Los Angeles Municipal Code Art. 2 Linked Banking of City Funds

(Former Chapter 5, Article 4, redesignated by Ord. No. 176,355, Eff. 1-31-05.)

Section

• 20.93 Purpose.

• 20.94 Definitions.

• 20.95 Disclosures Required from Financial Institutions.

• 20.95.1 Additional Disclosures Required from Financial Institutions.

• 20.96 Evaluation and Ranking of Banking Institutions.

• 20.97 Reporting Requirements.

• 20.98 Award of Banking Business.

• 20.99 Exemption.

• 20.99.01 Rules and Regulations.

• 20.99.02 Consistency with Federal or State Law.

The City of Los Angeles in exercising its power to promote the long term economic well-being of its citizens and to ensure economic growth by encouraging fair lending practices and equitable provision of banking services throughout the City shall conduct City banking transactions to the extent permissible and consistent with applicable law and the City’s interests, with banking institutions that are rated by the Treasurer as performing best at providing financial services to members of all of the City’s communities, consistent with safe and sound operation of those banking institutions.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

The following definitions shall apply to the following terms used in this article:

(a) “City” shall mean City of Los Angeles and all Departments for whose funds the City Treasurer is custodian and those Departments who grant the Treasurer discretion over their funds pursuant to City Charter § 60(b).

(b) “Banking institution” shall mean:

(1) State and national banks;

(2) “Associations” and “savings associations” as defined in California Financial Code § 5102(a);

(3) “Federal associations” as defined in California Financial Code § 5102(b).

(c) “Banking services” shall include, but not be limited to, deposit services, electronic access services, disbursement services, lending money on the security of real or personal property or without security and other credit services, clearing and safekeeping of securities, wire transfers of funds, and collection, investment and disbursement services of funds associated with securities transactions.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

Banking institutions seeking City banking business must disclose at a minimum the following information through an annual filing with the City Treasurer:

(a) Housing, consumer and commercial, including small business, lending activity by census tract; and

(b) Provision of banking services throughout the City by geographic areas; and

(c) Lending for economic development and affordable housing development throughout the City by geographic areas; and

(d) Any other information required by the rules and regulations adopted pursuant to this article.

The information shall be disclosed on a form to be provided by the City, under penalty of perjury from an authorized representative. The annual disclosure statements filed by banking institutions shall be available for public inspection and copying.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

The intent of the Responsible Banking Investment Monitoring Program is to spur community reinvestment by the City’s financial institutions and underwriters and promote responsible consumer banking.

In addition to the disclosures required elsewhere in this chapter, banking institutions already providing City banking business or seeking City banking business also must disclose the following information through annual filings with the appropriate City official as described below:

(a) Commercial banks: An annual statement of community reinvestment activities. The statement shall be specific to the City of Los Angeles and contain, at a minimum, the following information: the number, size and type of small business loans; the number of home mortgages; the number of home improvement loans; the number of community development loans; and the number of investments within the City of Los Angeles. The information shall be provided by census tract for the year immediately predating the filing. In addition, the statement shall also include the institution's participation in the City’s foreclosure prevention and home loan principal reduction programs and any other similar programs reported by census tract, and its federal Community Reinvestment Act (CRA) score.

“Commercial bank” shall be defined for purposes of this chapter as a banking institution that accepts cash deposits for checking and savings accounts from customers and uses those cash deposits to issue loans.

The statement required by this section shall be filed by July 1st of each year with the City Treasurer, who shall make this information available to the public on its official website within 60 days after it is filed. The information required by this section shall be first filed by the commercial bank when it applies to receive City deposits or other commercial banking business with the City, and shall be updated annually as long as the bank continues to receive or seek City business.

(b) Investment banks: A statement of their corporate citizenship, which, at a minimum, shall include participation in charitable programs or scholarships within the City during the year immediately predating the filing, and internal policies regarding utilization of subcontractors who are designated as “women owned”, “minority owned”, or “disabled” business enterprises.

“Investment bank” shall be defined for purposes of this chapter as a financial institution that provides underwriting services including the buying and selling of stocks, bonds and other securities and other debt related services.

The statement required by this section shall be filed by July 1st of each year with the City Administrative Officer, who shall make this information available to the public on its official website within 60 days after it is filed. The information required by this section shall be first filed by the investment bank when it applies to participate in the City’s selling of municipal indebtedness or other investment business with the City and shall be updated annually as long as the financial institution continues to receive or seek City business.

The City Administrative Officer, or the relevant City department, including proprietary departments, will produce a matrix of the information provided by the financial institutions, as defined by the City Administrative Officer, whenever a financial transaction is transmitted to the City Council for approval.

A financial institution that has both commercial and investment branches shall be subject to the type of disclosure associated with the kind of City business it pursues: cash deposits or other types of commercial banking services; or the selling of securities or other debt related services.

An investment bank shall not be subject to disclosure requirements identified in Section 20.95 as long as it seeks only investment banking business as defined above. If the financial institution seeks the City’s commercial banking business, then that financial institution is subject to all of this chapter’s requirements.

(c) In order to promote responsible consumer banking, in addition to the disclosures mentioned in Subsections (a) and (b), a commercial and/or investment bank shall inform the City, in writing and at the earliest time legally allowed, of any pending investigation and enforcement action undertaken by federal, state or local agencies against the bank; furthermore, the bank shall certify in writing, in a manner approved by the City, that it has whistleblower protection policies for bank workers who report suspected illegal banking practices to law enforcement authorities.

(d) In addition to the other disclosures required by this section, a commercial and/or investment bank shall certify, in writing, in a manner approved by the City whether:

(1) It is currently in compliance with all applicable consumer financial protection laws, including any law or regulation that prohibits illegal predatory consumer adverse practices, including those used as a basis for an employee’s compensation, promotion, or discipline;

(2) It sets or allows individual or branch- level goals or requirements for the sale of a consumer financial service;

(3) It considers the quantity of an employee’s sales of consumer financial products and services as a basis for the employee’s advancement, discipline, termination, or compensation; and

(4) It has policies, protocols, and trainings in place at both the employee and management level to help prevent the abuse of sales of consumer financial services and products.

(e) The information requested by this section shall be disclosed on a form to be provided by the City, and signed by an authorized representative of the bank under penalty of perjury. The disclosure statements filed by a banking institution shall be posted on the appropriate City websites for public viewing within 60 days of the beginning of each new City fiscal year, and be available for public inspection and copying.

SECTION HISTORY

Added by Ord. No. 182,138, Eff. 7-2-12.

Amended by: In Entirety, Ord. No. 185,670, Eff. 8-18-18.

The Treasurer, on an annual basis, shall review and evaluate the information contained in the annual disclosure statements filed by banking institutions pursuant to this article. In addition, the Treasurer shall review any additional information deemed necessary or desirable in evaluating the performance of banking institutions including but not limited to the public sections of evaluations and reports prepared by federal and state agencies pursuant to the Community Reinvestment Act of 1977, as amended.

The Treasurer shall, on an annual basis, rank the performance of banking institutions. The Treasurer shall utilize mechanisms to rank banking institutions that allow use of the evaluations of their performance to conduct City banking transactions, while ensuring the fiduciary responsibility of the Controller, Treasurer and any other financial officer responsible for banking City funds.

The Treasurer’s annual evaluation and ranking of banking institutions shall be made available to the public.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

The Treasurer shall, on an annual basis, publish a report pursuant to this article covering the prior year that contains, at a minimum, the following information:

(a) City banking activity and the volume of City banking transactions; and

(b) Rankings of the performance of banking institutions covered by this article; and

(c) Discussion of the ranking system used and the method used to arrive at each ranking.

The Treasurer shall from time to time report to the Mayor and City Council on the impact of this ordinance.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

Upon completion of the first evaluation and ranking of banking institutions pursuant to this article, and thereafter, prior to conducting any banking transactions to which this article applies, the Treasurer shall review the ranking of the performance of each and every such banking institution. A banking institution which fails to submit the information required by this article shall not be eligible to conduct City banking transactions.

The Treasurer shall, consistent with sound fiscal practice and applicable law, include as a factor in the choice of banking institutions with whom to conduct City banking transactions the Treasurer’s evaluation and ranking of banking institutions as described herein and adopted hereto. The Treasurer may, upon making such evaluation and ranking, take the following measures:

(a) Increase the level of City banking business held by a banking institution;

(b) Freeze the level of City banking business in the institution at its then current level;

(c) Withdraw City banking business from a banking institution;

(d) Enter into negotiations with a banking institution aimed at promoting institutional programs and behavior that are consistent with the public policy goals heretofore stated;

(e) Take other such steps, consistent with sound fiscal practice and applicable law, as may be necessary or desirable.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

In order to promote the purposes of this article and to protect the City’s interests, City banking transactions are exempt from application of Sec. 20.98 if the City Council determines that such application would otherwise be contrary to the best interests of the City. Such determination must be based on findings made by the City Council that set forth the nature of the proposed banking transaction, the interests being protected, alternatives available to the City, if any, and the manner in which granting the exemption protects the health, safety and welfare of the City’s citizens, employees or treasury.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

The Treasurer, with the assistance of the Mayor, Controller, Director of the Office of Administrative and Research Services, City Attorney and the Chief Legislative Analyst shall propose, subject to the approval of the Mayor and the City Council, rules and regulations not in conflict with this article to carry out the purposes of this article.

Such rules and regulations shall include, but not be limited to the following:

(a) Methods for encouraging banking institutions not seeking City banking business to participate voluntarily in the City’s disclosure and ranking system;

(b) Methods to ensure that the participation of smaller banking institutions in the City’s linked banking program is not hindered by unduly burdensome administrative requirements;

(c) The scope and structure of the system used to rank the performance of banking institutions in providing banking services to all members of the City’s communities;

(d) The form and content of the annual disclosure statement and of the oath required from banking institutions;

(e) Standards for the gathering, interpretation and dissemination of information obtained from banking institutions and other sources pursuant to this article;

(f) Guidelines for granting an exemption under Sec. 20.99;

(g) Methods to maintain open lines of communication between the City and the banking community.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.

Amended by: Ord. No. 173,348, Eff. 7-16-00, Oper. 7-1-00.

The provisions of this article shall not be applicable to those instances wherein application of Sec. 20.98 would be prohibited by federal or state law or where such application would violate or be inconsistent with the terms or conditions of a grant or contract with an agency of the United States, the State of California or the instruction of an authorized representative of any such agency with respect to any such grant or contract.

SECTION HISTORY

Added by Ord. No. 167,683, Eff. 4-26-92.