HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 431 Financial Institutions
SPONSOR(S): Commerce Committee, Insurance & Banking Subcommittee, Barnaby, Snyder and others
TIED BILLS: IDEN./SIM. BILLS: CS/SB 1680
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee 17 Y, 0 N, As CS Luczynski Hinshelwood
2) State Administration & Technology 14 Y, 0 N Lee Topp
Appropriations Subcommittee
3) Commerce Committee 19 Y, 0 N, As CS Hinshelwood Hamon
SUMMARY ANALYSIS
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions, finance
companies, and the securities industry. The OFR’s Division of Financial Institutions charters, licenses, and
regulates various entities that engage in financial institution business in Florida, in accordance with the financial
institutions codes and the rules promulgated thereunder. The bill makes the following changes to the financial
institutions codes:
Permits a foreign national to appear through video conference, rather than in person, at a hearing
regarding the foreign national’s proposal to have a controlling interest in a current or proposed state
bank or trust company.
Provides the OFR an additional 90 days to comply with the examination requirement for financial
institutions if the federal regulator suspends or cancels a scheduled examination.
Requires each director of a financial institution to review and sign a report of examination.
Clarifies provisions relating to a financial institution’s acquisition of another financial institution’s assets
or liabilities.
Amends the definition of “financial institution” for purposes of the Florida Control of Money Laundering
and Terrorist Financing in Financial Institutions Act.
Relocates and clarifies a provision relating to a credit union’s reporting of names and addresses of
newly elected or appointed officers and directors.
Permits OFR to approve a bank or trust company based on the intended “target market” rather than just
the geographic area from which the bank or trust company intends to draw deposits and accounts.
Allows the OFR to waive the experience requirement for a proposed president or CEO of a new bank or
trust company pursuant to specified considerations about the person and the proposed institution.
Provides a process for persons to seek approval to own a controlling interest in a financial institution in
the event of inheritance of such controlling interest.
Defines “de novo branch” in the context of interstate bank branching by state-chartered banks.
Permits family trust companies to maintain a deposit account at an insured bank or credit union located
anywhere in the United States, regardless of whether the bank or credit union has a principal office or
branch in Florida.
Amends the deadline for a family trust company to file an annual renewal.
Permits certain international bank offices licensed by OFR to maintain required assets in an insured
bank located anywhere in the United States, not just those banks that are located in Florida.
Updates reference to the name of a list of international jurisdictions that have weak measures to combat
money laundering and terrorist financing, and requires a specified licensed entity to suspend its activities
relating to a jurisdiction on that list.
The bill has an indeterminate fiscal impact. See Fiscal Comments.
The bill provides an effective date of July 1, 2022.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
STORAGE NAME: h0431d.COM
DATE: 2/17/2022
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions,
finance companies, and the securities industry.1 The OFR’s Division of Financial Institutions charters,
licenses, and regulates various entities that engage in financial institution business in Florida, in
accordance with the financial institutions codes and the rules promulgated thereunder.2 The specific
chapters under the financial institutions codes are:
Chapter 655, F.S. – Financial Institutions Generally
Chapter 657, F.S. – Credit Unions
Chapter 658, F.S. – Banks and Trust Companies
Chapter 660, F.S. – Trust Business
Chapter 662, F.S. – Family Trust Companies
Chapter 663, F.S. – International Banking
Chapter 665, F.S. – Capital Stock Associations
Chapter 667, F.S. – Savings Banks
As of June 30, 2020, the Division of Financial Institutions regulates 197 financial institutions:3
69 banks
66 credit unions
21 international bank offices
15 trust companies
16 family trust companies
10 qualified limited service affiliates
Formation and Regulation of a Florida-Chartered Bank or Trust Company
Under the dual banking system in the United States, banks may be chartered under either state or
federal law:
State-chartered banks are chartered under the laws of the state in which the bank is
headquartered. State-chartered banks have both a state regulator, which for banks chartered by
the state of Florida is the OFR, and a federal regulator. The primary federal regulator for state
banks that are members of the Federal Reserve System is the Board of Governors of the
Federal Reserve System (FRB), and the primary federal regulator for non-member state banks
is the Federal Deposit Insurance Corporation (FDIC). 4
National banks are chartered by the Office of the Comptroller of the Currency (OCC) under the
National Bank Act.5 As such, the OCC is the primary federal regulator for national banks.6
A trust company is a business organization, other than a bank, which is authorized by lawful authority
to engage in the business of acting as a fiduciary. 7 Trust companies are chartered by states, and the
state regulator for trust companies chartered by the state of Florida is the OFR. Trust companies do not
have a federal regulator.
1 S. 20.121(3)(a)2., F.S.
2 Chs. 655, 657, 658, 660, 662, 663, 665, and 667, F.S.; chs. 69U-100 through 69U-162, F.A.C.
3 Office of Financial Regulation, Fast Facts (2021 ed.), https://flofr.gov/sitePages/documents/FastFacts.pdf.
4 12 U.S.C. § 1813(q).
5 12 U.S.C. § 38.
6 12 U.S.C. § 1813(q).
7 S. 658.12(20) and (21), F.S.
STORAGE NAME: h0431d.COM PAGE: 2
DATE: 2/17/2022
In order to apply for authority to organize a new state-chartered bank or trust company, the proposed
directors must file a written application with the OFR.8 The application includes such information as the
name, residence, and occupation of each proposed director; the name and residence of the proposed
president and chief executive officer, if known; the proposed corporate name; the community, including
the street and number, if available, where the principal office of the proposed bank is to be located; the
total initial capital; the proposed business plan; and pro forma financial statements. 9
The OFR utilizes the information contained in the application in order to make an investigation of:10
1) The character, reputation, financial standing, business experience, and business qualifications
of the proposed officers and directors.
2) The need for bank or trust facilities or additional bank or trust facilities, as the case may be, in
the primary service area11 where the proposed bank or trust company is to be located.
3) The ability of the primary service area to support the proposed bank or trust company and all
other existing bank or trust facilities in the primary service area.
The OFR evaluates the viability of the business plan in light of current conditions in the primary service
area and the metropolitan statistical area or county, as well as in the industry in general.12
After making such investigation, the OFR must approve an application if it finds the following: 13
1) Local conditions indicate reasonable promise of successful operation for the proposed state
bank or trust company.
2) The proposed capitalization is adequate, but at least $8 million for a bank and at least $3 million
for a trust company.
3) The proposed capital structure is in such form as the OFR may require, subject to certain
minimum requirements.
4) Regarding officers and directors:
a. The proposed officers have sufficient financial institution experience, ability, standing,
and reputation and the proposed directors have sufficient business experience, ability,
standing, and reputation to indicate reasonable promise of successful operation.
b. None of the proposed officers or directors has been convicted of, or pled guilty or nolo
contendere to, any violation of s. 655.50, F.S., relating to the control of money
laundering and terrorist financing; ch. 896, F.S., relating to offenses related to financial
institutions; or similar state or federal law.
c. At least two of the proposed directors who are not also proposed officers have had at
least 1 year of direct experience as an executive officer, regulator, or director of a
financial institution within the 5 years before the date of the application. However, if the
applicant demonstrates that at least one of the proposed directors has very substantial
experience as an executive officer, director, or regulator of a financial institution more
than 5 years before the date of the application, the OFR may allow the applicant to have
only one director who has direct financial institution experience within the last 5 years.
d. The proposed president or chief executive officer must have had at least 1 year of direct
experience as an executive officer, director, or regulator of a financial institution within
the last 5 years.
5) The corporate name of the proposed state bank is approved by the OFR.
6) Provision has been made for suitable quarters at the location in the application.
8 S. 658.19(1), F.S.; R. 69U-105.202(1), F.A.C.
9 Id.
10 S. 658.20(1), F.S.
11 “Primary service area” is defined by agency rule as “the smallest geographical area from which the proposed state
bank, savings bank or association expects to draw approximately seventy -five percent of its deposits. Said term also
means the smallest geographical area from which a state trust company expects to draw approximately 75 percent of the
asset value of its fiduciary accounts. It should be drawn around a natural customer base and should not be unrealistically
delineated to exclude competing financial institutions or to include areas of concentrated population.” R. 69U-105.001(9),
F.A.C.
12 Office of Financial Regulation (OFR), Agency Analysis of 2022 Senate Bill 1680 (Jan. 12, 2022).
13 S. 658.21, F.S.
STORAGE NAME: h0431d.COM PAGE: 3
DATE: 2/17/2022
Due to technological advancements, the banking industry has become increasingly interconnected and
more digitally driven; many customers no longer engage with their bank exclusively through brick and
mortar branches.14 In order to remain competitive, many financial institutions have adopted online
banking platforms and apps.15 Despite the advent of online banking, the financial institutions codes
remain premised on a brick and mortar centric business plan. 16
In recent years, the banking industry both in Florida and nationally has consolidated. 17 As mergers and
acquisitions occur in the banking industry, executives are commonly subjected to non-compete
agreements that may last several years.18 Because a proposed president or chief executive officer
must have requisite experience within a 5-year time frame, the current statutory timeframe narrows the
pool of otherwise qualified potential executive officers who may serve in that capacity at a new Florida-
chartered bank.19 Groups of individuals seeking to organize a new bank have found the 5-year
requirement an impediment to finding quality president or CEO candidates. 20 This timeframe is not
required for nationally chartered banks.21 Further, for existing Florida-chartered banks, the OFR may
waive the timeframe after considering the overall experience and expertise of the proposed officer and
the condition of the bank or trust company.22
Interstate Bank Branching by State-Chartered Banks
A Florida-chartered bank may establish and maintain a de novo branch (new branch) or acquire a
branch in a state other than Florida. To do so, the Florida-chartered bank must submit an application
and fee to the OFR and receive the OFR’s approval.23
A bank chartered by a state other than Florida may establish and maintain a de novo branch or acquire
a branch in Florida upon compliance with Florida’s limited liability company or corporations laws
relating to doing business in Florida as a foreign business entity.24 No application is filed with the OFR.
Currently, Florida law does not contain a definition for “de novo branch”. Under FDIC regulations, “de
novo branch” is defined25 as a branch of a state bank which:
1) Is originally established by the State bank as a branch; and
2) Does not become a branch of such bank as a result of:
a. The acquisition by the bank of an insured depository institution or a branch of an insured
depository institution; or
b. The conversion, merger, or consolidation of any such institution or branch.
Acquisition of Control of a Florida-Chartered Bank or Trust Company
A person or group of persons is considered to have a controlling interest over a state bank or state trust
company if any of the following are true:26
14 OFR, supra note 12.
15 Id.
16 Id.
17 Id.
18 Id.
19 Id.
20 Id.
21 Id.
22 “The president, chief executive officer, or any other person, regardless of title, who has equivalent rank or leads the
overall operations of [an existing] bank or trust company must have had at least 1 year of direct experience as an
executive officer, director, or regulator of a financial institution within the last 5 years. This requirement may be waived by
the office after considering the overall experience and expertise of the proposed officer and the condition of the bank or
trust company, as reflected in the most recent regulatory examination report and other available data.” S. 658.33(5), F.S.
(emphasis added).
23 S. 658.2953(11)(a) and (b), F.S.
24 S. 658.2953(11)(c), F.S.
25 12 U.S.C. § 1828(d)(4)(C).
26 Ss. 658.27(2) and 658.28(2), F.S.
STORAGE NAME: h0431d.COM PAGE: 4
DATE: 2/17/2022
They directly or indirectly own, control, or have the power to vote 25 percent or more of any
class of voting securities of the institution.
They control, in any manner, the election of a majority of the directors, trustees, or other
governing body of the institution; they own, control, or have the power to vote 10 percent or
more of any class of voting securities and exercise a controlling influence over management or
policies of the institution.
The OFR determines, after notice and opportunity for a hearing, that the person or persons
directly or indirectly exercises a controlling influence.
A person or group of persons who proposes to purchase or acquire a controlling interest in a state bank
or trust company may not acquire such an interest until they have submitted an application to the OFR
and have been approved.27 In order to be approved, an applicant must have the reputation, character,
experience, and financial responsibility to control and operate the bank or trust company in a legal and
proper manner and in such a way that would not jeopardize the interests of the stockholders,
depositors, and creditors of the institution, or the public.28 Conviction for certain crimes, such as money
laundering, is a disqualifier.29
If a foreign national proposes to own or control 10 percent or more of a class of voting securities of a
new state bank or trust company, or proposes to acquire a controlling interest in an existing state bank
or trust company, the OFR must conduct a public hearing at which the