Section 34.103 - Bank Subsidiaries(a) Subject to this section and except as otherwise provided by this subtitle or rules adopted under this subtitle, a state bank may conduct any activity or make any investment through an operating subsidiary that a state bank or a bank holding company, including a financial holding company, is authorized to conduct or make under state or federal law if the operating subsidiary is adequately empowered and appropriately licensed to conduct its business.(b) Except for investment in a subsidiary engaging solely in activities that may be engaged in directly by the bank and that are conducted on the same terms and conditions that govern the conduct of the activities by the bank, a state bank without the prior written approval of the banking commissioner may not invest more than an amount equal to 10 percent of its unimpaired capital and surplus in a single subsidiary. For purposes of this subsection, the amount of a state bank's investment in a subsidiary is the sum of the amount of the bank's investment in securities issued by the subsidiary and any loans and extensions of credit from the bank to the subsidiary.(c) A state bank may not establish or acquire a subsidiary or a controlling interest in a subsidiary that engages in activities as principal in which the bank is prohibited from engaging directly unless: (1) the state bank's investment in the subsidiary has been allowed by the Federal Deposit Insurance Corporation under Section 24, Federal Deposit Insurance Act (12 U.S.C. Section 1831a) ; or (2) with respect to a subsidiary engaged in activities as principal that a national bank may conduct only through a financial subsidiary, including firm underwriting of equity securities other than as permitted by Section 34.101, and not otherwise engaged in activities as principal that are impermissible for a state bank or a financial subsidiary of a national bank, the subsidiary's activities and the bank's investment are in compliance with the restrictions and requirements of Section 46, Federal Deposit Insurance Act (12 U.S.C. Section 1831w) . (d) Except as otherwise provided by this subtitle or a rule adopted under this subtitle, a state bank may not make a non-controlling minority investment in equity securities of a company unless: (1) the investment or company is described by Subsection (c)(2) or Section 34.104 or 34.105;(2) the company engages solely in activities that are part of or incidental to the permissible business of a state bank under this subtitle and:(A) the state bank is adequately empowered to prevent the company from engaging in activities not part of or incidental to the permissible business of a state bank or, as a practical matter, is otherwise enabled to withdraw or liquidate its investment in the company in such an event;(B) as a legal and accounting matter, the loss exposure of the state bank with respect to the activities of the company is limited and does not include any open-ended liability for an obligation of the company; and(C) the investment is convenient or useful to the state bank in carrying out its business and is not a mere passive investment unrelated to the bank's banking business; or(3) the investment is made indirectly through an operating subsidiary in equity securities issued by: (B) a company that engages solely in an activity that is permissible for a bank service corporation or a bank holding company subsidiary; or(C) a company that engages solely in activities as agent or trustee or in a brokerage, custodial, advisory, or administrative capacity, or in a substantially similar capacity.(e) A state bank that intends to acquire, establish, or perform new activities through a subsidiary shall submit a letter to the banking commissioner describing in detail the proposed activities of the subsidiary. The bank may acquire or establish a subsidiary or perform new activities in an existing subsidiary beginning on the 31st day after the date the banking commissioner receives the bank's letter unless the banking commissioner specifies an earlier or later date. The banking commissioner may extend the 30-day period on a determination that the bank's letter raises issues that require additional information or additional time for analysis. If the period is extended, the bank may acquire or establish a subsidiary, or may perform new activities in an existing subsidiary, only on prior written approval of the banking commissioner.(f) A subsidiary of a state bank is subject to regulation by the banking commissioner to the extent provided by Chapter 11 or 12, this subtitle, or rules adopted under this subtitle. In the absence of limiting rules, the banking commissioner may regulate a subsidiary as if it were a state bank.Amended by Acts 2023, Texas Acts of the 88th Leg.- Regular Session, ch. 989,Sec. 5, eff. 6/18/2023.Amended By Acts 2007, 80th Leg., R.S., Ch. 110, Sec. 6, eff. 9/1/2007.Amended by Acts 2001, 77th Leg., ch. 528, Sec. 10, eff. 9/1/2001. Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. 9/1/1997.