and prevent money
laundering and funding of terrorist activities.
Chapter 152 of the Texas Finance Code requires
that the Banking Commissioner examine each sale
of check licensee annually or more often as
deemed necessary to protect and safeguard
customer funds and prevent money laundering and
funding of terrorist activities.
Chapter 396 of the Texas Finance Code requires
the Banking Commissioner to monitor private child
support enforcement agencies through registration
and investigation of consumer complaints.
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Profile of Regulated Entities
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Department Staffing by Strategy
(1) Represents actual staffing as of 7-31-04.
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Revenue Sources
The Department is fully self-funded and fully
self-leveling. Fees and assessments on regulated
entities fund 99.6 of the agencys expenditures,
with 58,000 in federal grants covering the
remainder. Expenditure reductions will not benefi
t the states General Revenue Fund.
By statute, the Department of Banking is limited
to collecting fees and assessments that cover
only the agencys direct and indirect
expenditures related to bank supervision (See
Chapter 31.106 of the Texas Finance Code).
Primary Expenses
The Departments expenditures are mainly
personnel related. Salaries and other personnel
expenses average 80 of total expenditures.
Travel related expenses, mainly to conduct
examinations, are 9 of total expenditures.
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Summary of L.A.R. for FY 2006 and 2007Texas
Department of Banking
Agency Funding at the 95 Target Level
Exceptional Items Requested for Fiscal Years 2006
and 2007
Fiscal Years 2004-2005 Update
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Delegated Authority for Financial Regulator

• The Finance Commission discussed and approved a
  resolution at its Board meeting on August 20,
  2004, directing the Finance Commission Agencies
  to seek self-directed status, including removal
  from the appropriations process in the 2005
  Legislative session.

Factors that influenced adoption of this
resolution The Department of Banking is fully se
lf-funding and fully self-leveling. The agency
neither provides to, nor takes funds from the
General Revenue Fund. A delegated operational sta
tus allows greater flexibility to regulate the
entire finance industry and to respond to
changing economic conditions, which reduces the
systemic risk within the industry and protects
the public. The Department of Banking remains acc
ountable to the Finance Commission and
Legislative Committee oversight and subject to
audit by the State Auditors Office and
Comptrollers Office. Removing statutory restrict
ions on administrative flexibility can save costs
and improve efficiency and productivity.
Human resource functions can be more effectively
and efficiently managed, which in turn helps the
Department preserve human resources by
controlling employee turnover and retaining
experienced personnel. Delegated authority in ope
rationally administrative areas would include the
Finance Commission building, employee levels,
employee compensation, and out-of-state travel.