Article 1. General Provisions of California Financial Code >> Division 1.1. >> Chapter 10. >> Article 1.
A bank or trust company may purchase, acquire, hold, or lease
real property or an interest therein only as follows:
(a) Such as may be necessary or convenient for the use, operation
or housing of its head office and branch offices, or for the storage
of records or other personal property, or for office space for use by
its officers or employees, or which may be reasonably necessary for
future expansion of its business, or which is otherwise reasonably
related to the conduct of its business. Real property used by a bank
as its banking premises may include in addition to the space required
for the transaction of its business other space which may be let as
a source of income.
(b) Such as may be conveyed to it in satisfaction in whole or in
part of debts previously contracted in the course of its business.
(c) Such as it may purchase or acquire at foreclosure sales under
mortgages or deeds of trust held by it, or under judgments or decrees
in its favor.
(d) Such as it may purchase or otherwise acquire when necessary to
minimize or prevent the loss or destruction of any lien or interest
(e) Such as it may purchase or otherwise acquire pursuant to
A bank or trust company may sell, lease, or encumber real property
or any interest therein owned by it, or, with the written approval
of the commissioner, exchange the same for other real property.
Any real property not held for any purpose permitted by
subdivisions (a) and (e) of Section 1320 shall be sold whenever the
same can be sold for an amount sufficient to reimburse the bank or
trust company for all loss arising out of the loan for which such
real property was security or arising out of the original investment.
A bank or trust company shall not by the retention of any real
property acquired pursuant to this section engage in any business not
authorized by this division except to the extent necessary in the
orderly liquidation of an indebtedness owing to the bank.
(a) The Legislature finds and declares:
(1) That it is necessary to increase job opportunities in real
estate development and construction and to provide additional housing
and commercial facilities in this state.
(2) That within the commercial banking community there exists the
expertise and ability to promote and assist in expansion of real
estate development projects in this state.
(3) That it is proper and appropriate to utilize that expertise
and ability by authorizing commercial banks to engage in real estate
development and management on an entrepreneurial basis.
(b) As used in this section, "real property investment" means all
forms of investing in real property, whether direct or in the form of
partnerships, joint ventures, or other methods of investment. It
includes, but is not limited to, the purchasing, subdividing, and
developing of real property or any interest therein, the building of
residential housing or commercial improvements, and the owning,
renting, leasing, managing, operating for income, or selling of that
(c) A commercial bank may acquire and hold stock of one or more
corporations the primary activities of which are engaging in real
property investment, in which event the sum of (1) investments made
by a commercial bank pursuant to the authority of this subdivision,
(2) any loans and guarantees extended by a commercial bank to, or for
the benefit of, corporations whose stock it holds pursuant to the
authority of this subdivision, and (3) real property investments made
pursuant to the authority of subdivision (d), unless a higher
percentage is approved by the commissioner in writing, shall not
exceed 10 percent of the total assets of the bank.
(d) A commercial bank may engage in real property investment. The
total of all real property investments made pursuant to the authority
of this subdivision, unless a higher percentage is approved by the
commissioner in writing, shall not exceed the total shareholders'
equity of the bank.
(e) Prior to initially engaging in real property investment
activities authorized by this section, a commercial bank shall make
application with the commissioner for approval of its general plan of
real property investment. The application for approval shall be in
letter form, shall contain a copy of the general plan for real
property investment as approved or adopted by the board of directors
of the bank, which shall include a brief description of either the
activities of the corporations the bank will invest in or the
activities the bank will engage in, or both, the approximate amount
to be invested, the extent, if any, of diversification of those
activities or investment, and the approximate date of the initial
investment, and shall be signed by the chief executive officer of the
bank. Unless the commissioner finds (1) that the capital, assets,
management, earnings, and liquidity of the commercial bank are, on a
composite basis, not satisfactory, or (2) that the plan for the
commercial bank to engage in real property investment or to acquire
and hold the stock of one or more real property investment
corporations is unsafe or unsound, the commissioner shall approve the
application. An application for approval shall be deemed approved on
the 46th day after the application is filed with the commissioner,
unless the commissioner earlier makes a final decision on the
application or extends the period for approving or denying the
application. For purposes of this subdivision, an application for
approval shall be deemed to be filed with the commissioner on the
date when the application, substantially in compliance with the
requirements of this subdivision, is received by the commissioner.
Upon the filing of the application for approval, the applicant shall
pay to the commissioner a filing fee of five hundred dollars ($500).
(f) The legality of any investment lawfully made pursuant to this
section as it read prior to the amendment of this section shall not
be affected by the existing form of this section, nor shall this
section be construed to require the changing of any investments
heretofore lawfully made.
Any director, officer, or employee of a bank or of a foreign
banking corporation who asks for or receives, or consents or agrees
to receive, any commission, emolument, or gratuity or any money,
property, or thing of value for his own personal benefit or of
personal advantage for procuring or endeavoring to procure for any
person any loan from such bank, or the purchase or discount of any
note, draft, check, bill of exchange, or other obligation by such
bank, or for permitting any person to overdraw any account with such
bank, is guilty of a felony.
Any director, officer, agent, or employee of any bank who
knowingly receives or possesses himself or herself of any of its
property otherwise than in payment of a just demand, and with intent
to defraud, omits to make or cause to be made a full and true entry
thereof in its books and accounts or concurs in omitting to make any
material entry thereof is guilty of a felony.
Any director, officer, agent, or employee of a bank who
knowingly concurs in making or publishing any written report,
exhibit, or statement of its affairs or pecuniary condition
containing any material statement which is false, or having the
custody of its books willfully refuses or neglects to make any proper
entry in such books as required by law, or to exhibit or allow the
same to be inspected or extracts to be taken therefrom by the
commissioner or his or her deputies or examiners, is guilty of a
No bank shall publish a statement of its resources or
liabilities in connection with those of any other bank, unless such
statement shall show the resources and liabilities of each bank
(a) Any person who willfully and knowingly makes, circulates,
or transmits to another or others, any statement or rumor, written,
printed, or by word of mouth, which is untrue in fact and is directly
or by inference derogatory to the financial condition or affects the
solvency or financial standing of any bank doing business in this
state, or who knowingly counsels, aids, procures, or induces another
to start, transmit, or circulate any such statement or rumor, is
guilty of a misdemeanor punishable by a fine of not more than one
thousand dollars ($1,000), or by imprisonment for not more than one
year, or both.
(b) The provisions of Section 329 shall not apply to this section.
(a) A bank or trust company may engage in the business of
renting safe deposit boxes and may receive personal property for
safekeeping and storage on its banking premises.
(b) A copy of any safe deposit rental agreement, or personal
property safekeeping and storage agreement, which is prepared by the
bank or trust company and signed by the customer shall be delivered
to the customer at the time the agreement is signed if the agreement
is signed at a place of business of the bank or trust company. If the
agreement is not signed at a place of business of the bank or trust
company, the bank or trust company shall mail or deliver a copy of
the agreement to the customer within 10 calendar days after the bank
or trust company receives it. The contract shall not contain any
blank spaces to be filled in after the customer signs the contract.
If more than one customer has signed the agreement, the bank or trust
company may comply with this section by mailing or delivering the
copy to any one of the customers who reside at the same address. A
copy shall also be mailed or delivered to any other customer who has
signed the agreement and who does not reside at the same address. As
used in this section, "copy" means a reproduction, facsimile, or
duplicate. A bank or trust company which fails to comply with this
section is liable to its customer for any actual damages suffered by
the customer as a result of that failure. The remedy provided by this
section is nonexclusive and is in addition to any remedies or
penalties available under other laws of this state.
(a) In this section, "subject person," when used with respect
to a bank, means any director or officer of the bank, any
controlling person of the bank, or any director or officer of a
controlling person of the bank. For purposes of this subdivision,
"controlling person" has the meaning set forth in subdivision (c) of
(b) No bank shall purchase any real or personal property or any
interest in real or personal property, including, but not limited to,
a leasehold, or any contract arising from the sale of real or
personal property or any note or bond in which any subject person of
such bank is personally or financially interested, directly or
indirectly, for such person's own account, for such person, or as the
partner or agent of others, without the prior approval by the board
of directors of the bank and for not more than the current market
value of the property purchased.
(a) In this section, "subject person" has the meaning set
forth in subdivision (a) of Section 1329.
(b) No subject person of a bank shall purchase, directly or
indirectly, or be interested in the purchase of, any of the bank's
obligations or assets without the prior approval of the board of the
directors of the bank and for an amount less than the then current
market value. Every person violating this section shall be liable to
the people of this state, for each offense, for twice the market
value of the assets so purchased.
(a) For purposes of this section, the following terms have
the following meanings:
(1) "Carrying a security" means maintaining, reducing, or retiring
indebtedness originally incurred to acquire a security.
(2) "Controlling person" has the same meaning specified in Section
(3) "Security" has the following meanings:
(A) When used with respect to a bank, "security" has the same
meaning set forth in subdivision (c) of Section 1200.
(B) When used with respect to any other person, "security" has the
same meaning set forth in Section 25019 of the Corporations Code.
(b) No bank shall acquire, hold, extend credit on the security of,
or extend credit for the purpose of acquiring or carrying, any
security of the bank or of any controlling person of the bank.
(c) (1) Any bank which acquires or holds securities in violation
of this section shall be liable to the people of this state for twice
the market, book, or face value of the securities, whichever is
(2) Any bank which extends credit in violation of this section
shall be liable to the people of this state for twice the amount of
the credit so extended.
(d) This section does not apply to any of the following
(1) Any acquisition or extension of credit by a bank which is
necessary to reduce or prevent loss to the bank on debts previously
contracted in good faith.
(2) Any redemption by a bank of any of its redeemable securities
in accordance with applicable provisions of this division and of
Division 1 (commencing with Section 100) of Title 1 of the
(3) Any acquisition by a bank of any of its securities, other than
an acquisition of the type described in paragraph (1) or (2), if the
acquisition is approved in advance by the commissioner.
(e) The provisions of Section 329 shall not apply to this section.
Any officer, director, trustee, employee, or agent of any
bank in this state, who abstracts or willfully misapplies any of the
money, funds, or property of the bank, or willfully misapplies its
credit, is guilty of a felony. Upon conviction, the court shall, in
addition to any other punishment imposed, order the person to make
full restitution to the bank. Nothing in this section shall be deemed
or construed to repeal, amend or impair any existing provision of
law prescribing a punishment for such an offense.
(a) Every director of a bank in this state who does either of
the following is guilty of a misdemeanor:
(1) In case of the fraudulent insolvency of such bank, the
director participated in the fraud.
(2) Willfully does any act as the director that is expressly
forbidden by law or willfully omits to perform any duty imposed by
law upon him or her as the director.
(b) The insolvency of a bank is deemed fraudulent for the purposes
of this section, unless its affairs appear upon investigation to
have been administered clearly, legally, and with the same care and
diligence that agents receiving a compensation for their services are
bound, by law, to observe.
An officer or agent of any bank in this state, who makes or
delivers any guaranty or endorsement on behalf of such bank, whereby
it may become liable upon any of its discounted notes, bills or
obligations, in a sum beyond the amount of loans and discounts which
such bank may legally make, is guilty of a misdemeanor.
A director of a bank, organized under the laws of this state,
who concurs in any vote or act of the directors of such corporation,
or any of them, by which it is intended to make a loan or discount
to any director of such corporation, or upon paper upon which any
such director is liable or responsible to an amount exceeding the
amount allowed by the statutes is guilty of a misdemeanor.
Any director, trustee, officer, or employee of any bank
organized under the laws of this state, who makes or maintains, or
attempts to make or maintain, a deposit of such bank's funds with any
other corporation on condition, or with the understanding, express
or implied, that the corporation receiving such deposit make a loan
or advance, directly or indirectly, to any director, trustee,
officer, or employee of the corporation so making or maintaining or
attempting to make or maintain such deposit is guilty of a felony.
Any officer or employee of any bank organized under the laws
of this state, who intentionally conceals from the directors of the
bank any discounts or loans made by it between the regular meetings
of its board, or the purchase of any securities or the sale of its
securities during that period, or knowingly fails to report to the
board when required to do so by law, all discounts or loans made by
it and all securities purchased or sold by it between the regular
meetings of its board, is guilty of a misdemeanor.
Every officer, agent, teller, or clerk of any bank, and every
individual banker, or agent, teller, or clerk of any individual
banker, who receives any deposits, knowing that the bank,
association, or banker is insolvent, is guilty of a misdemeanor.
Any officer, director, trustee, employee, or agent of any
bank, who willfully makes a false or untrue entry in any book or
record or in any report, tag, or statement of the business, affairs,
or condition or in connection with any transaction of the bank, with
intent to deceive any officer, director or trustee thereof, or any
agent or examiner, private or official, employed or lawfully
appointed to examine into its condition or into any of its affairs or
transactions, or any public officer, office, or board to which the
bank is required by law to report, or which has authority by law to
examine into its affairs or transactions, or into any of its affairs
or transactions, or who, with like intent, willfully omits to make a
new entry of any matter particularly pertaining to the business,
property, condition, affairs, transactions, assets, or accounts of
the bank in any book, record, report, statement, or tag of the bank,
or who with like intent alters, abstracts, conceals, or destroys any
book, record, report, statement, or tag of the bank made, written, or
kept, or required to be made, written, or kept by him or her or
under his or her direction, is guilty of a felony.
Unless specifically authorized by law or by the commissioner,
a bank shall not become, act as, or in any other manner assume the
duties or liabilities of, a general partner. For purposes of this
section, "general partner" has the meaning set forth in subdivision
(m) of Section 15901.02 of the Corporations Code.
A bank, or the agent of a bank, that has received a notice
pursuant to Section 7507.6 of the Business and Professions Code,
shall not make a subsequent assignment to skip trace, locate, or
repossess a vehicle without simultaneously, and in the same manner by
which the assignment is given, advising the assignee of the
assignment of the information contained in the notice. As used in
this section, "assignment" has the same meaning set forth in Section
7500.1 of the Business and Professions Code.