Texas Register, Volume 37, Number 35, Pages 6819-7008, August 31, 2012 Page: 6,841
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For each year of the first five years that the rules will be in effect,
the economic costs to persons required to comply with the rules
as proposed are anticipated to be minimal. State banks have
long been expected to maintain a risk management process to
ensure that credit risk is effectively identified, measured, moni-
tored, and controlled. Accordingly, every state bank that actu-
ally participates in derivative or securities financing transactions
should already be engaged in appropriate risk management ac-
However, additional steps may be required to comply with the
rules as proposed. Banks that engage in derivative or securities
financing transactions should be prepared to: (1) update their
policies and procedures; (2) ensure that bank management in-
formation systems can capture and consolidate credit data by
counterparty or borrower from all departments and lines of busi-
ness, including lending, foreign exchange, trust, broker-dealer,
etc.; (3) monitor and report on compliance with internal and legal
lending limits; (4) monitor each derivative or securities financing
transaction for the benefit of both customer and bank; and (5)
be aware that credit exposure under a derivative or securities fi-
nancing transaction must be combined with all other loans and
extensions of credit to that counterparty for purposes of the legal
There will be no adverse economic effect on small businesses
or micro-businesses. There will be no material difference in the
cost of compliance for small businesses as compared to large
businesses, as discussed in the following paragraph.
Currently there are 297 state banks. Of these 297 state banks,
241 or 81.2% are small businesses (banks with less than 100
employees or less than $6 million in annual gross receipts),
and 92 or 31.0% are micro-businesses (banks with 20 or fewer
employees) as those terms are defined in Government Code,
2006.001. Moreover, although all state banks will be subject to
the rules as proposed, only state banks that actually engage in
derivative or securities financing transactions will be obligated
to comply. In determining whether the rules as proposed would
have an adverse economic impact on small businesses, the
department reviewed the March 2012 Reports of Condition
and Income (Call Report) data to determine that only 60 state
banks actually engaged in derivative or securities financing
transactions during the first quarter of 2012. Of these 60 state
banks, 24 banks qualify as small businesses.
To address the potential for adverse economic impact and reg-
ulatory burden, 12.12 as proposed will permit use in certain
circumstances of look-up tables for measuring the exposures
for each transaction type. The department believes that, for
non-complex state banks engaged in these transactions, the
simpler approach to measuring credit exposure by non-model
methods using look-up tables adequately protects the safety and
soundness of the state bank while mitigating regulatory burden.
Further, proposed 12.6(i) will exempt credit exposures arising
from securities financing transactions in which the securities
being financed are government securities in which a state bank
may invest without limit pursuant to Finance Code 34.101(d).
These transactions typically involve less risk because of the
quality and marketability of the securities employed. This
exception will aid smaller state banks because it is relatively
uncommon for these banks to engage in a securities financing
transaction involving securities other than the referenced gov-
This approach will permit banks to adopt compliance alternatives
that fit their size and risk management requirements, consistent
with safety and soundness, and will reduce or eliminate any ad-
verse economic impact on the 24 banks that qualify as small
REQUEST FOR COMMENTS
To be considered, comments on the proposed new and amended
sections must be submitted no later than 5:00 p.m. on November
2, 2012. Comments should be addressed to General Counsel,
Texas Department of Banking, Legal Division, 2601 North Lamar
Boulevard, Suite 300, Austin, Texas 78705-4294. Comments
may also be submitted by email to firstname.lastname@example.org.
7 TAC 12.2
(Editor's note: The text of the following section proposed for repeal
will not be published. The section may be examined in the offices of
the Texas Department of Banking or in the Texas Register office, Room
245, James Earl Rudder Building, 1019 Brazos Street, Austin, Texas.)
The repeal is proposed under Finance Code, 34.201(b), which
authorizes the commission to adopt rules to administer the lend-
ing limit, including rules to: (1) define or further define terms
used by Finance Code, 34.201; and (2) establish limits, re-
quirements, or exemptions other than those specified by Finance
Code, 34.201 for particular classes or categories of loans or
extensions of credit. In addition, Finance Code, 31.002(b), au-
thorizes the commission to adopt additional definitions by rule to
accomplish the purposes of Finance Code, Title 3, Subtitle A.
Finance Code, 34.201, is affected by the proposed repeal.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal author-
ity to adopt.
Filed with the Office of the Secretary of State on August 17, 2012.
A. Kaylene Ray
Texas Department of Banking
Proposed date of adoption: December 14, 2012
For further information, please call: (512) 475-1300
7 TAC 12.2, 12.3, 12.6, 12.10, 12.12
The new and amended sections are proposed under Finance
Code, 34.201(b), which authorizes the commission to adopt
rules to administer the lending limit, including rules to: (1) define
or further define terms used by Finance Code, 34.201; and (2)
establish limits, requirements, or exemptions other than those
specified by Finance Code, 34.201 for particular classes or cat-
egories of loans or extensions of credit. In addition, Finance
Code, 31.002(b), authorizes the commission to adopt additional
definitions by rule to accomplish the purposes of Finance Code,
Title 3, Subtitle A.
Finance Code, 34.201, is affected by the proposed new and
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
PROPOSED RULES August 31, 2012 37 TexReg 6841
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Texas. Secretary of State. Texas Register, Volume 37, Number 35, Pages 6819-7008, August 31, 2012, periodical, August 31, 2012; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth253227/m1/23/: accessed April 30, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting UNT Libraries Government Documents Department.