Texas House Bill HB2822

Texas 2017 - 85th Regular

Caption

Relating to the regulation of banks and trust companies.

Impact

The changes introduced by HB 2822 are likely to streamline operational protocols for banks and trust companies in Texas, thereby reducing potential risks associated with outsourcing various functions to third-party providers. The banking commissioner will have broader authority to regulate these affiliates, which could enhance overall operational integrity within the financial sector. Additionally, the bill allows for the collection of fees to cover the cost of examinations of these providers, thereby offsetting the regulatory burden on the state and ensuring the sustainability of oversight activities.

Summary

House Bill 2822 proposes significant amendments to the Texas Finance Code, primarily aimed at enhancing the regulatory framework for banks and trust companies. One of the key elements of this legislation is the definition and regulation of third-party service providers that play a critical role in the provision of financial services. This includes not only data processing services but also a wide range of support functions that facilitate banking operations, such as electronic fund transfers and mobile application development. The bill empowers the banking commissioner to oversee and examine these third-party services, ensuring that they meet the required standards and operate within the legal parameters set by the state.

Sentiment

The sentiment surrounding HB 2822 appears to be largely supportive among financial institutions and regulatory bodies, as it addresses a critical aspect of modern banking practices—the role of third-party service providers. However, there may be concerns about the potential for increased regulatory costs for smaller financial institutions that might struggle to comply with enhanced oversight requirements. Overall, the bill reflects a proactive approach to adapting to the evolving landscape of financial services, which includes a heavy reliance on technology and outside service providers.

Contention

While the bill is generally seen as a necessary measure to modernize and secure the banking sector, some stakeholders might raise concerns regarding the balance between increased regulation and the operational flexibility of financial institutions. There's potential for contention around how broadly the term 'third-party service provider' is defined, as this could lead to regulatory implications affecting a wide range of businesses involved in the financial services ecosystem. Ensuring that the regulatory framework is both effective and not overly burdensome will be a topic of ongoing dialogue as the bill is implemented.