A Look at Increased Oversight of Financial Institutions in Florida
For several years, leaders in the Florida executive and legislative branches have sought regulatory and legislative changes to increase banking oversight at the state level.
During the 2023 legislative session, House Bill 3 was approved. This bill prohibits the use of environmental, social and governance (ESG) factors by state and local governments when issuing bonds. It also prohibits all state and local entities from considering or giving preference to ESG as part of the procurement and contracting process. Additionally, the bill prohibits banks that engage in discriminatory behavior from holding public deposits as a Qualified Public Depository (QPD), prohibits the financial sector from considering social credit scores in banking and lending practices, and prohibits financial institutions from discriminating against customers for their religious, political or social beliefs.
In the 2024 legislative session, House Bill 989 was passed into law. It requires each financial institution to file an attestation with the Florida Office of Financial Regulation (OFR) by July 1 of each year affirming that it does not discriminate in Florida. If a customer files a complaint with OFR alleging "de-banking" by the institution, the company must respond and OFR will investigate the institution. If OFR determines that discrimination took place, the institution is subject to penalties pursuant to the Florida Banking Code and can be sued by the Florida Attorney General under the Unfair and Deceptive Trade Practices Act. The new law also permits credit unions to hold public funds in Florida with some limitations.
On Aug. 19, 2024, Florida's Chief Financial Officer Jimmy Patronis unveiled a new banking proposal for the 2025 legislative session. The "Sunshine Freedom Bank" legislative proposal would create a public bank of Florida that would establish state control over state funds, instead of having those funds managed by major financial institutions in the private sector. According to Patronis and the press release, the new bank would save on administrative costs, increase investment earnings and protect taxpayers from large financial institutions with banking and investment policies influenced by factors such as ESG and diversity, equity and inclusion (DEI).
Specifically, the new proposal calls for the Florida Legislature to fund a feasibility study to determine what is required to build the Sunshine Freedom Bank. This study would assess costs, federal and state regulatory requirements and processes, vendors that could assist the bank with receipt and distribution of funds, establishment of a board, a timeline, and the need and impact the bank would have on the state.
The regular 60-day legislative session will begin on March 4, 2025, and more proposed legislation that could affect the financial services industry is anticipated. Holland & Knight will continue to monitor these developments.
If you have any questions about state laws affecting the financial services industry or the new state bank proposal, please contact one of the authors.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.