Texas Register, Volume 48, Number 52, Pages 8063-8476, December 29, 2023 Page: 8,329

                                
Q-DOPTED
ES Adopted rules include new rules, amendments to existing rules, and repeals of exist
L          rules. A rule adopted by a state agency takes effect 20 days after the date on which i
filed with the Secretary of State unless a later date is required by statute or specified
the rule (Government Code, 2001.036). If a rule is adopted without change to the text of the proposed rule, then t
Texas Register does not republish the rule text here. If a rule is adopted with change to the text of the proposed rule, th
the final rule text is included here. The final rule text will appear in the Texas Administrative Code on the effective dal

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TITLE 7. BANKING AND SECURITIES
PART 2. TEXAS DEPARTMENT OF
BANKING
CHAPTER 12. LOANS AND INVESTMENTS
The Finance Commission of Texas (the commission), on behalf
of the Texas Department of Banking (the department), adopts
amendments to Chapter 12 of Title 7 of the Texas Administrative
Code, concerning loans and investments by state banks. Sec-
tions 12.2, 12.3, 12.6, 12.11, 12.12, and 12.33 are the affected
sections. Amendments to 12.3, 12.6, 12.11, and 12.33 are
adopted without changes to the proposed text as published in
the November 10, 2023, issue of the Texas Register (48 TexReg
6509). The amended rules will not be republished. Amendments
to 12.2 and 12.12 are adopted with nonsubstantive changes
and the rule will be republished.
The amendments conform these rules to changes in applicable
Texas law, federal regulation, and accounting standards. The
amendments do not materially change the requirements of the
rules.
The department received no comments regarding the proposed
amendments.
SUBCHAPTER A. LENDING LIMITS
7 TAC 12.2, 12.3, 12.6, 12.11, 12.12
The amendments to Chapter 12, Subchapter A are adopted pur-
suant to Finance Code 11.301, which authorizes the commis-
sion to adopt rules applicable to state banks, and Finance Code,
31.003, which authorizes the commission to adopt rules nec-
essary to preserve or protect the safety and soundness of state
banks.
These amendments affect the statutes administered and en-
forced by the department's commissioner with respect to state
banks, contained in Finance Code, Subtitle A. No other statutes
are affected by this proposal.
12.2. Definitions.
Definitions in the Finance Code, Title 3, Subtitles A and G, are incor-
porated herein by reference. As used in this subchapter and in Finance
Code, Chapter 34, concerning investments and loans, the following
words and terms shall have the following meanings, unless the con-
text clearly indicates otherwise.
(1) Borrower--A person who is named as a borrower,
obligor, or debtor in a loan or extension of credit; a person to whom
a state bank has credit exposure arising from a derivative transaction

or a securities financing transaction, entered by the bank; or any other
person, including but not limited to a drawer, endorser, or guarantor
who is considered to be a borrower under the direct benefit, source of

repayment, or common enterprise tests set forth in 12.9 of this title
(relating to Aggregation and Attribution).
(2) Call report--The federal Consolidated Report of Condi-
tion and Income required by and filed under 12 U.S.C. 1817 (or under
12 U.S.C. 324 in the case of a bank that is a member of the Federal
Reserve System), or a report of financial condition and results of op-
erations of a state bank required by the banking commissioner under
Finance Code, 31.108.
(3)  Control--Control is presumed to exist when a person
directly or indirectly, or acting through or together with one or more
persons:
(A) owns, controls, or has the power to vote 25 percent
or more of any class of voting securities of another person;
(B) controls, in any manner, the election of a majority
of the directors, trustees, or other persons exercising similar functions
of another person; or
(C) has the power to exercise a controlling influence
over the management or policies of another person.
(4) Credit derivative--As defined in 12 C.F.R. 324.2 (or
12 C.F.R. 217.2 in the case of a bank that is a member of the Federal
Reserve System).
(5) Derivative transaction--Includes any transaction that is
a contract, agreement, swap, warrant, note, or option that is based, in
whole or in part, on the value of, any interest in, or any quantitative
measure or the occurrence of any event relating to, one or more com-
modities, securities, currencies, interest or other rates, indices, or other
assets.
(6) Effective margining arrangement--A master legal
agreement governing derivative transactions between a bank and a
counterparty that requires the counterparty to post, on a daily basis,
variation margin to fully collateralize that amount of the bank's net
credit exposure to the counterparty that exceeds $25 million created
by the derivative transactions covered by the agreement.
(7) Eligible credit derivative--A single-name credit deriva-
tive or a standard, non-tranched index credit derivative provided that:
(A) the derivative contract meets the requirements of an
eligible guarantee, as defined in 12 C.F.R. 324.2 (or 12 C.F.R. 217.2
in the case of a bank that is a member of the Federal Reserve System),
and has been confirmed by the protection purchaser and the protection
provider;
(B) any assignment of the derivative contract has been
confirmed by all relevant parties;
(C) if the credit derivative is a credit default swap, the
derivative contract includes the following credit events:

(i) failure to pay any amount due under the terms
of the reference exposure, subject to any applicable minimal payment

ADOPTED RULES December 29, 2023 48 TexReg 8329