According to the Legislative Budget Board (LBB), HB 3806 is expected to have no significant fiscal impact on the State of Texas. The bill would not generate new costs for the state, nor would it require additional resources or appropriations. The Texas Department of Banking, the agency responsible for enforcing the provisions of the bill, is a self-directed, semi-independent agency. As such, it funds its operations independently of the General Revenue Fund and operates outside the standard legislative budgeting process.

Because of this self-directed structure, any costs associated with enforcing the new restrictions on supervised trust companies, such as additional oversight or administrative enforcement related to the added discretionary authority of the banking commissioner, would be absorbed within the agency’s existing operational budget. Therefore, the bill does not trigger any new demands on taxpayer-funded state appropriations.

Similarly, no significant fiscal impact is anticipated for local governments. The bill does not impose new mandates, create local administrative responsibilities, or affect local revenue streams. It applies strictly to the operations of state-supervised trust companies and the regulatory functions of the Texas Department of Banking.

HB 3806 is a narrowly tailored measure that responsibly enhances the Texas Department of Banking’s authority to supervise state trust companies during periods of financial instability. The bill amends Section 185.106 of the Finance Code to prohibit a supervised trust company from engaging in any activity that the banking commissioner determines would threaten its safety and soundness. It also clarifies that the prohibition on dividend payments under supervision applies to all forms of dividends, not just cash. These adjustments bring consistency between the supervision of trust companies and other financial institutions regulated by the department.

Importantly, HB 3806 does not grow the size or scope of government. The bill applies only in limited circumstances, when a trust company is already under official supervision due to a determination that it is in a hazardous condition. It does not create new agencies, programs, or bureaucracies. Rather, it equips the existing regulatory structure with the authority necessary to prevent further harm during crisis situations.

There is also no increase in taxpayer burden. The Texas Department of Banking is a self-directed, semi-independent agency that operates without general revenue appropriations and is not subject to the legislative budgeting process. Therefore, any enforcement activities under this bill would be funded internally by the agency at no cost to taxpayers.

Finally, HB 3806 does not increase the regulatory burden on individuals or businesses operating under normal conditions. The new restriction applies only to trust companies under active supervision, a designation triggered only in extreme circumstances. Well-functioning trust companies are unaffected by this bill.

In conclusion, HB 3806 reinforces accountability and sound risk management in the trust company sector without expanding government, burdening taxpayers, or imposing unnecessary regulation. For these reasons, Texas Policy Research recommends that lawmakers vote YES on HB 3806.

• Individual Liberty: The bill indirectly protects individual liberty by safeguarding the interests of clients, beneficiaries, and shareholders of state trust companies during times when those institutions are financially compromised. By authorizing the banking commissioner to restrict any additional activities that pose risks to safety and soundness, the bill ensures that individuals' financial assets are not jeopardized by mismanagement or destabilizing actions taken during supervisory periods. It does not infringe on individual rights or liberties.
• Personal Responsibility: The bill upholds the principle of personal and institutional responsibility by holding troubled trust companies to a higher standard of conduct while under supervision. It ensures that companies cannot take further risky actions that may exacerbate their hazardous condition without regulatory review. By reinforcing accountability during financial distress, the bill incentivizes responsible corporate governance and sound risk management.
• Free Enterprise: While the bill introduces an additional regulatory check during supervision, it does not restrict the operations of financially healthy businesses. It applies only to companies already deemed to be in a hazardous condition and under formal supervision. Thus, it supports the long-term health and credibility of the financial system, which is essential for a functioning free enterprise system. A stable regulatory environment can help prevent market failures and enhance trust in private financial institutions.
• Private Property Rights: By preventing unsupervised or destabilizing actions, such as unapproved asset sales or dividend payments by failing trust companies, the bill helps protect the property rights of account holders and investors. It ensures that fiduciaries cannot mismanage or dispose of others’ property without oversight, especially during crises. This is a direct defense of the financial property of individuals and families.
• Limited Government: Though the bill grants broader discretion to the banking commissioner, that authority is narrowly scoped and applies only to institutions under temporary supervision. The bill does not create any new agencies or ongoing regulatory regimes. There is no fiscal impact or taxpayer cost, and the authority it provides is consistent with the limited-government ideal of intervening only when necessary to prevent broader harm.