Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would authorize a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met. The bill would specify that banks participating in these programs are still liable for deposits, as specified.

Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would authorize a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met. The bill would specify that banks participating in these programs are still liable for deposits, as specified.

Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would provide, in the definitions that apply to regulating bank offices, for the authorization of authorize a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met. The bill would specify that banks participating in these programs are still liable for deposits, as specified.

Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would provide, in the definitions that apply to regulating bank offices, for the authorization of a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met.

Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would provide, in the definitions that apply to regulating bank offices, for the authorization of a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met.

Existing law defines and regulates state banks and commits the enforcement of banking laws with the Commissioner of Business Oversight. The Banking Law prescribes definitions relating to bank offices and defines a branch office as an office at which core banking business is conducted other than an automated teller machine, a device used to facilitate check guarantee or check authorization, or a remote service facility, as defined.

This bill would provide, in the definitions that apply to regulating bank offices, for the authorization of a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of a school or school facility. The bill would provide that the school premises or facility will not be considered a branch office of the bank if certain conditions are met.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1784

Author:(Dababneh)

As Amended Ver:August 1, 2016

Majority vote

Original Committee Reference: B. & F.

SUMMARY: Allows state chartered banks to participate in school-based financial education programs (Programs). Specifically, this bill:

1. Permits the Programs to receive deposits or pay withdrawals on the premises of, or at a facility used by, a school.
2. Specifies that the school premises or facility will not be considered a branch office if:
   1. The bank does not establish and operate the school premises or facility in which the program is conducted;
   2. Bank employees work at the site only to participate in the Program;
   3. The Program is provided at the discretion of the school;
   4. The principal purpose of the Program is financial education;
   5. No services are provided to the general public; and,
   6. The program is conducted in a manner that is consistent with safe and sound banking practices and complies with applicable law.
3. Provides that a state chartered bank that participates in a program shall be liable for all deposits made on the premises of, or at a facility used by, a school as if the deposit was made directly at a branch office of the bank.

The Senate amendments:

1. Reorganize the measure by taking out the provisions from the definition of a "branch" and creating a new section.
2. Add two provisions that specify:
   1. A program must be conducted in a manner that is consistent with safe and sound banking practices; and,
   2. A bank that participates in the program shall be liable for all deposits.

EXISTING LAW:

1. Allows a savings association to contract with the authorities of any public or nonpublic elementary, secondary school or institution of higher learning, or any public or charitable institution caring for minors, for the participation and implementation by the association in any school or institutional thrift or savings plan, and it may accept savings accounts at the school or institution, either by its own collector or by any representative of the school or institution that becomes the agent of the association for that purpose. [Financial Code Section (FC) 6700]
2. Defines a branch office as any office at which core banking business is conducted, as specified, and defines core banking business as the business of receiving deposits, paying checks, making loans, and other activities that the Commissioner of Business Oversight may specify by order or regulation. [FC 1070]
3. Requires a bank to file a notice with the commissioner within 10 days of establishing, relocating, or redesignating an office and to pay an appropriate fee. [FC 1076]
4. Authorizes a bank to close or discontinue the operation of any branch office if, before the closing or discontinuance, the bank files a notice with the commissioner containing detailed information supporting the decision to close or discontinue the office. A branch office closure is deemed acceptable, if the commissioner issues a "no objection" letter or does not issue a written objection to the bank's notice. [FC 1078]

FISCAL EFFECT: According to the Assembly Appropriations Committee, negligible state costs.

COMMENTS:

Need for the bill:

These Programs are a collaborative effort between banks and elementary, middle and high school administrators and teachers that provide financial education activities through presentations, classes and curriculum development. The Programs are often structured as in-school credit union or bank programs that offer students basic savings accounts. These Programs range from "mini banks" that offer student savings accounts to more complex programs that offer career-oriented banker training. The Programs help students understand the value of saving by opening and managing savings accounts. The Programs may also include banker classroom presentations on saving and other financial education topics and field trips to banks so students can observe how banks operate. Typically, bank staff is available to answer financial education and banking-related questions that students, faculty, parents, and school administrations ask.

Additionally, the Programs teach students about the importance of savings and financial management. Research indicates that these Programs may be effective in helping improve long-term financial and education outcomes, such as completing college.

These programs provide a valuable service to the community and assist banks in meeting their federally mandated Community Reinvestment Act obligations. National banks and California savings associations are already authorized to participate in the Programs; however, a gap exists in California law that prevents state-chartered banks from engaging in these Programs because a branch license and related operations are presently required at each participating school. This bill will close this gap so that state-chartered banks can provide these educational services.

Background:

On February 24, 2015, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, and the Office of the Comptroller of the Currency, as members of the Financial Literacy and Education Commission together with the Financial Crimes Enforcement Network of the United States Department of the Treasury issued guidance to encourage financial institutions to develop youth savings programs. The purpose of the guidance was to encourage financial institutions to develop and implement programs to expand the financial capability of youth and build opportunities for financial inclusion for more families.

The federal guidance stated that the school is not considered a bank branch when the following conditions are met:

1. The bank does not establish and operate the school premises or facility on which the financial literacy program is conducted.
2. Bank employees work at the site only to participate in the program.
3. No services are provided to the general public.
4. The principal purpose of the financial literacy program is educational. For example, a program is educational if it is designed to teach students the principles of personal economics or the benefits of saving for the future and is not designed for the purpose of profit-making.

In addition, Texas recently took action. The Texas Administrative Code now provides a similar provision in Rule Section 1544 in Title 7, Part 2, Chapter 15, Subchapter C. It provides that a state bank's school-based savings program is not considered a branch if the program meets certain conditions similar to those in this bill.

To set up a program on school premises, a bank works with school administrators and teachers who are interested in providing financial education to their students. In cooperation with school administration and faculty, a bank determines where the program is to be located on school premises; what the days and hours of operation will be; which financial services are to be offered; and how students, faculty, school administration, and parents will participate in the program.

In addition, on August 4, 2014, the FDIC announced a two-year FDIC Youth Savings Pilot Program aimed at identifying and highlighting promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts for school-aged children. The first phase of the Pilot was open to institutions currently working with schools or nonprofit organizations that help students open savings accounts in conjunction with financial education programs during the 2014-15 school year. Phase I started with the 2014-15 school year and will conclude at the end of the 2015-16 school year. Only one program in California is part of the pilot program currently.

Analysis Prepared by: Kathleen OMalley / B. & F. / (916) 319-3081 FN: 0003681

 CONSENT  

Bill No: AB 1784

Author:

: 8/1/16

Vote:

SENATE BANKING & F.I. COMMITTEE: 7-0, 6/15/16

AYES: Glazer, Vidak, Galgiani, Hall, Hueso, Lara, Morrell

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 76-0, 4/14/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: California Bankers Association

DIGEST: This bill authorizes banks to participate in school-based financial education programs, as specified, without classifying the campuses on which those education programs are located as branches.

ANALYSIS:

Existing law:

1. Defines a branch office as any office at which core banking business is conducted, as specified, and defines core banking business as the business of receiving deposits, paying checks, making loans, and other activities that the Commissioner of Business Oversight (commissioner) may specify by order or regulation (Financial Code Section 1070).
   
2. Requires a bank to file a notice with the commissioner within 10 days of establishing, relocating, or redesignating an office and to pay an appropriate fee (Financial Code Section 1076).
   
3. Authorizes a bank to close or discontinue the operation of any branch office if, before the closing or discontinuance, the bank files a notice with the commissioner containing detailed information supporting the decision to close or discontinue the office. A branch office closure is deemed acceptable, if the commissioner issues a “no objection” letter or does not issue a written objection to the bank’s notice (Financial Code Section 1078).

This bill:

1. Authorizes a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of, or at a facility used by, a school.
   
2. Provides that the school premises or facility will not be considered a branch office of the bank if all of the following conditions are met:
   
   1. The bank does not establish and operate the school premises or facility in which the program is conducted.
      
   2. Bank employees work at the site only to participate in the program.
      
   3. The program is provided at the discretion of the school.
      
   4. The principal purpose of the program is financial education. A program is educational if it is designed to teach students the principles of personal financial management, banking operations, or the benefits of saving for the future, and is not designed for the purpose of profitmaking.
      
   5. No services are provided to the general public.
      
   6. The program is conducted in a manner that is consistent with safe and sound banking practices and complies with applicable law.
      
3. Provides that a bank, which participates in a financial education program at a school, as specified, is liable for all deposits made on the premises of, or at a facility used by the school as if the deposit was made directly at a branch office of the bank.
   

Background

This bill is sponsored by the California Bankers Association (CBA) to allow state-chartered banks to offer school-based savings programs, without having the locations of those programs classified as branches for purposes of the Banking Law. School-based savings programs are a collaborative effort between banks and elementary, middle, and high school administrators and teachers that provide financial education activities through presentations, classes and curriculum development. According to CBA, these programs range from mini-banks that offer student savings accounts to more complex programs that offer career-oriented banker training. These programs help students understand the value of saving by opening and managing savings accounts.

California law does not currently prohibit the school-based savings accounts that are the focus of this bill. However, existing law includes the act of receiving deposits as one of the activities that is classified as core banking business, and defines a branch office as any office at which core banking business is conducted. Existing law contains several requirements applicable to branch offices, which make it cost prohibitive for a bank to establish a branch office in every school where that bank wished to offer a school-based savings program. This bill allows banks to establish school-based savings programs offering limited banking services, without classifying those school premises as official branch offices and triggering a myriad of costly bureaucratic requirements as a result.

California law previously authorized state-chartered banks to offer school-based savings programs. However, the section containing that authorization was deleted when the Financial Code was reorganized and streamlined (former Financial Code Section 511 was repealed by AB 1301, Gaines, Chapter 125, Statutes of 2008). In 2008, the then-Department of Financial Institutions was of the opinion that banks could engage in any activities not otherwise prohibited under the Financial Code; thus, language giving banks express authority to offer school-based programs was unnecessary. Since that time, some have suggested that banks may lack the authority to offer school-based savings programs, because the Financial Code no longer expressly authorizes those activities. This bill will resolve that uncertainty by expressly authorizing banks to offer school-based savings, as specified.

The language of this bill is consistent with and tracks federal guidance encouraging financial institutions to develop youth savings programs, which was issued in February 2015 by five federal financial regulators, including the Board of Governors of Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/22/16)

California Bankers Association (source)

California Community Banking Network

OPPOSITION: (Verified 7/22/16)

None received

ARGUMENTS IN SUPPORT: CBA is sponsoring AB 1784 in response to the February 2015 regulatory guidance cited above. CBA views the bill as a charter parity measure, which will allow state-chartered banks to offer the same types of school-based savings programs as federally-chartered banks. School-based savings programs provide a valuable service to the community and help banks meet their federally mandated Community Reinvestment Act obligations.

The California Community Banking Network believes that “this measure will help encourage community banks in their efforts to increase the financial skills of young people.”

ASSEMBLY FLOOR: 76-0, 4/14/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Jones, Jones-Sawyer, Kim, Lackey, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Irwin, Levine, Melendez, Nazarian

Prepared by:

8/3/16 18:49:57

**** END ****

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Steven Glazer, Chair

2015 - 2016 Regular

Bill No: Hearing Date: June 15, 2016

Subject:

SUMMARY

Authorizes banks to participate in school-based financial education programs, as specified, without classifying the campuses on which those education programs are located as branches.

DESCRIPTION

1. Authorizes a bank to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of, or at a facility used by, a school.
   
2. Provides that the school premises or facility will not be considered a branch office of the bank if:
   
   1. The bank does not establish and operate the school premises or facility in which the program is conducted.
      
   2. Bank employees work at the site only to participate in the program.
      
   3. The program is provided at the discretion of the school.
      
   4. The principal purpose of the program is financial education. A program is educational if it is designed to teach students the principles of personal financial management, banking operations, or the benefits of saving for the future, and is not designed for the purpose of profitmaking.
      
   5. No services are provided to the general public.
      
   6. The program is conducted in a manner that is consistent with safe and sound banking practices and complies with applicable law.
      

EXISTING LAW

1. Defines a branch office as any office at which core banking business is conducted, as specified, and defines core banking business as the business of receiving deposits, paying checks, making loans, and other activities that the Commissioner of Business Oversight (commissioner) may specify by order or regulation (Financial Code Section 1070).
   
2. Requires a bank to file a notice with the commissioner within 10 days of establishing, relocating, or redesignating an office and to pay an appropriate fee (Financial Code Section 1076).
   
3. Authorizes a bank to close or discontinue the operation of any branch office if, before the closing or discontinuance, the bank files a notice with the commissioner containing detailed information supporting the decision to close or discontinue the office. A branch office closure is deemed acceptable, if the commissioner issues a “no objection” letter or does not issue a written objection to the bank’s notice (Financial Code Section 1078).
   

COMMENTS

1. Purpose: This bill is sponsored by the California Bankers Association (CBA) to allow state-chartered banks to offer school-based savings programs, without having the locations of those programs classified as branches for purposes of the Banking Law.
   
2. Background and Discussion: School-based savings programs are a collaborative effort between banks and elementary, middle, and high school administrators and teachers that provide financial education activities through presentations, classes and curriculum development. According to CBA, these programs range from mini-banks that offer student savings accounts to more complex programs that offer career-oriented banker training. These programs help students understand the value of saving by opening and managing savings accounts.
   
   California law does not currently prohibit the school-based savings accounts that are the focus of this measure. However, existing law includes the act of receiving deposits as one of the activities that is classified as core banking business, and defines a branch office as any office at which core banking business is conducted. Existing law contains several requirements applicable to branch offices, which would make it cost prohibitive for a bank to establish a branch office in every school where that bank wished to offer a school-based savings program. This bill allows banks to establish school-based savings programs offering limited banking services, without classifying those school premises as official branch offices and triggering a myriad of costly bureaucratic requirements as a result.
   
   California law previously authorized state-chartered banks to offer school-based savings programs. However, the section containing that authorization was deleted when the Financial Code was reorganized and streamlined (former Financial Code Section 511 was repealed by AB 1301, Gaines, Chapter 125, Statutes of 2008). In 2008, the then-Department of Financial Institutions was of the opinion that banks could engage in any activities not otherwise prohibited under the Financial Code; thus, language giving banks express authority to offer school-based programs was unnecessary. Since that time, some have suggested that banks may lack the authority to offer school-based savings programs, because the Financial Code no longer expressly authorizes those activities. This bill will resolve that uncertainty by expressly authorizing banks to offer school-based savings, as specified.
   
   The language of this bill is consistent with and tracks federal guidance encouraging financial institutions to develop youth savings programs, which was issued in February 2015 by five federal financial regulators, including the Board of Governors of Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network.
   
3. Summary of Arguments in Support: CBA is sponsoring AB 1784 in response to the February 2015 regulatory guidance cited above. CBA views the bill as a charter parity measure, which will allow state-chartered banks to offer the same types of school-based savings programs as federally-chartered banks. School-based savings programs provide a valuable service to the community and help banks meet their federally mandated Community Reinvestment Act obligations.
   
   The California Community Banking Network believes that “this measure will help encourage community banks in their efforts to increase the financial skills of young people.”
4. Summary of Arguments in Opposition: None received.
   
5. Prior and Related Legislation:
   
   1. AB 1301 (Gaines), Chapter 125, Statutes of 2008; AB 2749 (Gaines), Chapter 501, Statutes of 2008; AB 1268 (Gaines), Chapter 532, Statutes of 2010; and SB 664 (Committee on Banking and Financial Institutions), Chapter 243, Statutes of 2011: The series of bills that updated, modernized, and renumbered provisions of the Financial Code administered by DFI. The provision of the Banking Law that previously authorized the activities that AB 1784 would re-authorize was deleted during the reorganization accomplished by these bills.
      

LIST OF REGISTERED SUPPORT/OPPOSITION

Support

California Bankers Association (sponsor)

California Community Banking Network

Opposition

None received

-- END --

Date of Hearing: April 6, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1784

Author:(Dababneh) – As Amended Ver:March 3, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows state chartered banks to participate in school-based savings programs. Specifically, this bill:

1. Permits banks to participate in a financial education program that involves receiving deposits or paying withdrawals on the premises of, or at a facility used by, a school.
2. Specifies that the school premises or facility will not be considered a bank branch office if:
   1. The bank does not establish and operate the school premises or facility in which the financial education program is conducted;
   2. Bank employees work at the site only to participate in the program;
   3. The program is provided at the discretion of the school;
   4. The principal purpose of the program is financial education; and,
   5. No services are provided to the general public.

FISCAL EFFECT:

Negligible state costs.

COMMENTS:

1. Purpose. According to the author, AB 1784 will help students learn about personal finance by increasing the number of banks that can participate in school-based savings programs. The author notes that these programs can teach students about basic financial concepts, such as depositing and withdrawing money while obtaining real-world work experience.
2. Background. Existing law allows national banks and state savings associations to operate school-based savings programs. These programs are a collaborative effort between banks and elementary, middle, and high school administrator and teachers. They are often structured as in-school credit union or bank programs that offer students basic savings accounts. They range from “mini banks” that offer student savings accounts to more complex programs that offer career-oriented banker training. Existing law limits state-chartered banks from participating in these programs because a branch license is required at each participating school.
3. Benefit to the Banks. According to the US Department of the Treasury, school-based savings programs are beneficial to banks as well as students. In some cases, participating financial institutions may receive positive Community Reinvestment Act (CRA) consideration for providing community development service. Moreover, banks may participate in these programs to identify potential bank employees and to elevate visibility in the community.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: March 14, 2016

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Matthew Dababneh, Chair

ABPCA Bill Id:AB 1784 (

Author:Dababneh) – As Amended Ver:March 3, 2016

SUBJECT: State banks

SUMMARY: Allows state chartered banks to participate in school-based savings programs (Programs). Specifically, this bill:

1. Permits the Programs to receive deposits or pay withdrawals on the premises of, or at a facility used by, a school.
2. Specifies that the school premises or facility will not be considered a branch office if:
   1. The bank does not establish and operate the school premises or facility in which the program is conducted;
   2. Bank employees work at the site only to participate in the Program;
   3. The Program is provided at the discretion of the school;
   4. The principal purpose of the Program is financial education; and,
   5. No services are provided to the general public.

EXISTING LAW allows a savings association to contract with the authorities of any public or nonpublic elementary, secondary school or institution of higher learning, or any public or charitable institution caring for minors, for the participation and implementation by the association in any school or institutional thrift or savings plan, and it may accept savings accounts at the school or institution, either by its own collector or by any representative of the school or institution that becomes the agent of the association for that purpose. [Financial Code, Section 6700]

FISCAL EFFECT: Unknown.

COMMENTS:

Need for the bill:

These Programs are a collaborative effort between banks and elementary, middle and high school administrators and teachers that provide financial education activities through presentations, classes and curriculum development. The Programs are often structured as in-school credit union or bank programs that offer students basic savings accounts. These Programs range from “mini banks” that offer student savings accounts to more complex programs that offer career-oriented banker training. The Programs help students understand the value of saving by opening and managing savings accounts. The Programs may also include banker classroom presentations on saving and other financial education topics and field trips to banks so students can observe how banks operate. Typically, bank staff is available to answer financial education and banking-related questions that students, faculty, parents, and school administrations ask.

Additionally, the Programs teach students about the importance of savings and financial management. Research indicates that these Programs may be effective in helping improve long-term financial and education outcomes, such as completing college.

These programs provide a valuable service to the community and assist banks in meeting their federally mandated Community Reinvestment Act obligations.  National banks and California savings associations are already authorized to participate in the Programs; however, a gap exists in California law that prevents state-chartered banks from engaging in these Programs because a branch license and related operations are presently required at each participating school. AB 1784 will close this gap so that state-chartered banks can provide these educational services.

Background:

On February 24, 2015, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, and the Office of the Comptroller of the Currency, as members of the Financial Literacy and Education Commission together with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury issued guidance to encourage financial institutions to develop youth savings programs. The purpose of the guidance was to encourage financial institutions to develop and implement programs to expand the financial capability of youth and build opportunities for financial inclusion for more families.

The federal guidance stated that the school is not considered a bank branch when the following conditions are met:

1. The bank does not establish and operate the school premises or facility on which the financial literacy program is conducted.
2. Bank employees work at the site only to participate in the program.
3. No services are provided to the general public.
4. The principal purpose of the financial literacy program is educational. For example, a program is educational if it is designed to teach students the principles of personal economics or the benefits of saving for the future and is not designed for the purpose of profit-making.

In addition, Texas recently took action. The Texas Administrative Code now provides a similar provision in Rule § 1544 in Title 7, Part 2, Chapter 15, Subchapter C. It provides that a state bank’s school-based savings program is not considered a branch if the program meets certain conditions similar to those in AB 1784.

To set up a program on school premises, a bank works with school administrators and teachers who are interested in providing financial education to their students. In cooperation with school administration and faculty, a bank determines where the program is to be located on school premises; what the days and hours of operation will be; which financial services are to be offered; and how students, faculty, school administration, and parents will participate in the program.

In addition, on August 4, 2014, the FDIC announced a two-year FDIC Youth Savings Pilot Program aimed at identifying and highlighting promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts for school-aged children. The first phase of the Pilot was open to institutions currently working with schools or nonprofit organizations that help students open savings accounts in conjunction with financial education programs during the 2014-15 school year.  Phase I started with the 2014-15 school year and will conclude at the end of the 2015-16 school year.  Only one program in California is part of the pilot program currently.

Summary of the Phase I Participants:

Athol Savings Bank, a $335 million state nonmember bank headquartered in Athol, Massachusetts. The bank’s Save$um Banking program has operated in five elementary schools for 12 years.  These in-school bank branches are operated by students, with oversight from parents, teachers, and bank employees.  Students receive small incentives from the bank when they open and continue saving in the account. 

Bank of Hawaii, a $14 billion state member bank headquartered in Honolulu, Hawaii. The bank targets 10th graders at two high schools in Leeward Oahu, HI, in collaboration with Hawaiian Community Assets (a non-profit).  The bank provides the largely low- and moderate-income, native Hawaiian student population with age and culturally appropriate financial education and then offers to open a no fee, no minimum balance savings account.

Capital One, National Association, a $255 billion national bank headquartered in McLean, Virginia.  The bank has four student-operated bank branches on low- and moderate-income school campuses in Bronx, New York, Harlem, New York, Newark, New Jersey and Riverdale, Maryland.  Students need $1.00, their school ID, and their Social Security number to open a savings account at the school.  Students are hired into teller positions at the end of their junior year.  The student bankers provide financial education to their peers. 

First Bank of Highland Park, a $1.2 billion state nonmember bank headquartered in Highland Park, Illinois.  The bank works with a private school and non-profits. A minor receives a $25 bonus from the bank when opening a new savings account and another $10 bonus after the tenth deposit.  The bank’s financial education activities (which are based on Money Smart) are delivered monthly between October and April.

First Metro Bank, a $532 million state nonmember bank headquartered in Muscle Shoals, Alabama.  The bank implemented two student-run bank branches in local high schools in 2013.  Students can open a savings account at the school without an adult custodian at the age of 15.  The account has a $1 minimum balance with no minimum balance or maintenance fees.  Teachers and bank staff provide financial education. 

Montecito Bank & Trust, a $1.1 billion state nonmember bank headquartered in Santa Barbara, California.  The bank provides financial education through several predominately low- and moderate-income schools in Santa Barbara and Ventura Counties. Students can open a savings account with a $5 deposit, and the bank provides an incentive to students for regularly saving. 

Treynor State Bank, a $307 million state nonmember bank headquartered in Treynor, Iowa.  The bank facilitates three in-school banking programs—they are in two elementary schools (one of which is low- and moderate-income) and one high school (also a low- and moderate-income school).  Teachers and bank staff provide financial education.  The bank provides small incentives to students for opening an account and then for continuing to save in it. Students, with supervision from bank employees, operate the school bank branches.

Young Americans Bank, a $15 million state nonmember bank headquartered in Denver, Colorado.  Young Americans opened a branch in January 2013 on a Denver Public Schools campus that serves 1,700 students in grades K-12.  This branch is in one of the poorer areas of Colorado.  The bank modified its policies in response to the identified needs of the student population, such as allowing youth under age 18 to open accounts with a parent’s consent because many parents served by this school lack a state-issued ID.  Bank staff provides financial education through the school.

Wesbanco Bank, Inc. a $6.3 billion state nonmember bank headquartered in Wheeling, West Virginia.  Bank staff uses an array of financial education tools (including Money Smart).  Their school-based savings program requires a $10 minimum opening deposit and parental consent.  After three months, the bank deposits $10 into the minor’s account.  Students participating in financial education classes also receive a bonus of another $10. 

Phase II of the FDIC Youth Savings Pilot Program consists of a group of 12 banks that are carrying out a new or expanded program during the 2015-2016 school year. The FDIC selected these banks from the group of banks that submitted an expression of interest in participating in Phase II.

These 12 banks joined the nine banks that are participating in Phase I of the FDIC Youth Savings Pilot.

Summary of Phase II Participants

Beneficial Bank, a $4.8 billion state nonmember bank headquartered in Philadelphia, Pennsylvania.  The bank has an established program in eight high schools and non-profits in greater Philadelphia and south New Jersey. The bank plans to expand the program to several additional low- and moderate-income schools.

Caldwell Bank & Trust Company, a $165 million state nonmember bank headquartered in Columbia, Louisiana. The bank has an established savings program for 5th graders in four elementary schools in low- and moderate-income areas. The bank will expand this program by providing teachers with financial education lesson materials and working with them to teach about money.

Commercial Bank, an $818 million state member bank headquartered in Harrogate, Tennessee. The bank entered into a partnership with the Harlan, Kentucky Board of Education to start a new program beginning in August, 2015.

Fidelity Bank, an $812 million state non-member bank headquartered in New Orleans, Louisiana.  The bank plans to launch a new program at several schools that will feature regular “banking days” and monthly financial education lessons provided by bank staff. 

International Bank of Commerce, a $10 billion state nonmember bank headquartered in Laredo, Texas. The bank plans to add a savings component to its existing well-established financial education program offered in various K-12 schools in low- and moderate-income areas. 

Passumpsic Savings Bank, a $577 million state nonmember bank headquartered in St. Johnsbury, Vermont. The bank, in partnership with AHEAD Homeownership Center, plans to introduce a new program for students in grades 1-3 at seven elementary schools in Coos County, New Hampshire.

PNC Bank, National Association, a $340 billion national bank headquartered in Wilmington, Delaware.  The bank operates in-school banks at 83 low- to moderate-income schools that include offering financial education to both students and educators.  They plan to expand their program at the beginning of the school year to include additional low- to moderate-income schools.

Reading Co-operative Bank, a $477 million state member bank headquartered in Reading, Massachusetts. The bank currently has a full-service branch in a local high school.  The bank plans to expand their savings program to a neighboring community, which is a predominately low- and moderate-income area.

ServisFirst Bank, a $4.4 billion state nonmember bank headquartered in Birmingham, Alabama. The Bank plans to initiate a new savings program targeted to low- and moderate-income schools by collaborating with them to offer a “banking” day, while providing for account opening activities within PTA meetings, back to school nights and other similar events.

Southwest Capital Bank, a $317 million state nonmember bank headquartered in Albuquerque, New Mexico.  The bank will partner with a local non-profit organization to launch a new program to a group of low-income, underserved students at a predominately low- and moderate-income middle school. 

The Hastings City Bank, a $306 million state nonmember bank headquartered in Hastings Michigan. The bank plans to partner with a community foundation and all school districts in Barry County, Michigan to implement a new savings program. The community foundation will open a savings account at the bank for every kindergartner in the county starting in January of 2016. 

The Huntington National Bank, a $69 billion national bank headquartered in Columbus, Ohio.  The bank plans to expand its existing Huntington Kids Club savings program from serving five elementary schools to ten schools this fall, primarily in low- and moderate-income areas. 

REGISTERED SUPPORT / OPPOSITION:

Support

California Bankers Association (CBA) – Sponsor

California Community Banking Network (CCBN)

Opposition

None on file.

Analysis Prepared by: Kathleen O'Malley / B. & F. / (916) 319-3081