Examinations and Reports-bankingExamination

Section § 500

Explanation

This law describes the responsibilities of the commissioner regarding examinations of banks and trust companies in California. A 'foreign bank' is defined as those licensed to operate in the state, and the commissioner must ensure examinations occur at least once every 12 months for state and foreign banks, and once every 24 months for state trust companies. The commissioner can coordinate with federal examiners and conduct these reviews alongside them, but cannot rely solely on federal examinations consecutively. Bank officers must cooperate and provide access to necessary documents during these examinations.

The law allows the commissioner to inspect not only state banks but also any foreign bank offices operating within the state. All examined entities must assist by providing their securities and records for review.

(a)Copy CA Financial Code § 500(a)
(1)Copy CA Financial Code § 500(a)(1) For purposes of this section, “foreign bank” means the business in this state of every foreign (other nation) bank licensed under Article 3 (commencing with Section 1800) of Chapter 20 of Division 1.1.
(2)CA Financial Code § 500(a)(2) For purposes of this subdivision, an examination made by the commissioner in conjunction with or with assistance from a bank regulatory agency of the United States, of a state of the United States, or of a foreign nation is deemed to be an examination caused by the commissioner.
(3)CA Financial Code § 500(a)(3) No provision of this subdivision shall be deemed to require that the commissioner cause an examination to be made onsite at the offices of a bank.
(4)CA Financial Code § 500(a)(4) The commissioner shall cause every California state bank and every foreign bank to be examined to the extent and whenever and as often as the commissioner shall deem it advisable, but in no case less frequently than once every 12 months, except that the following banks shall be examined pursuant to federal law no less frequently than state banks and foreign banks that meet the respective federal criteria:
(A)CA Financial Code § 500(a)(4)(A) California state banks that meet the criteria set forth in Section 1820(d)(4) of Title 12 of the United States Code.
(B)CA Financial Code § 500(a)(4)(B) Foreign banks that meet the criteria set forth in Section 211.26(c)(2) of Title 12 of the Code of Federal Regulations.
(5)CA Financial Code § 500(a)(5) The examinations required by paragraph (4) may be conducted in alternate examination periods, as appropriate, if the commissioner determines that an examination of the state bank by the appropriate federal regulator, insuring or guaranteeing corporation during the intervening examination period carries out the purpose of this section. The commissioner may not accept two consecutive examinations, or two consecutive examination reports, made by federal regulators, insuring or guaranteeing corporations, or agencies with respect to the condition of the state bank.
(6)CA Financial Code § 500(a)(6) The commissioner shall cause every California state trust company to be examined to the extent and whenever and as often as the commissioner shall deem it advisable, but in no case less frequently than once every 24 months.
(7)CA Financial Code § 500(a)(7) The commissioner may examine subsidiaries of every California state bank, state trust company, and foreign (other nation) bank licensed under Article 3 (commencing with Section 1800) of Chapter 20 of Division 1.1 to the extent and whenever and as often as the commissioner shall deem it advisable.
(b)CA Financial Code § 500(b) The commissioner may at any time examine any of the following:
(1)CA Financial Code § 500(b)(1) Any office of a bank organized under the laws of this state.
(2)CA Financial Code § 500(b)(2) Any office of a foreign (other state) bank that maintains an office in this state.
(3)CA Financial Code § 500(b)(3) Any office of a foreign (other nation) bank that maintains an office in this state.
(c)CA Financial Code § 500(c) The officers and employees of every California state bank, California state trust company, and foreign bank being examined shall exhibit to the examiners, on request, any or all of its securities, books, records, and accounts and shall otherwise facilitate the examination so far as it may be in their power.
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Section § 501

Explanation

If the commissioner believes it's necessary to conduct a special review of any bank or foreign bank, they have the authority to proceed with this examination and charge the bank a fee. The fee is based on the average costs involved, including overhead.

If the examination requires the examiner to travel outside the state, the commissioner can charge the bank for the examiner's travel expenses.

(a)CA Financial Code § 501(a) Whenever, in the judgment of the commissioner, it is necessary or advisable to make an extra examination of or to devote any extraordinary attention to any bank, any foreign bank, or any office of a foreign bank, the commissioner has the authority to do so and to charge and collect from the bank or foreign bank, in the case of an extra examination, a fee for the examination, as determined by the commissioner. In determining the fee, the commissioner may use the estimated average hourly cost, including, but not limited to, overhead, for all persons performing the examination.
(b)CA Financial Code § 501(b) Whenever in the judgment of the commissioner it is necessary or expedient for any examiner engaged in any examination to travel outside this state, the commissioner may charge for the travel expenses of the examiner.
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Section § 502

Explanation

This law outlines requirements for California state banks to submit an annual audit report to the state's commissioner. The commissioner has the power to grant exemptions if deemed unnecessary. The audit report must be submitted within 90 days after the fiscal year ends, or later if the commissioner extends the deadline. Financial statements included in the report must be prepared according to standard accounting principles and any other specific requirements from the commissioner. An independent accountant, deemed acceptable by the commissioner, must prepare and certify the report. If any issues arise in the accountant's certification, the commissioner can demand corrective actions from the bank.

(a)CA Financial Code § 502(a) The commissioner may by order or regulation grant exemptions from this section in cases where the commissioner finds that the requirements of this section are not necessary.
(b)CA Financial Code § 502(b) Each California state bank shall, within 90 days after the end of each fiscal year, or within such extended time as the commissioner may prescribe, file with the commissioner an audit report for the fiscal year.
(c)CA Financial Code § 502(c) The audit report called for in subdivision (b) shall comply with all of the following provisions:
(1)CA Financial Code § 502(c)(1) The audit report shall contain those audited financial statements of the bank for or as of the end of the fiscal year prepared in accordance with generally accepted accounting principles and any other information that the commissioner may require.
(2)CA Financial Code § 502(c)(2) The audit report shall be based upon an audit of the bank conducted in accordance with generally accepted auditing standards and any other requirements that the commissioner may prescribe.
(3)CA Financial Code § 502(c)(3) The audit report shall be prepared by an independent certified public accountant or independent public accountant who is not unsatisfactory to the commissioner.
(4)CA Financial Code § 502(c)(4) The audit report shall include or be accompanied by a certificate or opinion of the independent certified public accountant or independent public accountant that is satisfactory in form and content to the commissioner. If the certificate or opinion is qualified, the commissioner may order the bank to take such action as the commissioner may find necessary to enable the independent certified public accountant or independent public accountant to remove the qualification.
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Section § 503

Explanation

This law allows the commissioner to request a special audit of a bank, trust company, or foreign banking corporation if they believe there might be issues with the organization's condition. The bank or trust company has to hire a certified public accountant and pay for the audit.

The commissioner, whenever in his or her opinion the condition of the bank, trust company, or foreign banking corporation is such as to require such audit, may require any bank, trust company, or foreign banking corporation to employ a certified public accountant to make a special audit of the affairs of such bank or trust company at its expense.
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Section § 504

Explanation

This law allows a commissioner to hire appraisers to evaluate the value of any investment, asset, or property that is held as security for a loan. Any bank, trust company, or foreign banking corporation is required to cover the cost of these appraisals when demanded by the commissioner.

The commissioner, for good cause, at any time and from time to time may employ appraisers to appraise the value of any investment, asset, or property held or upon which a lien is held as security for a loan. The bank, trust company, or foreign banking corporation shall pay to the commissioner on demand the cost of such appraisal.
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Section § 505

Explanation

This law allows certain officials, like the commissioner and examiners, to require someone to give a sworn statement during an examination related to their duties. They can also issue a subpoena, which is a legal order, to make a person show up or produce evidence for the examination.

The commissioner, a deputy commissioner, and every examiner assigned to an examination may administer an oath to any person whose testimony is required for the purposes of any examination authorized by this division and may by issuance of subpoena compel the appearance of any person and the production of any evidence for the purposes of the examination.
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Section § 506

Explanation

This section allows the commissioner to organize a meeting of a bank or trust company's stockholders whenever they think it's necessary. Stockholders must receive a mailed notice about the meeting's time and place at least 15 days in advance, and the costs of holding the meeting must be paid by the bank or trust company.

Whenever he or she deems it expedient, the commissioner may call a meeting of the stockholders of any bank or trust company. Notice of the time and place of the meeting shall be given to each stockholder by a notice mailed to the stockholder by registered mail at the stockholder’s last known address at least 15 days before the date of the meeting. Any expenses of such meeting shall be borne by the bank or trust company.
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Section § 507

Explanation

When there's a national emergency declared by the U.S. President, banks must follow specific directives from a commissioner. These directives align with rules set by financial authorities like the Treasury or the Federal Reserve on how banks operate during these times.

During any emergency period declared by the President of the United States, each bank shall conform to any order of the commissioner directed to it, relating to and conforming with regulations, limitations, or restrictions which are applicable thereto prescribed by the Secretary of the Treasury, the Comptroller of the Currency, or the Board of Governors of the Federal Reserve System regulating or governing the operations of banks which are members of the Federal Reserve System.
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Section § 508

Explanation

In times of emergency declared by the Governor, banks in California can't conduct regular banking activities unless allowed under specific guidelines set by the banking commissioner. These guidelines must align as closely as possible with the Federal Reserve Act for member banks and with FDIC rules for insured banks, given the emergency conditions.

During any emergency period declared by the Governor no bank shall transact any banking business except to such extent and subject to such regulations, limitations, or restrictions as may be prescribed by the commissioner, which, as to member banks, shall be as consistent as the exigencies of the situation permit with the provisions of the Federal Reserve Act and regulations issued thereunder or, as to insured banks, shall be as consistent as the exigencies of the situation permit with the rules and regulations governing banks whose deposits are insured by the Federal Deposit Insurance Corporation.
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Section § 509

Explanation

This law allows the commissioner to take legal action on behalf of the state to stop violations, enforce compliance, or collect penalties related to financial regulations. Penalties collected are deposited into the State Banking Account. The court can issue injunctions and appoint fiduciaries such as receivers or conservators to manage the defendant's assets.

These fiduciaries, once appointed, have the authority to act on behalf of the defendant's officers and may even file for bankruptcy if needed. The commissioner can also seek additional relief for the public like restitution or damages for affected individuals.

Certain banks, such as state, national, or foreign banks with authorized branches in California, are exempt from some of these provisions. Additionally, this law does not restrict the rights of others who may also wish to bring similar legal actions or seek similar outcomes.

(a)CA Financial Code § 509(a) The commissioner may, in his or her discretion, bring an action in the name of the people of this state in a superior court to enjoin a violation of, to enforce compliance with, or to collect a penalty or other liability imposed under, this division or any regulation or order issued under this division. The amount of any penalty or liability collected shall be deposited into the State Banking Account in the Financial Institutions Fund. Upon a proper showing, a permanent or preliminary injunction, restraining order, or writ of mandate shall be granted, and a monitor, receiver, conservator, or other designated fiduciary or officer of the court may be appointed for the defendant or the defendant’s assets, or other appropriate relief may be granted.
(b)CA Financial Code § 509(b) A receiver, monitor, conservator, or other designated fiduciary officer of the court appointed by the superior court pursuant to this section may, with the approval of the court, exercise all of the powers of the defendant’s officers, directors, partners, trustees, or of persons who exercise similar powers and perform similar duties, including the filing of a petition for bankruptcy. No action at law or in equity may be maintained by any party against the commissioner, or a receiver, monitor, conservator, or any other designated fiduciary officer of the court by reason of their exercising these powers or performing these duties pursuant to the order of, or with the approval of, the superior court.
(c)CA Financial Code § 509(c) If the commissioner determines it is in the public interest, the commissioner may include in an action authorized by subdivision (a), a claim for ancillary relief, including, but not limited to, a claim for restitution, disgorgement, or damages on behalf of the person injured by the act or practice that is the subject matter of the action. The court has jurisdiction to award additional relief.
(d)CA Financial Code § 509(d) The provision of subdivision (a) that authorizes the appointment of a monitor, receiver, conservator, or other designated fiduciary or officer of the court, and subdivisions (b) and (c) do not apply to any of the following:
(1)CA Financial Code § 509(d)(1) A state bank that is authorized by the commissioner to transact commercial banking or trust business.
(2)CA Financial Code § 509(d)(2) A national bank.
(3)CA Financial Code § 509(d)(3) A foreign (other state) bank that maintains a branch office in this state in accordance with federal law, the law of this state, and the law of the bank’s domicile.
(4)CA Financial Code § 509(d)(4) A foreign (other nation) bank that is licensed by the commissioner to maintain a branch office or agency, as defined in Section 1750, in this state.
(5)CA Financial Code § 509(d)(5) A foreign (other nation) bank that maintains a federal branch or agency, as defined in Section 1750, in this state.
(e)CA Financial Code § 509(e) The provisions of this section that authorize the commissioner to bring actions and seek relief are not intended to, and do not, affect any right that any other person may have to bring the same or similar actions, or to seek the same or similar relief.
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