Senate Bill 2348

AN ACT TO AUTHORIZE THE COMMISSIONER OF BANKING AND CONSUMER FINANCE TO REGULATE AND EXAMINE THE PERFORMANCE OF SERVICE PROVIDERS THAT PROVIDE SERVICES TO MISSISSIPPI FINANCIAL INSTITUTIONS; TO PROVIDE FOR THE CONFIDENTIALITY OF SERVICE PROVIDER EXAMINATION REPORTS; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. The following shall be codified as Section 81-1-139, Mississippi Code of 1972:

81-1-139. (1) Purpose. The connections between financial depository institutions and their service providers create risks to the financial system, as institutions are increasingly reliant on third parties to provide or enable key functions and everyday services. In light of the vital role service providers perform in the safety and soundness of institutions and the stability of the financial system, it is imperative for banking agencies to supervise and examine service providers. A significant disruption affecting a single service provider could have an adverse impact on a large number of depository institutions; understanding the interconnectivity between institutions and service providers is crucial to avoiding such a situation. The purpose of this section is to provide the requisite legal authority for the Department of Banking and Consumer Finance to examine service providers that provide services to Mississippi financial institutions.

(2) Definitions. For purposes of this section, the following definitions shall apply:

(a) "Depository institution" means a state-chartered financial institution subject to the authority of the Department of Banking and Consumer Finance.

(b) "Service provider" means any person, company, corporation, or other legal entity that provides a service enumerated in subsection (3) of this section to a depository institution.

(3) Examination of service providers. (a) Whenever a depository institution, or any subsidiary or affiliate of such depository institution that is subject to examination by the commissioner, causes to be performed for itself, by contract or otherwise, any of the services listed in paragraph (b) of this subsection, such performance shall be subject to regulation and examination by the commissioner to the same extent as if such services were being performed by the depository institution itself.

(b) Covered services are as follows:

(i) Data processing services;

(ii) Activities that support financial services, including but not limited to, lending, funds transfer, fiduciary activities, trading activities and deposit taking;

(iii) Internet related services, including but not limited to web services and electronic bill payments, mobile applications, system and software development and maintenance, and security monitoring; and

(iv) Activities related to the business of banking.

(4) Acceptance of examinations from other agencies. The commissioner may, in his discretion, accept examinations authorized or required to be conducted, that are performed by any other authorized federal or state regulatory agencies, in lieu of conducting an independent examination authorized by this act.

(5) Confidentiality of service provider examination reports.

(a) All examination reports and related information authorized under this section are confidential to the department and shall be maintained in the strictest confidence in the same manner as an examination of a depository institution pursuant to this title.

(b) Notwithstanding subsection (1) of this section, the commissioner may furnish a copy of a report of any examination performed or relied upon by the commissioner, demonstrating the condition and affairs of any service provider to the depository institutions that use the service provider.

(6) Other provisions. (a) The commissioner may enter into agreements with any depository institution regulatory agency that has concurrent jurisdiction over a service provider to provide services in order to efficiently accomplish the requirements of this section.

(b) The commissioner may take enforcement actions against the service provider pursuant to authority described in Chapter 1 of Title 81, if the commissioner considers the actions to be necessary or appropriate to carry out his responsibilities under this chapter or to ensure compliance with the laws of the state.

(c) The commissioner may enter into joint examinations or joint enforcement actions with other bank regulatory agencies having concurrent jurisdiction over a service provider.

(d) The cost of any examination performed by the department shall be borne by the service provider.

SECTION 2. This act shall take effect and be in force from and after July 1, 2016.