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Senate Finance Committee. Budget Hearing. Texas Department of Banking Testimony of: Randall S. James – Commissioner January 30, 2007. Statutory Mandates.

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Budget Hearing

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Budget hearing

Senate Finance Committee

Budget Hearing

Texas Department of Banking

Testimony of:

Randall S. James – Commissioner

January 30, 2007


Statutory mandates

Statutory Mandates

  • The Department of Banking is entrusted with insuring the safety of the public’s money held by institutions that provide financial services. We charter and/or license the following businesses:

  • Banks, Trust Companies and Offices of Foreign Bank Agencies

  • 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.

  • 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-transferees.

  • 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.

Budget Hearing


Statutory mandates1

Statutory Mandates

  • Prepaid Funeral Contract Sellers, Perpetual Care Cemeteries, Money Service Businesses, 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 151 of the Texas Finance Code (Money Services Act) requires that the Banking Commissioner examine each money service business (currency exchange, transportation, transmission, stored value cards, and third party bill payers) annually 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.

Budget Hearing


Profile of regulated entities

Profile of Regulated Entities

Information as of September 2006.

* Does not include 17 out-of-state, state-chartered banks operating in Texas ($16 billion).

Budget Hearing


Supervisory information

Supervisory Information

The total number of state-chartered banking organizations has declined.

Most of this reduction is the result of merger activity. As a result, the surviving banks are substantially larger in size and operate many more branch locations. As the size of the organization increases, so does the complexity of its operations. Larger banks engage in more sophisticated investment ventures and provide a greater variety of products and services to their customers.

Even though the number of banking organizations has decreased, the assets and branches have increased, and agency resources needed to appropriately supervise these businesses have not diminished. Larger and more complex banks also necessitate a better trained and experienced staff of examiners, including more subject matter specialists, to review their operations.

  • [1] Does not include out-of-state, state-chartered banks operating in Texas.

  • [2] Includes Bank and Trust field examiners and related directors.

Budget Hearing


Department staffing by strategy

Department Staffing by Strategy

[1] Represents actual staffing as of 12-31-06.

Budget Hearing


Revenue sources

Revenue Sources

  • The Department is fully self-funded and fully self-leveling.

    • Fees and assessments on regulated entities fund 100% of the agency’s expenditures.

    • Expenditure reductions will not benefit the state’s General Revenue Fund.

    • By statute, the Department of Banking is limited to collecting fees and assessments that cover only the agency’s direct and indirect expenditures related to bank supervision (Chapter 31.106 of the Texas Finance Code).

Primary Expenses

  • The Department’s expenditures are mainly personnel related.

    • Salaries and other personnel expenses average 80% of total expenditures.

    • Travel related expenses, mainly to conduct examinations, are 10% of total expenditures.

Budget Hearing


Summary of l a r for fy 2008 and 2009 texas department of banking

Summary of L.A.R. for FY 2008 and 2009Texas Department of Banking

Exceptional Item Requested for Fiscal Years 2008 and 2009

Budget Hearing


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Summary of L.A.R. for FY 2008 and 2009Texas Department of Banking

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Budget Hearing


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Budget Hearing


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