Entrepreneurial Investment Act of 1996

Summary: Entrepreneurial Investment Act of 1996 - Amends the Bank Holding Company Act of 1956 to prescribe conditions and requirements exempting certain smaller-sized bank holding companies from its proscription against the acquisition of interests (equity capital investments) in certain nonbanking organizations.  Sets forth restrictions upon joint marketing.  Requires such bank holding companies to obtain a one-time approval of the Board of Governors of the Federal Reserve System prior to engaging in such investment activities.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Entrepreneurial Investment Act of 
1996''.

SEC. 2. EQUITY CAPITAL INVESTMENTS BY SMALLER BANK HOLDING COMPANIES.

    Section 4(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)) is amended by adding at the end thereof the following new 
paragraph:
            ``(15) shares of a company (other than an insured 
        depository institution or a depository institution holding 
        company) engaged in activities not authorized pursuant to 
        section 4 provided the conditions and requirements of this 
        paragraph are met.
                    ``(A) Acquisition and retention of shares.--No bank 
                holding company may acquire and retain ownership or 
                control of shares of a company pursuant to this 
                paragraph unless--
                            ``(i) each insured depository institution 
                        controlled by the bank holding company is well-
                        capitalized;
                            ``(ii) the total consolidated assets of the 
                        bank holding company are less than $1 billion;
                            ``(iii) the bank holding company or any 
                        subsidiary of the bank holding company has had 
                        a significant debt relationship with the 
                        company for at least 1 year;
                            ``(iv) the aggregate amount of all 
                        investments held by the bank holding company 
                        and all of its subsidiaries under this 
                        paragraph, measured quarterly, does not exceed 
                        50 percent of the sum of the excess capital of 
                        each insured depository institution controlled 
                        by the bank holding company;
                            ``(v) the shares do not represent 25 
                        percent or more of any class of voting shares 
                        of any company;
                            ``(vi) the shares are not acquired or held 
                        by a depository institution or a subsidiary of 
                        a depository institution; and
                            ``(vii) the bank holding company does not 
                        actively manage or operate the company.
                    ``(B) Restrictions on joint marketing.--No 
                depository institution (and no subsidiary of such 
                depository institution) shall--
                            ``(i) offer or market, directly or 
                        indirectly through any arrangement, any product 
                        or service of any company whose shares are 
                        owned or controlled by the bank holding company 
                        pursuant to this paragraph; or
                            ``(ii) permit any of such depository 
                        institution's (or subsidiary's) products or 
                        services to be offered or marketed, directly or 
                        indirectly through any arrangement, by or 
                        through any company whose shares are owned or 
                        controlled by the bank holding company pursuant 
                        to this paragraph.
                    ``(C) One-time prior approval.--Prior to making any 
                investments under this paragraph, the bank holding 
                company must obtain approval from the Board to engage 
                in investment activities under this paragraph.
                    ``(D) Accounting requirements.--
                            ``(i) Aggregate value of investments.--The 
                        value of all investments made under this 
                        paragraph shall be computed quarterly and shall 
                        be the lower of the initial cost of the shares 
                        or the book value of the shares.
                            ``(ii) Mark-to-market.--For purposes of 
                        determining compliance with the limitations in 
                        this paragraph, the value of any shares held 
                        under this paragraph shall be determined--
                                    ``(I) by treating the shares as 
                                having been sold by the bank holding 
                                company for the fair market value of 
                                such shares as of the date of such 
                                determination; or
                                    ``(II) in the case of any shares 
                                which are not traded in any market or 
                                on any exchange, the value of any such 
                                shares shall be the lower of the cost 
                                of the shares to the bank holding 
                                company at the time of the acquisition 
                                of such shares or the book value of the 
shares.
                    ``(E) Acquisition of shares in excess of limitation 
                through satisfaction of a prior debt.--
                            ``(i) Not subject to limitations.--The 
                        acquisition of voting shares of any company in 
                        satisfaction of a debt which was previously 
                        contracted in good faith shall not be subject 
                        to the limitations contained in this paragraph 
                        and any shares so acquired shall not be taken 
                        into account under this paragraph in connection 
                        with any other acquisition of shares by the 
                        bank holding company under this paragraph.
                            ``(ii) Divestiture required.--
                        Notwithstanding any other provision of law, any 
                        voting shares of any company which are acquired 
                        in satisfaction of a debt which was previously 
                        contracted in good faith at a time when such 
                        company was a company referred to in this 
                        paragraph shall be divested before the end of 
                        the 3-year period beginning on the date of such 
                        acquisition.
                    ``(F) Authority of the board.--
                            ``(i) In general.--No provision of this 
                        paragraph shall be construed as limiting the 
                        authority of the Board to--
                                    ``(I) supervise and regulate the 
                                investments in voting shares of any 
                                company; or
                                    ``(II) require the divestiture of a 
                                bank holding company or any of its 
                                subsidiaries of shares of any company 
                                whenever the Board determines such 
                                action to be appropriate in order to 
                                preserve the safety and soundness of 
                                any insured depository institution.
                            ``(ii) Bank with falling capital levels.--
                        If, at any time, the aggregate amount of the 
                        investments in shares made under this paragraph 
                        exceeds the amount described in subparagraph 
                        (A)(iv) due to a decrease in the capital levels 
                        of any insured depository institution, the 
                        Board may take such action, including requiring 
                        the sale of any shares held under this 
                        paragraph, as may be appropriate in order to 
                        preserve the safety and soundness of the 
                        insured depository institution.
                    ``(G) Definitions.--
                            ``(i) Excess capital.--For purposes of this 
                        paragraph, the term `excess capital' means the 
                        amount by which the total risk-based capital of 
                        a depository institution exceeds the level 
                        required for the institution to be well-
                        capitalized for purposes of section 38 of the 
                        Federal Deposit Insurance Act;
                            ``(ii) Book value of shares.--For purposes 
                        of this paragraph, the term `book value of 
                        shares' means the product of--
                                    ``(I) the amount equal to the total 
                                assets of the company issuing the 
                                shares minus the total liabilities of 
                                such company; and
                                    ``(II) the percentage of the total 
                                amount of shares of the company which 
                                are owned by the bank holding company.
                            ``(iii) Foreign banks.--For purposes of 
                        subparagraph (B), the term `depository 
                        institution' includes a foreign bank.''.