I

104TH CONGRESS

1ST SESSION H. R. 2520

To enhance competition in the financial services industry by providing a

prudential framework for the affiliation of banks, securities firms, and

other financial service providers, to reduce paperwork and additional

regulatory burdens for depository institutions, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 24, 1995

Mr. LEACH introduced the following bill; which was referred to the Committee

on Banking and Financial Services, and in addition to the Committee on

Commerce, for a period to be subsequently determined by the Speaker,

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To enhance competition in the financial services industry

by providing a prudential framework for the affiliation

of banks, securities firms, and other financial service

providers, to reduce paperwork and additional regulatory

burdens for depository institutions, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
2

•HR 2520 IH

1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Financial Services Competitiveness and Regulatory Re4 lief Act of 1995’’.

5 (b) TABLE OF CONTENTS.—The table of contents of

6 this Act is as follows:

Section 1. Short title; table of contents.

TITLE I—BANK SECURITIES ACTIVITIES AND AFFILIATIONS

WITH SECURITIES FIRMS AND OTHER FINANCIAL COMPANIES

Subtitle A—Securities Activities

Sec. 101. Anti-affiliation provision of the Banking Act of 1933 repealed.

Sec. 102. Financial services holding companies authorized to have securities affiliates.

Sec. 103. Establishment and operations of securities affiliates.

Sec. 104. Safeguards relating to securities affiliates.

Sec. 105. Ownership of shares of certain companies by financial services holding companies.

Sec. 106. Provisions applicable to limited purpose banks.

Sec. 107. Securities company affiliations of FDIC—insured banks.

Sec. 108. Authority to terminate grandfather rights under the International

Banking Act of 1978.

Sec. 109. Effect on State laws prohibiting the affiliation of banks and securities

companies.

Sec. 110. Interagency agreement relating to retail sales of certain nondeposit

investment products.

Sec. 111. Effective date.

Subtitle B—Investment Bank Holding Companies

Sec. 116. Investment bank holding companies.

Sec. 117. Wholesale financial institutions.

Subtitle C—Financial Activities

Sec. 121. Financial activities.

Sec. 122. No prior approval required for well capitalized and well managed financial services holding companies.

Sec. 123. Streamlined examination and reporting requirements for all financial

services holding companies.

Sec. 124. Holding company supervision for financial services holding companies

engaged primarily in nonbanking activities.

Sec. 125. Conversion of unitary savings and loan holding companies to financial

services holding companies.

Sec. 126. Financial services advisory committee.

Sec. 127. Coordination with State law.

Sec. 129. Conforming amendments to the Bank Holding Company Act Amendments of 1970.
3

•HR 2520 IH

Sec. 130. Credit cards for business purposes.

Sec. 131. Disposition of foreclosed assets.

Subtitle D—Interagency Banking and Financial Services Advisory Committee

Sec. 141. Interagency banking and financial services advisory committee.

Subtitle E—Application and Registration Fees

Sec. 151. Authority to impose fees.

TITLE II—FUNCTIONAL REGULATION

Subtitle A—Brokers and Dealers

Sec. 201. Definition of broker.

Sec. 202. Definition of dealer.

Sec. 203. Power to exempt from the definitions of broker and dealer.

Sec. 204. Margin requirements.

Sec. 205. Effective date.

Subtitle B—Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.

Sec. 212. Use of underwriting proceeds.

Sec. 213. Lending to an affiliated investment company.

Sec. 214. Independent directors.

Sec. 215. Additional SEC disclosure authority.

Sec. 216. Definition of broker under the Investment Company Act of 1940.

Sec. 217. Definition of dealer under the Investment Company Act of 1940.

Sec. 218. Removal of the exclusion from the definition of investment adviser for

banks that advise investment companies.

Sec. 219. Definition of broker under the Investment Advisers Act of 1940.

Sec. 220. Definition of dealer under the Investment Advisers Act of 1940.

Sec. 221. Interagency consultation.

Sec. 222. Treatment of bank common trust funds.

Sec. 223. Investment advisers prohibited from having controlling interest in

registered investment company.

Sec. 224. Conforming change in definition.

Sec. 225. Effective date.

TITLE III—BANK INSURANCE ACTIVITIES

Sec. 301. Authority of the Comptroller of the Currency.

Sec. 302. National bank community development insurance activities.

TITLE IV—REDUCTIONS IN GOVERNMENT OVERREGULATION

Subtitle A—The Home Mortgage Process

Sec. 401. Regulatory authority over disclosures and escrow accounts under

RESPA transferred to Federal Reserve Board.

Sec. 402. Simplification and unification of disclosures required under RESPA

and TILA for mortgage transactions.

Sec. 403. Increased regulatory flexibility under the Truth in Lending Act.

Sec. 404. Reductions in RESPA regulatory burdens; clarifying amendments.

Sec. 405. Disclosures for adjustable rate mortgages.
4

•HR 2520 IH

Sec. 406. Treatment of certain debt cancellation and deficiency waiver contracts.

Sec. 407. Recovery of fees.

Sec. 408. Home ownership debt counseling notification.

Sec. 409. Home Mortgage Disclosure Act.

Subtitle B—Community Reinvestment Act Amendments

Sec. 421. Expression of congressional intent.

Sec. 422. Increased incentives for lending to low- and moderate-income communities.

Sec. 423. Prohibition on additional reporting under CRA.

Sec. 424. Technical amendment.

Sec. 425. CRA congressional oversight.

Sec. 426. Consultation among examiners.

Sec. 427. Limitation on regulations.

Subtitle C—Consumer Banking Reforms

Sec. 441. Truth in savings.

Sec. 442. Information sharing.

Sec. 443. Electronic Fund Transfer Act clarification.

Sec. 444. Limit on restitution for truth in lending violations if safety and

soundness of violator would be affected.

Subtitle D—Equal Credit Opportunity Act Amendments

Sec. 451. Short title.

Sec. 452. Findings and purpose.

Sec. 453. Equal Credit Opportunity Act amendments.

Sec. 454. Fair Credit Reporting Act amendments.

Sec. 455. Incentives for self-testing.

Sec. 456. Consultation by Attorney General required in nonreferral cases.

Sec. 457. Effective date.

Subtitle E—Consumer Leasing Act Amendments

Sec. 461. Short title.

Sec. 462. Congressional findings and declaration of purpose.

Sec. 463. Regulations.

Sec. 464. Consumer lease advertising.

Sec. 465. Statutory penalties.

TITLE V—STREAMLINING GOVERNMENT REGULATIONS

Subtitle A—Regulatory Approval Issues

Sec. 501. Streamlined bank acquisitions by well capitalized and well managed

banking organizations.

Sec. 502. Eliminate filing and approval requirements for insured depository institutions already controlled by the same holding company.

Sec. 503. Eliminate redundant approval requirement for Oakar transactions.

Sec. 504. Elimination of duplicative requirements imposed upon financial services holding companies and other regulatory relief under the

Home Owners’ Loan Act.

Sec. 505. Eliminate requirement that approval be obtained for divestitures.

Sec. 506. Eliminate unnecessary branch applications.
5

•HR 2520 IH

Sec. 507. Eliminate branch applications and requirements for ATMs and similar facilities.

Sec. 508. Eliminate requirement for approval of investments in bank premises

for well capitalized and well managed banks.

Sec. 509. Eliminate unnecessary filing for officer and director appointments.

Sec. 510. Increase in certain credit union loan ceilings.

Subtitle B—Streamlining of Government Regulations; Miscellaneous Provisions

Sec. 521. Eliminate the per-branch capital requirement for national banks and

State member banks.

Sec. 522. Branch closures.

Sec. 523. Amendments to the Depository Institutions Management Interlocks

Act.

Sec. 524. Acceleration of repayment to Treasury.

Sec. 525. Eliminate unnecessary and duplicative recordkeeping and reporting

requirements relating to loans to executive officers and permit

participation in employee benefit plans.

Sec. 526. Expanded regulatory discretion for small bank examinations.

Sec. 527. Cost reimbursement.

Sec. 528. Identification of foreign nonbank financial institution customers.

Sec. 529. Paperwork reduction review.

Sec. 530. Daily confirmations for hold-in-custody repurchase transactions.

Sec. 531. Required regulatory review of regulations.

Sec. 532. Country risk requirements.

Sec. 533. Audit costs.

Sec. 534. Standards for director and officer liability.

Sec. 535. Foreign bank applications.

Sec. 536. Duplicate examination of foreign banks.

Sec. 537. Second mortgages.

Sec. 538. Streamlining FDIC approval of new State bank powers.

Sec. 539. Repeal of call report attestation requirement.

Sec. 540. Authorizing bank service companies to organize as limited liability

partnerships.

Sec. 541. Bank investments in Edge Act and agreement corporations.

Sec. 542. Report on the reconciliation of differences between regulatory accounting principles and generally accepted accounting principles.

Sec. 543. Waivers authorized for residency requirement for national bank directors.

TITLE VI—LENDER LIABILITY

Sec. 601. Lender liability.

TITLE VII—ANNUAL STUDY AND REPORT ON IMPACT ON

LENDING TO SMALL BUSINESS

Sec. 701. Annual study and report.
6

•HR 2520 IH

1 TITLE I—BANK SECURITIES AC2 TIVITIES AND AFFILIATIONS

3 WITH SECURITIES FIRMS AND

4 OTHER FINANCIAL COMPA5 NIES

6 Subtitle A—Securities Activities

7 SEC. 101. ANTI-AFFILIATION PROVISION OF THE BANKING

8 ACT OF 1933 REPEALED.

9 (a) SECTION 20 REPEALED.—Section 20 (12 U.S.C.

10 377) of the Banking Act of 1933 (commonly referred to

11 as the ‘‘Glass-Steagall Act’’) is repealed.

12 (b) CONFORMING AMENDMENT TO SECTION 32.—

13 Section 32 (12 U.S.C. 78) of the Banking Act of 1933

14 is amended by adding at the end the following sentence:

15 ‘‘This section shall not apply so as to prohibit an officer,

16 director, or employee of a securities affiliate (as defined

17 in section 2 of the Financial Services Company Act of

18 1995) from serving at the same time as an officer, direc19 tor, or employee of a member bank affiliated with that

20 securities affiliate pursuant to section 10 of such Act. This

21 section shall not apply so as to prohibit an officer, direc22 tor, or employee of an investment company registered

23 under the Investment Company Act of 1940 or an invest24 ment adviser registered under the Investment Advisers
7

•HR 2520 IH

1 Act of 1940 from serving at the same time as an officer,

2 director, or employee of a member bank.’’.

3 SEC. 102. FINANCIAL SERVICES HOLDING COMPANIES AU4 THORIZED TO HAVE SECURITIES AFFILIATES.

5 Section 4(c) of the Bank Holding Company Act of

6 1956 (12 U.S.C. 1843(c)) is amended—

7 (1) by striking ‘‘or’’ at the end of paragraph

8 (13);

9 (2) by striking the period at the end of para10 graph (14) and inserting ‘‘; or’’; and

11 (3) by adding after paragraph (14) the follow12 ing new paragraph:

13 ‘‘(15) shares of a securities affiliate in accord14 ance with section 10.’’.

15 SEC. 103. ESTABLISHMENT AND OPERATIONS OF SECURI16 TIES AFFILIATES.

17 (a) IN GENERAL.—Section 10 of the Bank Holding

18 Company Act of 1956 (12 U.S.C. 1841 et seq.) is amend19 ed to read as follows:

20 ‘‘SEC. 10. SECURITIES ACTIVITIES.

21 ‘‘(a) ACTIVITIES PERMISSIBLE FOR SECURITIES AF22 FILIATES.—

23 ‘‘(1) IN GENERAL.—A securities affiliate may

24 engage in 1 or more of the following activities:
8

•HR 2520 IH

1 ‘‘(A) Underwrite, deal in, broker, place, or

2 distribute securities of any type, provide invest3 ment advice regarding securities of any type,

4 and engage in other securities activities.

5 ‘‘(B) Sponsor, organize, control, manage,

6 and act as investment adviser to an investment

7 company.

8 ‘‘(C) Engage in, or acquire the shares of a

9 company engaged in, any activity if—

10 ‘‘(i) a provision of section 4(c) permits

11 financial services holding companies gen12 erally to engage in that activity or acquire

13 those shares; and

14 ‘‘(ii) either—

15 ‘‘(I) the Board permits the finan16 cial services holding company to en17 gage in that activity or acquire those

18 shares through the securities affiliate;

19 or

20 ‘‘(II) a provision of section 4(c)

21 permits the financial services holding

22 company to engage in such activity or

23 acquire such shares without the

24 Board’s approval.
9

•HR 2520 IH

1 ‘‘(2) FACTOR TO BE CONSIDERED.—In making

2 determinations pursuant to this section, the Board

3 shall take into account the need for securities firms

4 affiliated with banks to be innovative and competi5 tive.

6 ‘‘(b) ACQUIRING INTEREST IN SECURITIES AFFILI7 ATE.—

8 ‘‘(1) NOTICE REQUIRED.—A financial services

9 holding company shall not, without complying with

10 and receiving approval pursuant to the notice proce11 dure in section 4(j)(1), directly or indirectly acquire

12 or retain more than 5 percent of the voting shares

13 of, or all or substantially all of the assets of, a secu14 rities affiliate (or a company that would be a securi15 ties affiliate if the Board permitted the financial

16 services holding company to acquire that company).

17 ‘‘(2) CRITERIA FOR APPROVAL.—The Board

18 shall disapprove a notice required under paragraph

19 (1) unless the Board determines that the require20 ments of the following subparagraphs have been

21 met:

22 ‘‘(A) CAPITAL.—

23 ‘‘(i) DEPOSITORY INSTITUTIONS.—
10

•HR 2520 IH

1 ‘‘(I) The lead depository institu2 tion of the financial services holding

3 company is well capitalized.

4 ‘‘(II) Well capitalized depository

5 institutions control at least 80 percent

6 of the aggregate total risk-weighted

7 assets of depository institutions con8 trolled by the financial services hold9 ing company.

10 ‘‘(III) All depository institutions

11 controlled by the financial services

12 holding company are well capitalized

13 or adequately capitalized.

14 ‘‘(ii) RECENTLY ACQUIRED DEPOSI15 TORY INSTITUTIONS.—Depository institu16 tions acquired by a financial services hold17 ing company during the 12-month period

18 preceding the submission of a notice under

19 paragraph (1) may be excluded for pur20 poses of clause (i)(II) if—

21 ‘‘(I) the financial services holding

22 company has submitted a plan to the

23 appropriate Federal banking agency

24 to restore the capital of the institution
11

•HR 2520 IH

1 and the plan has been accepted by

2 such agency; and

3 ‘‘(II) all such institutions that

4 are excluded for the purposes of

5 clause (i)(II) represent, in the aggre6 gate, less than 25 percent of the ag7 gregate total risk-weighted assets of

8 all depository institutions controlled

9 by the financial services holding com10 pany.

11 ‘‘(iii) FINANCIAL SERVICES HOLDING

12 COMPANY.—The financial services holding

13 company is (and immediately after the ac14 quisition of a securities affiliate would con15 tinue to be) adequately capitalized under

16 the capital standards applicable, if any, to

17 such financial services holding company.

18 ‘‘(iv) FOREIGN BANKS AND COMPA19 NIES.—For purposes of applying this sub20 section and other provisions of this section,

21 the Board shall establish and apply com22 parable capital standards for the acquisi23 tion, retention, and operation of a securi24 ties affiliate in the United States by a for25 eign bank that operates a branch or agen-
12

•HR 2520 IH

1 cy or owns or controls a bank or commer2 cial lending company in the United States,

3 and any company that owns or controls

4 such a foreign bank, giving due regard to

5 the principle of national treatment and

6 equality of competitive opportunity.

7 ‘‘(B) ALTERNATIVE CAPITAL TREATMENT

8 FOR WELL CAPITALIZED FINANCIAL SERVICES

9 HOLDING COMPANIES.—

10 ‘‘(i) IN GENERAL.—A financial serv11 ices holding company and the depository

12 institution subsidiaries of such company

13 shall be deemed to have met the capital re14 quirements set forth in subparagraph (A)

15 if—

16 ‘‘(I) the holding company files a

17 written notice with the Board of such

18 company’s election to meet such cap19 ital requirements in the manner pro20 vided in this subparagraph;

21 ‘‘(II) all depository institutions

22 controlled by the financial services

23 holding company are at least ade24 quately capitalized; and
13

•HR 2520 IH

1 ‘‘(III) the financial services hold2 ing company is (and immediately after

3 the acquisition of a securities affiliate

4 would continue to be) well capitalized.

5 ‘‘(ii) LOSSES INCURRED BY FDIC.—A

6 financial services holding company which

7 makes an election under clause (i) in con8 nection with the acquisition of control of

9 any securities affiliate shall be liable for

10 any loss incurred by the Federal Deposit

11 Insurance Corporation, or any loss which

12 the Federal Deposit Insurance Corporation

13 reasonably anticipates incurring in connec14 tion with—

15 ‘‘(I) the default of any insured

16 depository institution controlled by

17 the financial services holding com18 pany; or

19 ‘‘(II) any assistance provided by

20 the Corporation to any insured deposi21 tory institution in danger of default

22 that is controlled by the financial

23 services holding company.

24 ‘‘(C) MANAGERIAL RESOURCES.—
14

•HR 2520 IH

1 ‘‘(i) IN GENERAL.—The financial

2 services holding company and each deposi3 tory institution subsidiary of such com4 pany—

5 ‘‘(I) are well managed; and

6 ‘‘(II) were well managed during

7 the 12-month period preceding the ac8 quisition of a securities affiliate (but

9 for purposes of this subparagraph the

10 Board may disregard any depository

11 institution acquired by the financial

12 services holding company during that

13 period).

14 ‘‘(ii) SECURITIES ACTIVITIES.—The

15 financial services holding company has the

16 managerial resources to conduct the pro17 posed securities activities safely and sound18 ly.

19 ‘‘(D) INTERNAL CONTROLS.—The financial

20 services holding company has established ade21 quate policies and procedures to manage finan22 cial and operational risks, to provide reasonable

23 assurance of compliance with this section and

24 other applicable laws, and to provide reasonable

25 assurance of maintenance of corporate sepa-
15

•HR 2520 IH

1 rateness within the financial services holding

2 company.

3 ‘‘(E) NO DETRIMENTAL EFFECT ON FI4 NANCIAL SERVICES HOLDING COMPANY OR ITS

5 SUBSIDIARY DEPOSITORY INSTITUTIONS.—The

6 acquisition of a securities affiliate would not ad7 versely affect the safety and soundness of—

8 ‘‘(i) the financial services holding

9 company; or

10 ‘‘(ii) any depository institution sub11 sidiary of the financial services holding

12 company.

13 ‘‘(F) CONCENTRATION OF RESOURCES.—

14 The acquisition of a securities affiliate would

15 not result in an undue concentration of re16 sources in the financial services business.

17 ‘‘(G) RESPONSIVENESS TO COMMUNITY

18 NEEDS.—The lead insured depository institu19 tion subsidiary of the financial services holding

20 company and insured depository institutions

21 controlling at least 80 percent of the aggregate

22 total risk-weighted assets of insured depository

23 institutions controlled by the financial services

24 holding company have achieved a ‘satisfactory

25 record of meeting community credit needs’, or
16

•HR 2520 IH

1 better, during the most recent examination of

2 such insured depository institutions.

3 ‘‘(3) LIMITED NOTICE PROCEDURES FOR PRO4 POSALS BY WELL CAPITALIZED AND WELL MANAGED

5 COMPANIES TO ACQUIRE ADDITIONAL SECURITIES

6 AFFILIATES.—A financial services holding company

7 may, without providing the notice required under

8 paragraph (1), directly or indirectly acquire the

9 shares or substantially all of the assets of any com10 pany that is engaged in activities described in sub11 paragraph (A) or (B) of subsection (a)(1), if—

12 ‘‘(A) the financial services holding com13 pany previously received the Board’s approval

14 under paragraph (1) to control a securities af15 filiate and continues to control the securities af16 filiate pursuant to that approval;

17 ‘‘(B) the acquisition proposal qualifies

18 under section 4(j)(4);

19 ‘‘(C) the financial services holding com20 pany provides the written notification required

21 in section 4(j)(5); and

22 ‘‘(D) the acquisition would not result in an

23 undue concentration of resources in the finan24 cial services business.
17

•HR 2520 IH

1 ‘‘(4) APPLICATION FEE.—Notwithstanding any

2 other provision of this Act, no financial services

3 holding company may acquire any securities affiliate

4 or make any additional investment in a securities af5 filiate in accordance with subsection (c) unless the

6 Board has received, from the company, full payment

7 of a fee which the Board shall impose in accordance

8 with section 5(h).

9 ‘‘(c) ADDITIONAL INVESTMENT IN SECURITIES AF10 FILIATE.—

11 ‘‘(1) PRIOR NOTICE REQUIRED.—A financial

12 services holding company that has acquired control

13 of a securities affiliate under this section shall not,

14 directly or indirectly, make any additional invest15 ment in the securities affiliate that is considered

16 capital for purposes of any capital requirement im17 posed on the securities affiliate under the Securities

18 Exchange Act of 1934 (other than an extension of

19 credit under a revolving credit agreement approved

20 by the Board), unless the financial services holding

21 company gives the Board prior written notice of the

22 proposed investment and the Board—

23 ‘‘(A) issues a written statement of the

24 Board’s intent not to disapprove the notice; or
18

•HR 2520 IH

1 ‘‘(B) does not disapprove the notice within

2 30 days after the notice is filed.

3 ‘‘(2) NO PRIOR NOTICE REQUIRED FOR CER4 TAIN FINANCIAL SERVICES HOLDING COMPANIES.—

5 ‘‘(A) IN GENERAL.—A financial services

6 holding company shall not be required to pro7 vide prior notice under paragraph (1) if after

8 making any investment described in paragraph

9 (1)—

10 ‘‘(i) the financial services holding

11 company would be adequately capitalized

12 under the capital standards applicable, if

13 any, to such financial services holding com14 pany and each of the financial services

15 holding company’s subsidiary depository

16 institutions would be well capitalized; and

17 ‘‘(ii) the financial services holding

18 company and each of its subsidiary deposi19 tory institutions are well managed (but for

20 purposes of this clause the Board may dis21 regard any depository institution acquired

22 by the financial services holding company

23 during the previous 12-month period).

24 ‘‘(B) SUBSEQUENT NOTICE.—A financial

25 services holding company that makes an invest-
19

•HR 2520 IH

1 ment pursuant to subparagraph (A) shall pro2 vide written notice to the Board of the addi3 tional investment within 10 days after making

4 the investment.

5 ‘‘(3) CRITERIA FOR DISAPPROVING NOTICE.—

6 The Board may disapprove a notice filed under

7 paragraph (1) if—

8 ‘‘(A) any depository institution affiliate of

9 the securities affiliate is undercapitalized; or

10 ‘‘(B) the Board determines that the finan11 cial services holding company would be

12 undercapitalized under the capital standards

13 applicable, if any, to such financial services

14 holding company after making the investment

15 or that the investment would otherwise be un16 safe or unsound.

17 ‘‘(4) EMERGENCY APPROVAL.—Notwithstanding

18 any provision of this subsection, in the event of ad19 verse market conditions, or concerns regarding the

20 financial or operational condition of the securities

21 affiliate, the Board may approve any additional in22 vestment in the securities affiliate on an emergency

23 basis if such additional investment does not ad24 versely affect the safety and soundness of all insured

25 depository institution affiliates of such securities af-
20

•HR 2520 IH

1 filiate and does not diminish the ability of the finan2 cial services holding company to maintain an appro3 priate amount of capital in all such insured deposi4 tory institutions.

5 ‘‘(d) PROVISIONS APPLICABLE IF AFFILIATED DE6 POSITORY INSTITUTION CEASES TO BE WELL CAPITAL7 IZED.—

8 ‘‘(1) HOLDING COMPANY ACTION REQUIRED IF

9 AFFILIATED INSTITUTIONS ARE NOT WELL CAPITAL10 IZED.—

11 ‘‘(A) APPLICABILITY.—This paragraph

12 shall apply if—

13 ‘‘(i) the lead depository institution of

14 the financial services holding company is

15 not well capitalized, or

16 ‘‘(ii) well capitalized depository insti17 tutions do not control at least 80 percent

18 of the aggregate total risk-weighted assets

19 of depository institutions affiliated with the

20 securities affiliate.

21 ‘‘(B) CAPITAL MAINTENANCE AGREE22 MENT.—Within 30 days after subparagraph (A)

23 becomes applicable with respect to any financial

24 services holding company, such company shall

25 execute an agreement with the Board—
21

•HR 2520 IH

1 ‘‘(i) to meet the capital requirements

2 of subparagraph (A) within a reasonable

3 period of time; or

4 ‘‘(ii) to divest control of the depository

5 institution in an orderly manner within

6 180 days, or within such additional period

7 of time as the Board may determine is rea8 sonably required in order to effect such di9 vestiture.

10 ‘‘(C) RESTRICTIONS ON CERTAIN SECURI11 TIES ACTIVITIES.—If a financial services hold12 ing company fails to meet the requirements of,

13 or comply with the agreement executed pursu14 ant to, subparagraph (B), a securities affiliate

15 of such financial services holding company shall

16 not, beginning 180 days after subparagraph (A)

17 becomes applicable with respect to such com18 pany, agree to underwrite or deal in, any secu19 rities other than—

20 ‘‘(i) securities expressly authorized by

21 section 5136 of the Revised Statutes of the

22 United States as permissible for a national

23 bank to underwrite or deal in;

24 ‘‘(ii) securities backed by or represent25 ing interests in notes, drafts, acceptances,
22

•HR 2520 IH

1 loans, leases, receivables, other obligations,

2 or pools of any such obligations; or

3 ‘‘(iii) securities issued by an open-end

4 investment company registered under the

5 Investment Company Act of 1940.

6 ‘‘(D) EXCEPTION.—The Board may permit

7 the securities affiliate of a financial services

8 holding company described in subparagraph (C)

9 to underwrite or deal in securities not described

10 in clauses (i) through (iii) of such subparagraph

11 for a period of 1 year from the date on which

12 subparagraph (A) first becomes applicable with

13 respect to such company, if—

14 ‘‘(i) the financial services holding

15 company submits a capital restoration plan

16 to the Board specifying the steps the fi17 nancial services holding company will take

18 to meet the requirements of subsection

19 (b)(2)(A), and containing such other infor20 mation as the Board may require; and

21 ‘‘(ii) the Board approves the plan.

22 ‘‘(E) EXTENSION OF PERIOD.—

23 ‘‘(i) IN GENERAL.—Upon application

24 by a financial services holding company,

25 the Board may extend, for not more than
23

•HR 2520 IH

1 1 year at a time, the period provided in

2 subparagraph (C).

3 ‘‘(ii) MAXIMUM EXTENSION.—No ex4 tension under clause (i) of the period pro5 vided in subparagraph (C) shall, in the ag6 gregate, exceed 2 years.

7 ‘‘(2) DIVESTITURE OF SECURITIES AFFILI8 ATE.—

9 ‘‘(A) IN GENERAL.—A financial services

10 holding company shall divest itself of the securi11 ties affiliate if any of the financial services

12 holding company’s subsidiary depository institu13 tions has been undercapitalized for more than 6

14 months.

15 ‘‘(B) EXTENDING TIME.—The Board may

16 provide additional time, not exceeding 18

17 months, for a divestiture under subparagraph

18 (A) if—

19 ‘‘(i) the appropriate Federal banking

20 agency or, in the case of a foreign bank or

21 company that owns or controls a foreign

22 bank, the Board, has approved the

23 undercapitalized institution’s capital res24 toration plan; and
24

•HR 2520 IH

1 ‘‘(ii) the Board determines that the

2 securities affiliate poses no significant risk

3 to any affiliated depository institution.

4 ‘‘(e) SECURITIES AFFILIATE EXCLUDED IN DETER5 MINING WHETHER FINANCIAL SERVICES HOLDING COM6 PANY IS ADEQUATELY CAPITALIZED.—

7 ‘‘(1) IN GENERAL.—In determining whether a

8 financial services holding company is adequately cap9 italized—

10 ‘‘(A) the financial services holding compa11 ny’s capital and total assets shall each be re12 duced by—

13 ‘‘(i) an amount equal to the amount

14 of the financial services holding company’s

15 equity investment in any securities affili16 ate; and

17 ‘‘(ii) an amount equal to the amount

18 of any extensions of credit by the financial

19 services holding company to any securities

20 affiliate that are considered capital for

21 purposes of any capital requirement im22 posed on the securities affiliate under sec23 tion 15(c)(3) of the Securities Exchange

24 Act of 1934; and
25

•HR 2520 IH

1 ‘‘(B) the securities affiliate’s assets and li2 abilities shall not be consolidated with those of

3 the financial services holding company.

4 ‘‘(2) EXCEPTION FOR NONSECURITIES ACTIVI5 TIES.—Paragraph (1) shall not apply to the extent

6 that the Board determines by regulation or order

7 that—

8 ‘‘(A) an item described in such paragraph

9 relates to activities which are not described in

10 subparagraph (A) or (B) of subsection (a)(1);

11 or

12 ‘‘(B) another method of adjusting capital

13 is more appropriate to ensure the safety and

14 soundness of depository institutions.

15 ‘‘(3) EXCEPTION FOR COMPANIES ENGAGED

16 PREDOMINANTLY IN SECURITIES ACTIVITIES.—Para17 graph (1) shall not apply to an investment bank

18 holding company which is predominantly engaged in

19 securities activities on a consolidated basis.

20 ‘‘(f) SAFEGUARDS.—Each financial services holding

21 company and each subsidiary of any such company shall

22 comply with all applicable safeguard requirements of sec23 tion 11.

24 ‘‘(g) ACTIVITIES NOT PERMISSIBLE FOR DEPOSI25 TORY INSTITUTIONS.—
26

•HR 2520 IH

1 ‘‘(1) IN GENERAL.—A financial services holding

2 company that acquires control of a securities affili3 ate shall not, after the end of the 1-year period be4 ginning on the date of such acquisition, permit any

5 depository institution, or any subsidiary of any de6 pository institution, which is controlled by such hold7 ing company—

8 ‘‘(A) to engage, directly or indirectly, in

9 the United States—

10 ‘‘(i) in underwriting securities backed

11 by or representing interests in notes,

12 drafts, acceptances, loans, leases, receiv13 ables, other obligations, or pools of any

14 such obligations originated or purchased by

15 the institution or its affiliates; or

16 ‘‘(ii) in underwriting or dealing in any

17 other securities,

18 except securities expressly authorized by section

19 5136 of the Revised Statutes of the United

20 States as permissible for a national bank to un21 derwrite or deal in; or

22 ‘‘(B) to make an equity investment in any

23 securities affiliate.

24 ‘‘(2) EXCEPTION FOR CERTAIN EDGE ACT AND

25 AGREEMENT CORPORATIONS.—The limitations in
27

•HR 2520 IH

1 paragraph (1)(A) shall not apply with respect to ac2 tivities conducted by a subsidiary of a financial serv3 ices holding company which is held pursuant to sec4 tion 25 or 25A of the Federal Reserve Act or section

5 4(c)(13) of this Act.

6 ‘‘(3) RULE OF CONSTRUCTION.—No provision

7 of this subsection shall be construed as permitting a

8 securities affiliate to accept deposits in contravention

9 of section 21 of the Banking Act of 1933.

10 ‘‘(h) APPROVAL OF SECURITIES ACTIVITIES UNDER

11 SECTION 4(c)(8) RESTRICTED.—The Board shall deny

12 any notice or application by a financial services holding

13 company under authority of section 4(c)(8) to engage in,

14 or acquire the shares of a company engaged in, underwrit15 ing or dealing in securities in the United States, other

16 than securities expressly authorized by section 5136 of the

17 Revised Statutes of the United States as permissible for

18 a national bank to underwrite or deal in.

19 ‘‘(i) BANKERS’ BANKS.—

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, each shareholder of or participant in a com22 pany that controls a depository institution described

23 in section 5169(b)(1) of the Revised Statutes of the

24 United States or in a similar statute of any State,

25 and each subsidiary of such a shareholder or partici-
28

•HR 2520 IH

1 pant, shall be treated as if such shareholder, partici2 pant, or subsidiary were a subsidiary of that com3 pany.

4 ‘‘(2) EXCEPTION.—This subsection shall not

5 apply with respect to a shareholder or participant in

6 a company described in subparagraph (A) (or any

7 subsidiary of such shareholder or participant) if the

8 shareholder or participant, and the affiliates of any

9 such shareholder or participant, do not, in the ag10 gregate, control more than 5 percent of any class of

11 voting shares of such company.

12 ‘‘(j) SHARES ACQUIRED IN CONNECTION WITH UN13 DERWRITING AND INVESTMENT BANKING ACTIVITIES.—

14 ‘‘(1) IN GENERAL.—Notwithstanding section

15 4(a), a financial services holding company may di16 rectly or indirectly acquire or control, whether as

17 principal, on behalf of 1 or more entities (including

18 entities, other than a depository institution or sub19 sidiary of a depository institution, that the financial

20 services holding company controls), or otherwise,

21 shares, assets, or ownership interests (including

22 without limitation debt or equity securities, partner23 ship interests, trust certificates, or other instru24 ments representing ownership) of a company or

25 other entity, whether or not constituting control of
29

•HR 2520 IH

1 such company or entity, engaged in activities not au2 thorized pursuant to section 4 if—

3 ‘‘(A) the shares, assets, or ownership inter4 ests are not acquired or held by a depository in5 stitution or a subsidiary of a depository institu6 tion;

7 ‘‘(B) such shares, assets, or ownership in8 terests are acquired and held by a securities af9 filiate or an affiliate of a securities affiliate as

10 part of a bona fide underwriting or investment

11 banking activity, which includes investment ac12 tivities engaged in for the purpose of apprecia13 tion and ultimate resale or other disposition of

14 the investment, and such shares, assets, or own15 ership interests are held for such a period of

16 time as will permit the sale or disposition there17 of on a reasonable basis consistent with the na18 ture of such activities; and

19 ‘‘(C) during the period such shares, assets,

20 or ownership interests are held, the financial

21 services holding company does not actively man22 age or operate the company or entity except in23 sofar as necessary to achieve the objectives of

24 subparagraph (B).
30

•HR 2520 IH

1 ‘‘(2) NO EXPANSION OF UNDERWRITING ACTIVI2 TIES.—No provision of this subsection shall be con3 strued as authorizing any financial services holding

4 company, or any subsidiary of any such company, to

5 underwrite or deal in any security.

6 ‘‘(3) ACQUISITION FEE.—No financial services

7 holding company may acquire any company or other

8 entity under paragraph (1) unless the Board has re9 ceived, from the holding company, full payment of a

10 fee which the Board shall impose in accordance with

11 section 5(h).

12 ‘‘(k) REGISTRATION FEES.—In the case of any finan13 cial services holding company which controls—

14 ‘‘(1) a securities affiliate; or

15 ‘‘(2) any company or entity pursuant to sub16 section (j),

17 the Board shall assess an annual registration fee in ac18 cordance with section 5(h) on such holding company with

19 respect to each affiliate, company, or other entity referred

20 to in paragraph (1) or (2) which is controlled by such

21 holding company.

22 ‘‘(l) DEFINITIONS.—For purposes of this section and

23 sections 11 and 12, the following definitions shall apply:
31

•HR 2520 IH

1 ‘‘(1) CAPITAL STOCK AND SURPLUS.—The term

2 ‘capital stock and surplus’ has the same meaning as

3 in section 23A of the Federal Reserve Act.

4 ‘‘(2) COVERED TRANSACTION.—The term ‘cov5 ered transaction’ has the same meaning as in section

6 23A of the Federal Reserve Act.

7 ‘‘(3) SECURITY.—

8 ‘‘(A) IN GENERAL.—The term ‘security’

9 has the meaning given to such term in section

10 3(a)(10) of the Securities Exchange Act of

11 1934.

12 ‘‘(B) EXCEPTIONS.—Notwithstanding any

13 other provision of law, the term ‘security’ does

14 not include any of the following for purposes of

15 this section other than subsection (a):

16 ‘‘(i) A contract of insurance.

17 ‘‘(ii) A deposit account, savings ac18 count, certificate of deposit, or other de19 posit instrument issued by a depository in20 stitution.

21 ‘‘(iii) A share account issued by a sav22 ings association if the account is insured

23 by the Federal Deposit Insurance Corpora24 tion.

25 ‘‘(iv) A banker’s acceptance.
32

•HR 2520 IH

1 ‘‘(v) A letter of credit issued by a de2 pository institution.

3 ‘‘(vi) A debit account at a depository

4 institution arising from a credit card or

5 similar arrangement.

6 ‘‘(vii) A loan or loan participation (as

7 determined by the Board), including any

8 debt security issued in connection with sov9 ereign debt restructuring which a bank

10 purchases and sells pursuant to such

11 bank’s lending authority.

12 ‘‘(viii) A qualified financial contract

13 (as defined in section 11(e)(8)(D)(i) of the

14 Federal Deposit Insurance Act), as deter15 mined by the Board, after consultation

16 with and consideration of the views of the

17 Securities and Exchange Commission, ex18 cept that, for purposes of this section other

19 than subsection (a), such term does not in20 clude—

21 ‘‘(I) any securities contract (as

22 defined in section 11(e)(8)(D)(ii) of

23 such Act) that is based on or directly

24 relates to a security that is not ex25 pressly authorized by section 5136 of
33

•HR 2520 IH

1 the Revised Statutes of the United

2 States as permissible for a national

3 bank to underwrite or deal in unless

4 the Board determines, after consulta5 tion with and consideration of the

6 views of the Securities and Exchange

7 Commission, that such securities con8 tract is appropriate for a bank to un9 derwrite or deal in, taking into ac10 count other qualified financial con11 tracts which a bank is permitted to

12 underwrite or deal in; and

13 ‘‘(II) any agreement, contract, or

14 transaction which is determined by

15 the Federal Deposit Insurance Cor16 poration in a regulation prescribed

17 after the date of the enactment of the

18 Financial Services Competitiveness

19 and Regulatory Relief Act of 1995 to

20 be a qualified financial contract unless

21 the Board determines, after consulta22 tion with and consideration of the

23 views of the Securities and Exchange

24 Commission, that such agreement,

25 contract, or transaction shall be treat-
34

•HR 2520 IH

1 ed as a qualified financial contract for

2 purposes of this section.

3 ‘‘(C) BOARD’S AUTHORITY TO EXEMPT

4 TRADITIONAL BANKING PRODUCTS.—Notwith5 standing any other provision of law, the Board

6 may, by regulation or order, exempt a banking

7 product from the definition of security if the

8 Board finds that—

9 ‘‘(i) the product is available in the

10 course of a banking business and is more

11 appropriately regulated as a banking prod12 uct; and

13 ‘‘(ii) the exemption is otherwise con14 sistent with the purposes of this section,

15 the maintenance of fair and orderly mar16 kets, and the protection of investors.

17 ‘‘(D) DEFINITION FOR LIMITED PUR18 POSE.—The fact that a particular instrument is

19 excluded pursuant to subparagraph (B) or (C)

20 from the definition of security for purposes of

21 this section shall not be construed as finding or

22 implying that such instrument is or is not a se23 curity for purposes of Federal securities laws.

24 ‘‘(E) RESERVATION OF AUTHORITY TO

25 CHARTERING AUTHORITY.—A determination by
35

•HR 2520 IH

1 the Board under this paragraph shall not be

2 construed in any way as authorizing a bank to

3 provide any product or service that the bank is

4 not otherwise authorized to provide under rel5 evant law governing the activities and powers

6 of the bank.

7 ‘‘(F) CONSULTATION WITH COMMISSION.—

8 ‘‘(i) NOTICE AND CONSULTATION RE9 QUIRED.—In determining whether to ex10 empt a banking product pursuant to sub11 paragraph (C), the Board shall provide

12 written notice to, consult with, and con13 sider the views of the Securities and Ex14 change Commission.

15 ‘‘(ii) RESPONSE AND PUBLICATION.—

16 If the Securities and Exchange Commis17 sion comments in writing on a proposed

18 determination of the Board, the Board

19 shall—

20 ‘‘(I) respond in writing to such

21 written comment; and

22 ‘‘(II) at the request of such com23 mission, publish such comment and

24 response in the Federal Register at
36

•HR 2520 IH

1 the time the determination becomes

2 effective.’’.

3 (b) TRANSITION RULE FOR SECURITIES AFFILIATES

4 APPROVED UNDER SECTION 4(c)(8).—

5 (1) CONVERSION TO (4)(c)(15) SUBSIDIARY.—

6 (A) IN GENERAL.—Except as provided in

7 subparagraph (B) and paragraphs (3) and (4),

8 effective 18 months after the date of enactment

9 of this Act, no financial services holding com10 pany may engage in, or retain the shares of any

11 company engaged in, underwriting or dealing in

12 securities based on the approval of an applica13 tion under section 4(c)(8) of the Bank Holding

14 Company Act of 1956 (as in effect before the

15 date of the enactment of the Financial Services

16 Competitiveness and Regulatory Relief Act of

17 1995) unless the financial services holding com18 pany has obtained the Board’s approval to re19 tain the shares of that company under section

20 10.

21 (B) EXCEPTION FOR BANK ELIGIBLE SE22 CURITIES.—Subparagraph (A) shall not apply

23 with respect to underwriting or dealing in—

24 (i) securities expressly authorized by

25 section 5136 of the Revised Statutes of the
37

•HR 2520 IH

1 United States as permissible for a national

2 bank to underwrite or deal in; and

3 (ii) municipal securities.

4 (2) EXTENDING TIME.—

5 (A) IN GENERAL.—The Board may, for

6 good cause shown, extend the time provided

7 under paragraph (1) for not more than 18

8 months.

9 (B) PENDING NOTICES.—If a financial

10 services holding company has filed a notice

11 under section 10(b) of the Bank Holding Com12 pany Act of 1956 not later than 180 days after

13 the date of enactment of this Act, paragraph

14 (1) shall not apply with respect to the company

15 engaged in such underwriting or dealing until

16 180 days after the Board has acted on the no17 tice.

18 (3) CONVERSION PROCEDURES FOR COMPANIES

19 PREVIOUSLY AUTHORIZED TO CONDUCT SECURITIES

20 ACTIVITIES.—Any financial services holding com21 pany that controls a company engaged in underwrit22 ing and dealing in corporate debt and equity securi23 ties pursuant to an order issued by the Board under

24 section 4(c)(8) of the Bank Holding Company Act of

25 1956 before the date of enactment of the Financial
38

•HR 2520 IH

1 Services Competitiveness and Regulatory Relief Act

2 of 1995 shall be treated as follows:

3 (A) REVENUE TEST AND CERTAIN OTHER

4 RESTRICTIONS.—Upon filing the notice required

5 under section 10(b) of the Financial Services

6 Holding Company Act of 1995, the financial

7 services holding company shall be relieved

8 from—

9 (i) the limitation contained in such

10 order on the amount of revenue that may

11 be derived from securities underwriting

12 and dealing activities; and

13 (ii) any other restriction contained in

14 such order that would not be required

15 under section 11 of such Act, as permitted

16 by the Board.

17 (B) EXAMINATION OF INTERNAL CON18 TROLS.—The financial services holding com19 pany shall not, in connection with action on the

20 notice submitted under section 10(b)(1) of the

21 Financial Services Holding Company Act of

22 1995, be subject to an examination of internal

23 controls under section 10(b)(2)(D) of such Act.

24 (4) RETENTION OF COMPANIES CONDUCTING

25 LIMITED SECURITIES ACTIVITIES.—Notwithstanding
39

•HR 2520 IH

1 paragraph (1), any financial services holding com2 pany that controls a company engaged in underwrit3 ing and dealing in securities (other than corporate

4 debt or equity securities) pursuant to an order is5 sued by the Board under section 4(c)(8) of the Bank

6 Holding Company Act of 1956 before the date of en7 actment of the Financial Services Competitiveness

8 Act and Financial Institutions Regulatory Relief of

9 1995 may retain control of such company, so long

10 as such company complies with all of the limitations,

11 restrictions and conditions, including the limitation

12 on the revenue that may be derived from such un13 derwriting or dealing activities, contained in such

14 order.

15 SEC. 104. SAFEGUARDS RELATING TO SECURITIES AFFILI16 ATES.

17 (a) IN GENERAL.—The Bank Holding Company Act

18 of 1956 (12 U.S.C. 1841 et seq.) is amended—

19 (1) by redesignating sections 11 and 12 as sec20 tions 13 and 14, respectively; and

21 (2) by inserting after section 10 (as added by

22 section 103 of this Act) the following new section:
40

•HR 2520 IH

1 ‘‘SEC. 11. SAFEGUARDS RELATING TO SECURITIES AFFILI2 ATES.

3 ‘‘(a) EXTENSIONS OF CREDIT AND ASSET PUR4 CHASES RESTRICTED.—

5 ‘‘(1) IN GENERAL.—No depository institution

6 affiliated with a securities affiliate shall, directly or

7 indirectly, do any of the following:

8 ‘‘(A) Extend credit in any manner to the

9 securities affiliate.

10 ‘‘(B) Issue a guarantee, acceptance, or let11 ter of credit, including an endorsement or a

12 standby letter of credit, for the benefit of the

13 securities affiliate.

14 ‘‘(C) Except as provided in paragraph (3),

15 purchase for its own account, or for the account

16 of any subsidiary of such institution, financial

17 assets of the securities affiliate.

18 ‘‘(2) EXCEPTION FOR CLEARING SECURITIES.—

19 Paragraph (1)(A) shall not apply with respect to an

20 extension of credit by a well capitalized depository

21 institution to acquire or sell securities if the follow22 ing conditions are met:

23 ‘‘(A) The extension of credit is incidental

24 to clearing transactions in those securities

25 through that depository institution.
41

•HR 2520 IH

1 ‘‘(B) Both the principal of and the interest

2 on the extension of credit are fully secured by

3 those securities.

4 ‘‘(C) Either—

5 ‘‘(i) the extension of credit is to be re6 paid before the close of business on the

7 same business day; or

8 ‘‘(ii) all of the following conditions are

9 satisfied:

10 ‘‘(I) The securities cannot, in the

11 ordinary course of business, be cleared

12 on that business day.

13 ‘‘(II) The extension of credit is to

14 be repaid before the close of business

15 on the next business day.

16 ‘‘(III) Extensions of credit sub17 ject to this clause, when aggregated

18 with all other covered transactions be19 tween the institution and all affiliated

20 securities affiliates do not exceed 10

21 percent of the institution’s capital

22 stock and surplus.

23 ‘‘(D) Either—

24 ‘‘(i) the securities are securities ex25 pressly authorized by section 5136 of the
42

•HR 2520 IH

1 Revised Statutes of the United States as

2 permissible for a national bank to under3 write or deal in; or

4 ‘‘(ii) the Board permits transactions

5 under this paragraph in securities not de6 scribed in clause (i) and the securities af7 filiate provides the depository institution

8 with such additional security or other as9 surance of performance, if any, as the

10 Board shall require to prevent such trans11 actions from posing any appreciable risk to

12 the institution.

13 ‘‘(3) EXCEPTIONS FOR CERTAIN SECURITIES

14 PURCHASED FOR A DEPOSITORY INSTITUTION’S OWN

15 ACCOUNT.—Paragraph (1)(C) shall not apply with

16 respect to purchases at the current market value

17 (based on reliable and regularly available price

18 quotations) of—

19 ‘‘(A) securities expressly authorized by sec20 tion 5136 of the Revised Statutes of the United

21 States as permissible for a national bank to un22 derwrite or deal in; or

23 ‘‘(B) securities that—

24 ‘‘(i) the securities affiliate has been

25 marking to market daily; and
43

•HR 2520 IH

1 ‘‘(ii) are rated investment grade by at

2 least 1 nationally recognized statistical rat3 ing organization.

4 ‘‘(4) OTHER EXCEPTIONS.—The Board may

5 make exceptions to paragraph (1) for well capital6 ized depository institutions if—

7 ‘‘(A) the transaction is fully secured in ac8 cordance with section 23A(c) of the Federal Re9 serve Act; and

10 ‘‘(B) the aggregate amount of covered

11 transactions between the institution and all se12 curities affiliates of the financial services hold13 ing company, excluding transactions permitted

14 under paragraph (2)(C)(i) or (3)(A), does not

15 exceed 10 percent of the institution’s capital

16 stock and surplus.

17 ‘‘(b) CREDIT ENHANCEMENT RESTRICTED.—

18 ‘‘(1) IN GENERAL.—No depository institution

19 affiliated with a securities affiliate shall, directly or

20 indirectly, extend credit, or issue or enter into a

21 standby letter of credit, asset purchase agreement,

22 indemnity, guarantee, insurance, or other facility,

23 for the purpose of enhancing the marketability of a

24 securities issue underwritten by the securities affili25 ate.
44

•HR 2520 IH

1 ‘‘(2) DEFINITION OF TERM BY BOARD.—The

2 Board shall prescribe a definition for the term ‘for

3 the purpose of enhancing the marketability of a se4 curities issue’ for purposes of paragraph (1).

5 ‘‘(3) EXCEPTION FOR BANK ELIGIBLE SECURI6 TIES.—Paragraph (1) shall not apply with regard to

7 securities expressly authorized by section 5136 of

8 the Revised Statutes of the United States as permis9 sible for a national bank to underwrite or deal in.

10 ‘‘(4) APPLICATION TO WELL CAPITALIZED DE11 POSITORY INSTITUTIONS.—

12 ‘‘(A) IN GENERAL.—A well capitalized de13 pository institution may engage in a transaction

14 described in paragraph (1) if—

15 ‘‘(i) the depository institution has

16 adopted appropriate limits on exposure on

17 a consolidated basis to any single customer

18 whose securities are underwritten by the

19 securities affiliate; and

20 ‘‘(ii) the institution and its securities

21 affiliate have adopted appropriate proce22 dures, including maintenance of necessary

23 documentary records, to assure that any

24 such extension of credit, standby letter of

25 credit, asset purchase agreement, indem-
45

•HR 2520 IH

1 nity, guarantee, insurance or other facility,

2 is on an arm’s length basis.

3 ‘‘(B) ARM’S LENGTH TRANSACTION DE4 SCRIBED.—An extension of credit may be con5 sidered to be on an arm’s length basis if the

6 terms and conditions are substantially the same

7 as those prevailing at the time for comparable

8 transactions involving securities that are not

9 underwritten by the securities affiliate.

10 ‘‘(C) COMPLIANCE WITH PARAGRAPH (1).—

11 The Board may require, by regulation or order,

12 compliance with paragraph (1) by well capital13 ized depository institutions exempt under this

14 paragraph in order to achieve any purpose spec15 ified in subsection (l).

16 ‘‘(c) PROHIBITION ON FINANCING PURCHASE OF SE17 CURITY BEING UNDERWRITTEN.—

18 ‘‘(1) IN GENERAL.—No financial services hold19 ing company or subsidiary of a financial services

20 holding company (other than a securities affiliate)

21 shall knowingly extend or arrange for the extension

22 of credit, directly or indirectly, secured by or for the

23 purpose of purchasing any security while, or for 30

24 days after, that security is the subject of a distribu25 tion in which a securities affiliate of that financial
46

•HR 2520 IH

1 services holding company participates as an under2 writer or a member of a selling group.

3 ‘‘(2) RELIANCE ON ACKNOWLEDGEMENT.—For

4 purposes of paragraph (1), a financial services hold5 ing company or subsidiary may rely on an express

6 written acknowledgement signed by the borrower

7 that the credit is not secured by or for the purpose

8 of purchasing a security described in this subpara9 graph.

10 ‘‘(3) APPLICATION TO BANK ELIGIBLE SECURI11 TIES.—Paragraph (1) shall not apply with regard to

12 extensions of credit if the securities are securities ex13 pressly authorized by section 5136 of the Revised

14 Statutes of the United States as permissible for a

15 national bank to underwrite or deal in.

16 ‘‘(4) APPLICATION TO WELL CAPITALIZED DE17 POSITORY INSTITUTIONS.—The Board may make ex18 ceptions, by regulation or order, to paragraph (1)

19 for an extension of credit, after consultation with

20 and considering the views of the Securities and Ex21 change Commission, if—

22 ‘‘(A) the financial services holding com23 pany is adequately capitalized;
47

•HR 2520 IH

1 ‘‘(B) the financial services holding compa2 ny’s lead depository institution is well capital3 ized;

4 ‘‘(C) well capitalized depository institutions

5 control at least 80 percent of the assets of de6 pository institutions controlled by the financial

7 services holding company; and

8 ‘‘(D) all depository institutions controlled

9 by the financial services holding company are

10 well capitalized or adequately capitalized.

11 ‘‘(5) CONSISTENCY WITH THE FEDERAL SECU12 RITIES LAWS.—No provision of this subsection shall

13 be construed as permitting a securities affiliate to

14 extend or maintain credit, or arrange for an exten15 sion of credit, except in compliance with applicable

16 provisions of the Securities Exchange Act of 1934

17 and the regulations prescribed and interpretations

18 issued under such Act.

19 ‘‘(d) RESTRICTION ON EXTENDING CREDIT TO

20 MAKE PAYMENTS ON SECURITIES.—

21 ‘‘(1) IN GENERAL.—No depository institution

22 affiliated with a securities affiliate shall, directly or

23 indirectly, extend credit to an issuer of securities un24 derwritten by the securities affiliate for the purpose
48

•HR 2520 IH

1 of paying the principal of those securities or interest

2 or dividends on those securities.

3 ‘‘(2) EXCEPTIONS FOR CERTAIN EXTENSIONS

4 OF CREDIT.—Paragraph (1) shall not apply to an

5 extension of credit for a documented purpose (other

6 than paying principal, interest, or dividends) if the

7 timing, maturity, and other terms of the credit,

8 taken as a whole, are substantially different from

9 those of the underwritten securities.

10 ‘‘(3) EXCEPTIONS FOR BANK ELIGIBLE SECURI11 TIES.—Paragraph (1) shall not apply with respect to

12 any security expressly authorized by section 5136 of

13 the Revised Statutes of the United States as permis14 sible for a national bank to underwrite or deal in.

15 ‘‘(4) APPLICATION TO WELL CAPITALIZED DE16 POSITORY INSTITUTIONS.—

17 ‘‘(A) IN GENERAL.—Paragraph (1) shall

18 not apply with respect to well capitalized depos19 itory institutions if—

20 ‘‘(i) the depository institution has

21 adopted appropriate limits on exposure on

22 a consolidated basis to any single customer

23 whose securities are underwritten by the

24 securities affiliate; and
49

•HR 2520 IH

1 ‘‘(ii) the depository institution has

2 adopted appropriate procedures, including

3 maintenance of necessary documentary

4 records, to assure that any extension of

5 credit by the depository institution to an

6 issuer for the purpose of paying the prin7 cipal, interest or dividends on securities

8 underwritten by the securities affiliate is

9 on an arm’s length basis.

10 ‘‘(B) ARM’S LENGTH TRANSACTION DE11 SCRIBED.—An extension of credit may be con12 sidered to have been made on an arm’s length

13 basis if the terms and conditions are substan14 tially the same as those prevailing at the time

15 for comparable transactions with issuers whose

16 securities are not underwritten by the securities

17 affiliate.

18 ‘‘(C) COMPLIANCE WITH SUBPARAGRAPH

19 (A).—The Board may require, by regulation or

20 order, compliance with paragraph (1) by well

21 capitalized depository institutions exempt under

22 this paragraph in order to achieve any purpose

23 specified in subsection (l).

24 ‘‘(e) COMMON DIRECTORS AND SENIOR EXECUTIVE

25 OFFICERS.—
50

•HR 2520 IH

1 ‘‘(1) IN GENERAL.—The Board shall, by regula2 tion or order, prescribe the circumstances under

3 which directors and senior executive officers of a se4 curities affiliate may serve at the same time as di5 rectors or senior executive officers of any affiliated

6 depository institutions.

7 ‘‘(2) STANDARDS.—The Board, in issuing any

8 regulation or order pursuant to paragraph (1), shall

9 consider appropriate factors including—

10 ‘‘(A) any burdens imposed by restrictions

11 on director and senior executive officer inter12 locks;

13 ‘‘(B) the safety and soundness of deposi14 tory institutions and securities affiliates;

15 ‘‘(C) unfair competition in securities activi16 ties;

17 ‘‘(D) improper exchange of customer infor18 mation; or

19 ‘‘(E) harm to customers of securities affili20 ates or depository institutions that could rea21 sonably result from director and senior officer

22 interlocks.

23 ‘‘(3) EXCEPTION FOR SMALL FINANCIAL SERV24 ICES HOLDING COMPANIES.—
51

•HR 2520 IH

1 ‘‘(A) IN GENERAL.—Notwithstanding para2 graph (1), a director or senior executive officer

3 of a securities affiliate may serve at the same

4 time as a director or senior executive officer of

5 an affiliated depository institution if that insti6 tution and all affiliated depository institutions

7 have, in the aggregate, total assets of not more

8 than $500,000,000.

9 ‘‘(B) INFLATION ADJUSTMENT.—The dol10 lar limitation contained in subparagraph (A)

11 shall be adjusted annually after December 31,

12 1995, by the annual percentage increase in the

13 Consumer Price Index for Urban Wage Earners

14 and Clerical Workers published by the Bureau

15 of Labor Statistics.

16 ‘‘(4) EXCEPTION FOR CERTAIN REGULATION K

17 AFFILIATES.—Paragraph (1) shall not prohibit a di18 rector or senior executive officer of a securities affili19 ate from serving at the same time as a director or

20 senior executive officer of a depository institution

21 which—

22 ‘‘(A) is organized under section 25 or 25A

23 of the Federal Reserve Act;

24 ‘‘(B) is an affiliate of such securities affili25 ate; and
52

•HR 2520 IH

1 ‘‘(C) principally engages in business out2 side the United States.

3 ‘‘(f) DISCLOSURE REQUIRED BY SECURITIES AFFILI4 ATE.—

5 ‘‘(1) IN GENERAL.—At the time a securities ac6 count is opened, a securities affiliate shall conspicu7 ously disclose in writing to each of its customers

8 that—

9 ‘‘(A) securities sold, offered, or rec10 ommended by the securities affiliate—

11 ‘‘(i) are not deposits;

12 ‘‘(ii) are not insured by the Federal

13 Deposit Insurance Corporation;

14 ‘‘(iii) are not guaranteed by an affili15 ated insured depository institution;

16 ‘‘(iv) are not otherwise an obligation

17 of an insured depository institution (unless

18 such is the case); and

19 ‘‘(v) with regard to any product that

20 includes any investment component, are

21 subject to investment risks including pos22 sible loss of principal invested;

23 ‘‘(B) the securities affiliate is not an in24 sured depository institution, and is a corpora-
53

•HR 2520 IH

1 tion separate from any insured depository insti2 tution; and

3 ‘‘(C) the securities affiliate may be under4 writing or dealing in the securities being sold,

5 offered or recommended, and if so, would have

6 a financial interest in the transaction.

7 ‘‘(2) FORM OF DISCLOSURE.—The disclosures

8 required by paragraph (1) shall be made in clear

9 and concise language that—

10 ‘‘(A) is readily comprehensible to cus11 tomers of the securities affiliate, and

12 ‘‘(B) is designed to promote customer un13 derstanding that uninsured investment products

14 are not deposits insured by the Federal Deposit

15 Insurance Corporation.

16 ‘‘(3) BOARD AUTHORITY.—Subject to para17 graph (2), the Board may, in the Board’s discretion,

18 prescribe disclosures in addition to the disclosures

19 prescribed by paragraph (1).

20 ‘‘(g) DISCLOSURE REQUIRED BY INSURED DEPOSI21 TORY INSTITUTIONS.—

22 ‘‘(1) IN GENERAL.—No insured depository in23 stitution shall knowingly express any opinion on the

24 value of, or the advisability of purchasing or selling,

25 nonbanking products (as defined by the Board) sold
54

•HR 2520 IH

1 by the insured depository institution or any affiliate

2 of an insured depository institution unless the in3 sured depository institution conspicuously discloses

4 in writing to the customer that—

5 ‘‘(A) the insured depository institution or

6 affiliate (whichever is applicable) is selling the

7 nonbanking product and has a financial interest

8 in the transaction (if such is the case);

9 ‘‘(B) the nonbanking products—

10 ‘‘(i) are not deposits;

11 ‘‘(ii) are not insured by the Federal

12 Deposit Insurance Corporation;

13 ‘‘(iii) are not guaranteed by the insti14 tution or any other affiliated insured de15 pository institution;

16 ‘‘(iv) are not otherwise an obligation

17 of an insured depository institution (unless

18 such is the case); and

19 ‘‘(v) with regard to any nonbanking

20 product that includes any investment com21 ponent, are subject to investment risks in22 cluding possible loss of principal invested;

23 and

24 ‘‘(C) an affiliate, if involved, is not an in25 sured depository institution (unless such is the
55

•HR 2520 IH

1 case), and is a corporation separate from any

2 insured depository institution (unless such is

3 not the case).

4 ‘‘(2) FORM OF DISCLOSURE.—The disclosures

5 required by paragraph (1) shall be made in clear

6 and concise language that—

7 ‘‘(A) is readily comprehensible to cus8 tomers of the insured depository institution,

9 and

10 ‘‘(B) is designed to promote customer un11 derstanding that nonbanking products are not

12 deposits insured by the Federal Deposit Insur13 ance Corporation.

14 ‘‘(3) CUSTOMER ACKNOWLEDGEMENT OF DIS15 CLOSURE.—

16 ‘‘(A) IN GENERAL.—Whenever any insured

17 depository institution or securities affiliate

18 opens an account for the purpose of selling a

19 nondeposit investment product or products to a

20 customer, such insured depository institution or

21 securities affiliate as the case may be, shall ob22 tain a 1-time acknowledgment of receipt by the

23 customer of such disclosures, including the date

24 of receipt with the customer’s name, address,

25 and the account number.
56

•HR 2520 IH

1 ‘‘(B) SPECIAL RULE FOR ACCREDITED IN2 VESTORS.—In the case of any customer who is,

3 or meets the requirements for, an accredited in4 vestor (as defined in section 2(15) of the Secu5 rities Act of 1933), the acknowledgment of the

6 receipt of any disclosure described in subpara7 graph (A) may be obtained by the insured de8 pository institution or securities affiliate at the

9 time any account is opened by such customer.

10 ‘‘(4) BOARD AUTHORITY.—Subject to para11 graph (2), the Board, after consultation with the

12 other appropriate Federal banking agencies, may

13 prescribe disclosures in addition to the disclosures

14 required by paragraph (1).

15 ‘‘(h) IMPROPER DISCLOSURE OF CONFIDENTIAL

16 CUSTOMER INFORMATION PROHIBITED.—

17 ‘‘(1) IN GENERAL.—No depository institution

18 subsidiary of a financial services holding company

19 shall disclose to any affiliate of such institution

20 which is not a depository institution, and no affiliate

21 of such company which is not a depository institu22 tion shall disclose to any other affiliate which is a

23 depository institution or a subsidiary of such an in24 stitution, any nonpublic customer information (in25 cluding an evaluation of the creditworthiness of an
57

•HR 2520 IH

1 issuer or other customer of that institution or secu2 rities affiliate), unless it is clearly and conspicuously

3 disclosed that such information may be commu4 nicated among such persons and the customer is

5 given the opportunity, before the time that the infor6 mation is initially communicated, to direct that such

7 information not be communicated among such per8 sons.

9 ‘‘(2) DEFINITION.—For purposes of paragraph

10 (1), the term ‘nonpublic customer information’ does

11 not include—

12 ‘‘(A) customers’ names and addresses (un13 less a customer has specified otherwise);

14 ‘‘(B) information that could be obtained

15 from unaffiliated credit bureaus or similar com16 panies in the ordinary course of business; or

17 ‘‘(C) information that is customarily pro18 vided to unaffiliated credit bureaus or similar

19 companies in the ordinary course of business

20 by—

21 ‘‘(i) depository institutions not affili22 ated with securities affiliates; or

23 ‘‘(ii) brokers and dealers not affiliated

24 with depository institutions.
58

•HR 2520 IH

1 ‘‘(i) UNDERWRITING SECURITIES REPRESENTING

2 OBLIGATIONS ORIGINATED BY AFFILIATE RE3 STRICTED.—A securities affiliate shall not underwrite se4 curities secured by or representing an interest in mort5 gages or other obligations originated or purchased by an

6 affiliated depository institution or subsidiary of such an

7 institution—

8 ‘‘(1) unless those securities—

9 ‘‘(A) are rated by at least 1 unaffiliated,

10 nationally recognized statistical rating organiza11 tion;

12 ‘‘(B) are issued or guaranteed by the Fed13 eral Home Loan Mortgage Corporation, the

14 Federal National Mortgage Association, or the

15 Government National Mortgage Association; or

16 ‘‘(C) represent interests in securities de17 scribed in subparagraph (B); or

18 ‘‘(2) except as permitted by the Board.

19 ‘‘(j) RECIPROCAL ARRANGEMENTS PROHIBITED.—

20 No financial services holding company and no subsidiary

21 of a financial services holding company may enter into any

22 agreement, understanding, or other arrangement under

23 which—

24 ‘‘(1) 1 financial services holding company (or

25 subsidiary of that financial services holding com-
59

•HR 2520 IH

1 pany) agrees to engage in a transaction with, or on

2 behalf of, another financial services holding company

3 (or subsidiary of that financial services holding com4 pany), in exchange for

5 ‘‘(2) the agreement of the second financial serv6 ices holding company referred to in paragraph (1)

7 (or a subsidiary of that financial services holding

8 company) to engage in any transaction with, or on

9 behalf of, the first financial services holding com10 pany referred to in such paragraph (or any subsidi11 ary of that financial services holding company), for

12 the purpose of evading any requirement or restric13 tion of Federal law on transactions between, or for

14 the benefit of, affiliates of financial services holding

15 companies.

16 ‘‘(k) SAFEGUARDS APPLY TO CERTAIN SUBSIDI17 ARIES.—Except as provided in this section—

18 ‘‘(1) SECURITIES AFFILIATE.—No subsidiary of

19 a securities affiliate may do anything that this sec20 tion prohibits the securities affiliate from doing.

21 ‘‘(2) DEPOSITORY INSTITUTION.—No subsidi22 ary of a depository institution may do anything that

23 this subsection prohibits the institution from doing.

24 ‘‘(l) AUTHORITY TO MODIFY AND IMPOSE ADDI25 TIONAL SAFEGUARDS; INTERPRETIVE AUTHORITY.—
60

•HR 2520 IH

1 ‘‘(1) IN GENERAL.—The Board may, by regula2 tion or order—

3 ‘‘(A) adopt additional limitations, restric4 tions or conditions on relationships or trans5 actions among depository institutions, their af6 filiates, and their customers; and

7 ‘‘(B) make any modification to any limita8 tion, restriction, or condition imposed under

9 this section on relationships or transactions

10 among depository institutions, the affiliates of

11 insured depository institutions, and the cus12 tomers of such institutions or affiliates, includ13 ing modifications in addition to those expressly

14 provided for in this section.

15 ‘‘(2) STANDARDS.—The Board may not exercise

16 authority under paragraph (1) unless the Board

17 finds that such action is consistent with the pur18 poses of this Act, including—

19 ‘‘(A) the avoidance of any significant risk

20 to the safety and soundness of depository insti21 tutions or the Federal deposit insurance funds;

22 ‘‘(B) the enhancement of the financial sta23 bility of financial services holding companies;

24 ‘‘(C) the prevention of the subsidization of

25 securities affiliates by depository institutions;
61

•HR 2520 IH

1 ‘‘(D) the avoidance of conflicts of interest

2 or other abuses; and

3 ‘‘(E) the application of the principle of na4 tional treatment and equality of competitive op5 portunity between securities affiliates owned or

6 controlled by domestic financial services holding

7 companies and securities affiliates owned or

8 controlled by foreign banks operating in the

9 United States.

10 ‘‘(3) BIENNIAL REVIEW.—Beginning 2 years

11 after the date of enactment of the Financial Services

12 Competitiveness and Regulatory Relief Act of 1995,

13 the Board shall, on a biennial basis—

14 ‘‘(A) review all restrictions established pur15 suant to paragraph (1) to determine whether

16 any such restrictions are required any longer to

17 carry out the purposes of this Act; and

18 ‘‘(B) modify or eliminate any such restric19 tion that the Board determines is no longer re20 quired to carry out the purposes of this Act.

21 ‘‘(m) COMPLIANCE PROGRAMS REQUIRED.—

22 ‘‘(1) IN GENERAL.—Each appropriate Federal

23 banking agency and the Securities and Exchange

24 Commission shall establish a program for—
62

•HR 2520 IH

1 ‘‘(A) sharing information, including reports

2 of examinations, concerning compliance with

3 subtitle A of title I or subtitle A or B of title

4 II of the Financial Services Competitiveness

5 and Regulatory Relief Act of 1995, and the

6 amendments made by such subtitles, by—

7 ‘‘(i) brokers, dealers, investment ad8 visers, or investment companies that are

9 registered with the Securities and Ex10 change Commission that are affiliated with

11 depository institutions, or are separately

12 identifiable departments or divisions of de13 pository institutions registered as brokers,

14 dealers, or investment advisers; and

15 ‘‘(ii) depository institutions and their

16 affiliates;

17 ‘‘(B) enforcing compliance with subtitle A

18 of title I of the Financial Services Competitive19 ness and Regulatory Relief Act of 1995, and

20 the amendments made by such subtitle and

21 paragraphs (4) and (5) of section 3(a) of the

22 Securities Exchange Act of 1934 by entities

23 under its supervision; and
63

•HR 2520 IH

1 ‘‘(C) responding to any complaints from

2 customers about inappropriate cross-marketing

3 of securities products or inadequate disclosure.

4 ‘‘(2) DATA COLLECTION.—

5 ‘‘(A) IN GENERAL.—The appropriate Fed6 eral banking agencies, after consultation with

7 and consideration of the views of the Securities

8 and Exchange Commission, shall (except as oth9 erwise provided by the appropriate Federal

10 banking agency after such consultation) require

11 any depository institution that has effected se12 curities transactions pursuant to any exception

13 enumerated in paragraphs (4) and (5) of sec14 tion 3(a) of the Securities Exchange Act of

15 1934 to identify the exceptions relied upon and

16 to submit such information necessary to mon17 itor compliance under such paragraphs.

18 ‘‘(B) COMMISSION ACCESS.—The appro19 priate Federal banking agency shall make any

20 information referred to in subparagraph (A)

21 available to the Securities and Exchange Com22 mission, upon the request of the Commission.

23 ‘‘(C) COMPLIANCE.—In implementing the

24 provisions of this paragraph, the appropriate

25 Federal banking agencies shall ensure that any
64

•HR 2520 IH

1 information requests to depository institutions

2 take into account the size and activities of the

3 institutions and do not cause undue reporting

4 burdens.

5 ‘‘(3) COMMISSION’S ENFORCEMENT AUTHOR6 ITY.—Without limiting in any way the authority of

7 the appropriate Federal banking agencies under this

8 section, the Securities and Exchange Commission

9 shall have the authority to enforce any subsection of

10 this section against a securities affiliate as if such

11 subsection were a provision of the Securities Ex12 change Act of 1934 to the extent that the subsection

13 applies with respect to the conduct or activities of

14 the securities affiliate.

15 ‘‘(4) EXAMINATION REPORTS.—

16 ‘‘(A) IN GENERAL.—The appropriate Fed17 eral banking agencies shall, to the fullest extent

18 possible, use the reports of examination of any

19 broker, dealer, investment adviser, or invest20 ment company made by or on behalf of the Se21 curities and Exchange Commission and reports

22 made by or on behalf of a registered securities

23 association or national securities exchange, and

24 shall defer to such examinations for compliance

25 with the Federal securities laws.
65

•HR 2520 IH

1 ‘‘(B) COMPLIANCE WITH SECTION 11 SAFE2 GUARDS.—The appropriate Federal banking

3 agencies shall—

4 ‘‘(i) to the fullest extent possible, use

5 the reports of examination of any securi6 ties affiliate made by the appropriate Fed7 eral banking agency for such affiliate; and

8 ‘‘(ii) defer to such examinations for

9 compliance with the provisions of this sec10 tion.

11 ‘‘(5) INTERPRETATIONS OF THE FEDERAL SE12 CURITIES LAWS.—The appropriate Federal banking

13 agencies shall defer to the Securities and Exchange

14 Commission regarding all interpretations and en15 forcement of the Federal securities laws relating to

16 the application of the Federal securities laws to the

17 activities and conduct of brokers, dealers, investment

18 advisers, and investment companies.

19 ‘‘(6) NOTICE OF CERTAIN ACTIONS BY SEC.—

20 The Securities and Exchange Commission shall give

21 notice to the appropriate Federal banking agency

22 upon the commencement of any disciplinary or law

23 enforcement proceedings by the Commission and a

24 copy of any order entered by the Commission

25 against—
66

•HR 2520 IH

1 ‘‘(A) any broker, dealer, or investment ad2 viser that—

3 ‘‘(i) is registered with the Securities

4 and Exchange Commission; and

5 ‘‘(ii) is affiliated with, or is a sepa6 rately identifiable department or division

7 of, a depository institution;

8 ‘‘(B) any investment company registered

9 with the Securities and Exchange Commission

10 that is an affiliate of or is advised by an invest11 ment adviser affiliated with a depository institu12 tion or by a separately identifiable department

13 or division of a depository institution that is a

14 registered investment adviser; or

15 ‘‘(C) any financial services holding com16 pany, depository institution, or subsidiary of

17 such company or institution, if the proposed ac18 tion relates to subtitle A of title I or subtitle A

19 or B of title II of the Financial Services Com20 petitiveness and Regulatory Relief Act of 1995.

21 ‘‘(7) NOTICE OF CERTAIN ACTIONS BY APPRO22 PRIATE FEDERAL BANKING AGENCIES.—Upon the

23 commencement of any disciplinary or law enforce24 ment proceedings to enforce the provisions of sub25 title A of title I of the Financial Services Competi-
67

•HR 2520 IH

1 tiveness and Regulatory Relief Act of 1995, or any

2 amendment made by such subtitle, by an appro3 priate Federal banking agency against any broker,

4 dealer, investment adviser, or investment company

5 that is registered under the Federal securities laws

6 and is affiliated with a depository institution or is a

7 separately identifiable department or division of a

8 depository institution, the appropriate Federal bank9 ing agency shall give notice to the Securities and

10 Exchange Commission of the proposed action.

11 ‘‘(8) IMMEDIATE ACTION ALLOWED BEFORE

12 NOTICE.—The notice required under paragraph (6)

13 or (7) may be provided promptly after action by the

14 Securities and Exchange Commission or the appro15 priate Federal banking agency, if—

16 ‘‘(A) the Commission determines that the

17 protection of investors requires immediate ac18 tion by the Commission and prior notice under

19 paragraph (6) is not practical under the cir20 cumstances; or

21 ‘‘(B) the appropriate Federal banking

22 agency determines that concerns for the safety

23 and soundness of a depository institution or its

24 affiliate require immediate action by the agency
68

•HR 2520 IH

1 and prior notice under paragraph (7) is not

2 practical under the circumstances.

3 ‘‘(9) COORDINATED ENFORCEMENT ACTIONS.—

4 The Securities and Exchange Commission and the

5 appropriate Federal banking agencies shall, to the

6 extent practicable, coordinate supervisory actions

7 based on applicable law where the actions are based

8 on the same or related events or practices.

9 ‘‘(10) INVESTMENT COMPANIES NOT AFFILI10 ATED WITH A DEPOSITORY INSTITUTION.—The ap11 propriate Federal banking agency shall not have au12 thority under this Act or any other provision of law

13 to inspect or examine any investment company reg14 istered under the Federal securities laws that is

15 not—

16 ‘‘(A) affiliated with a depository institu17 tion; or

18 ‘‘(B) advised by an investment adviser af19 filiated with a depository institution or by a

20 separately identifiable department or division of

21 a depository institution that is a registered in22 vestment adviser.

23 ‘‘(11) USE OF EXAMINATION REPORTS.—The

24 appropriate Federal banking agencies shall—
69

•HR 2520 IH

1 ‘‘(A) to the fullest extent possible, use the

2 reports of examination of any investment ad3 viser or investment company made by or on be4 half of the Securities and Exchange Commis5 sion; and

6 ‘‘(B) defer to such examinations for com7 pliance with the Federal securities laws.

8 ‘‘(12) DEFINITION.—For purposes of this sub9 section, the term ‘Federal securities laws’ means the

10 provisions of Federal law governing securities activi11 ties that are within the jurisdiction of the Securities

12 and Exchange Commission under the Securities Act

13 of 1933, the Securities Exchange Act of 1934, the

14 Investment Company Act of 1940, the Investment

15 Advisers Act of 1940, and the Trust Indenture Act

16 of 1939.

17 ‘‘(n) FOREIGN BANK FIREWALLS.—

18 ‘‘(1) IN GENERAL.—A foreign bank that oper19 ates a branch, agency, or commercial lending com20 pany in the United States and accepts no deposits

21 in the United States, either directly or through an

22 affiliate, that are insured under the Federal Deposit

23 Insurance Act, and any affiliate of such foreign

24 bank, shall not be subject to the restrictions of any

25 subsection of this section, other than subsections (l)
70

•HR 2520 IH

1 and (m), if the conditions described in paragraph (2)

2 are met.

3 ‘‘(2) CONDITIONS FOR APPLICABILITY OF EX4 CEPTION.—The conditions of this paragraph have

5 been met with respect to any foreign bank referred

6 to in paragraph (1) if—

7 ‘‘(A) transactions between a securities af8 filiate of such foreign bank and any branch,

9 agency or commercial lending company oper10 ated in the United States by such foreign bank

11 comply with the provisions of sections 23A and

12 23B of the Federal Reserve Act as if the for13 eign bank were a member bank; and

14 ‘‘(B) such foreign bank has received a de15 termination from the Board that the bank

16 meets capital standards comparable to those es17 tablished by the Board for well capitalized fi18 nancial services holding companies, giving due

19 regard to the principle of national treatment

20 and equality of competitive opportunity, subject

21 to any changes the Board may adopt with re22 spect to such standards.

23 ‘‘(3) APPLICABILITY OF SUBSECTION (l) TO

24 FOREIGN BANKS.—Any limitation, restriction, condi-
71

•HR 2520 IH

1 tion, or modification adopted by the Board under

2 subsection (l) may be applied by the Board to—

3 ‘‘(A) a foreign bank described in para4 graph (1) (and any company that owns or con5 trols such foreign bank);

6 ‘‘(B) any branch, agency or commercial

7 lending company operated by such foreign bank

8 in the United States; or

9 ‘‘(C) any other affiliate of such foreign

10 bank in the United States,

11 if such limitation, restriction, condition, or modifica12 tion is applied by regulation or order of general ap13 plicability under section 12(a)(2)(B)(ii) to wholesale

14 financial institutions and securities affiliates con15 trolled by investment bank holding companies, sub16 ject to such modifications, conditions, or exemptions

17 as the Board deems appropriate, giving due regard

18 to the principle of national treatment and equality of

19 competitive opportunity.’’.

20 (b) AMENDMENT TO THE FEDERAL RESERVE ACT.—

21 Section 23B(b)(1)(B) of the Federal Reserve Act (12

22 U.S.C. 371c–l(b)(1)(B)) is amended by inserting ‘‘and for

23 30 days thereafter’’ after ‘‘during the existence of any un24 derwriting or selling syndicate’’.
72

•HR 2520 IH

1 (c) EXEMPTION FROM SECTION 305(b) OF THE FED2 ERAL POWER ACT.—Section 305(b) of the Federal Power

3 Act shall not apply to any person now holding, or propos4 ing to hold, at the same time the position of officer or

5 director of a public utility and the position of officer or

6 director of a bank, trust company, banking association,

7 or firm permitted by section 10 of the Financial Services

8 Holding Company Act of 1995 (as amended by section

9 103(a) of this Act) to underwrite or participate in the

10 marketing of securities (including commercial paper) of a

11 public utility, if that bank, trust company, banking asso12 ciation, or firm does not underwrite or participate in the

13 marketing of securities of the public utility for which the

14 person serves, or proposes to serve, as an officer or direc15 tor.

16 (d) AMENDMENT TO THE RIGHT TO FINANCIAL PRI17 VACY ACT.—Section 1112(e) of the Right to Financial

18 Privacy Act (12 U.S.C. 3412(e)) is amended as follows—

19 (1) by striking ‘‘this title’’ and inserting ‘‘law’’;

20 and

21 (2) by inserting ‘‘, examination reports,’’ after

22 ‘‘financial records’’.

23 (e) REGULATIONS TO PRESERVE SEPARATION OF

24 BANKING AND COMMERCE.—Section 5(b) of the Bank

25 Holding Company Act of 1956 (12 U.S.C. 1844(b)) is
73

•HR 2520 IH

1 amended by inserting ‘‘, including the protection of deposi2 tory institutions and the separation of banking and com3 merce,’’ after ‘‘purposes of this Act’’.

4 SEC. 105. OWNERSHIP OF SHARES OF CERTAIN COMPANIES

5 BY FINANCIAL SERVICES HOLDING COMPA6 NIES.

7 Section 4 of the Bank Holding Company Act of 1956

8 (12 U.S.C. 1843) is amended by adding at the end the

9 following new subsection:

10 ‘‘(k) OWNERSHIP OF SHARES OF CERTAIN COMPA11 NIES BY FINANCIAL SERVICES HOLDING COMPANIES.—

12 ‘‘(1) NONCONFORMING FINANCIAL COMPA13 NIES.—Notwithstanding section 4(a), a financial

14 services holding company may retain direct or indi15 rect ownership or control of voting shares of any

16 company that—

17 ‘‘(A) engages solely in activities that the

18 Board finds to be financial but which the Board

19 has not authorized under section 4(c)(8) (and

20 such other financial activities that the Board

21 has authorized) if—

22 ‘‘(i) the financial services holding

23 company acquired the shares of a company

24 engaged in such activities or of each com25 pany to which the company engaged in
74

•HR 2520 IH

1 such activities is a successor more than 2

2 years before the date that such financial

3 services holding company becomes a finan4 cial services holding company;

5 ‘‘(ii) the aggregate investment by the

6 financial services holding company in

7 shares of all such companies does not ex8 ceed 10 percent of the total consolidated

9 capital and surplus of the financial services

10 holding company as of the date that the

11 holding company becomes a financial serv12 ices holding company or as of the date of

13 any additional investment by the financial

14 services holding company in such shares;

15 ‘‘(iii) more than 50 percent of the ag16 gregate gross revenues of the financial

17 services holding company and the subsidi18 aries of such holding company for each of

19 the 2 calendar years before the date the

20 holding company becomes a financial serv21 ices holding company were attributable to

22 securities activities described in subpara23 graphs (A) and (B) of section 10(a)(1), as

24 determined without taking into account

25 any activities (other than securities activi-
75

•HR 2520 IH

1 ties) in which financial services holding

2 companies were permitted to engage before

3 the date of the enactment of the Financial

4 Services Competitiveness and Regulatory

5 Relief Act of 1995; and

6 ‘‘(iv) the company engaged in such ac7 tivities continues to engage only in activi8 ties that such company conducted as of the

9 date that such financial services holding

10 company becomes a financial services hold11 ing company (or other activities permitted

12 under section 4(c)(8) or section 10); or

13 ‘‘(B) engages in activities not authorized

14 under section 4 if—

15 ‘‘(i) the financial services holding

16 company held the shares of any company

17 engaged in such activities as of the date of

18 the enactment of the Financial Services

19 Competitiveness and Regulatory Relief Act

20 of 1995 and the financial services holding

21 company was then exempt from the provi22 sions of section 4 pursuant to section 4(d)

23 as of such date;

24 ‘‘(ii) the company engaged in such ac25 tivities continues to engage only in the
76

•HR 2520 IH

1 same general lines of business and related

2 activities that such company conducted as

3 of the date of the enactment of the Finan4 cial Services Competitiveness and Regu5 latory Relief Act of 1995 (or other activi6 ties permitted under section 4(c) or section

7 10); and

8 ‘‘(iii) 80 percent of the aggregate

9 gross revenues of the financial services

10 holding company and the subsidiaries of

11 such holding company as of the date of the

12 enactment of the Financial Services Com13 petitiveness and Regulatory Relief Act of

14 1995 was attributable to—

15 ‘‘(I) ownership and operation of

16 depository institutions;

17 ‘‘(II) activities that are financial

18 in nature as determined by the Board

19 pursuant to section 4(c)(8);

20 ‘‘(III) activities permissible under

21 section 10; and

22 ‘‘(IV) such other activities that

23 would be permissible generally for the

24 holding company as a financial serv-
77

•HR 2520 IH

1 ices holding company (other than as

2 an investment bank holding company).

3 ‘‘(2) NONFINANCIAL COMPANIES.—

4 ‘‘(A) IN GENERAL.—Notwithstanding sec5 tion 4(a), a financial services holding company

6 described in paragraph (1)(A)(iii) may, during

7 the 5-year period beginning on the date that

8 the company becomes a financial services hold9 ing company, retain direct or indirect ownership

10 or control of voting shares of any company that

11 the financial services holding company owns or

12 controls on the date such holding company be13 comes a financial services holding company.

14 ‘‘(B) EXTENSION OF DIVESTITURE PE15 RIOD.—The Board may extend the period de16 scribed in subparagraph (A) for an additional

17 period not to exceed 5 years if the Board—

18 ‘‘(i) determines that such extension is

19 necessary to avert substantial loss to the

20 financial services holding company; and

21 ‘‘(ii) finds that the financial services

22 holding company has made good faith ef23 forts to divest such shares.

24 ‘‘(C) NO EXPANSION OF NONFINANCIAL

25 COMPANIES PRIOR TO DIVESTITURE.—Unless
78

•HR 2520 IH

1 an acquisition or activity is permitted in accord2 ance with section 3 or 4(c)—

3 ‘‘(i) no financial services holding com4 pany, and no company whose shares are

5 owned or controlled by a financial services

6 holding company in accordance with this

7 paragraph, may acquire any interest in or

8 assets of any other company, and

9 ‘‘(ii) no company whose shares are

10 owned or controlled by a financial services

11 holding company pursuant to this para12 graph may engage directly or indirectly in

13 any activity that the company did not con14 duct on the day before the financial serv15 ices holding company registered as a finan16 cial services holding company.

17 ‘‘(3) RESTRICTIONS ON JOINT MARKETING.—

18 No depository institution (and no subsidiary of such

19 institution) shall—

20 ‘‘(A) offer or market, directly or indirectly

21 through any arrangement, any product or serv22 ice of any affiliate whose shares are owned or

23 controlled by the financial services holding com24 pany pursuant to this subsection or section

25 10(j); or
79

•HR 2520 IH

1 ‘‘(B) permit any of such depository institu2 tion’s or subsidiary’s products or services to be

3 offered or marketed, directly or indirectly

4 through any arrangement, by or through any

5 affiliate whose shares are owned or controlled

6 by the financial services holding company pur7 suant to this subsection or section 10(j),

8 unless, in a case involving an affiliate held under

9 this subsection, the product or service is permissible

10 for financial services holding companies to provide

11 under section 4(c)(8) or 10.

12 ‘‘(4) DEPOSITORY INSTITUTION DEFINED.—For

13 purposes of paragraph (3), the term ‘depository in14 stitution’ includes a foreign bank.’’.

15 SEC. 106. PROVISIONS APPLICABLE TO LIMITED PURPOSE

16 BANKS.

17 (a) EXCEPTION TO RESTRICTION ON ASSET GROWTH

18 OF NONBANK BANKS.—

19 (1) IN GENERAL.—Section 4(f)(3) of the Bank

20 Holding Company Act of 1956 (12 U.S.C.

21 1843(f)(3)) is amended by adding at the end the fol22 lowing new subparagraph:

23 ‘‘(D) EXCEPTION TO RESTRICTION ON

24 ASSET GROWTH, ACTIVITIES, AND CERTAIN

25 CROSS-MARKETING RESTRICTIONS.—
80

•HR 2520 IH

1 ‘‘(i) QUALIFICATION FOR EXCEPTION

2 FROM GROWTH RESTRICTION.—A bank

3 controlled by a company described in para4 graph (1) shall not be subject to the limi5 tation contained in subparagraph (B)(iv) if

6 the company meets the requirements of

7 this subparagraph and the requirements of

8 paragraph (14).

9 ‘‘(ii) QUALIFICATION FOR EXCEPTION

10 FROM ACTIVITIES RESTRICTION.—Notwith11 standing subparagraph (B)(i), a bank con12 trolled by a company described in para13 graph (1) that meets the requirements of

14 clause (i) may engage in an activity au15 thorized under applicable law (other than

16 an activity that would have resulted in the

17 institution being a bank for purposes of

18 this Act, as in effect on the day before the

19 date of the enactment of the Competitive

20 Equality Banking Act of 1987, based on

21 the activities each bank conducted on

22 March 5, 1987, as reported to the Board)

23 if such bank, at least 60 days before com24 mencing such activity, has notified the
81

•HR 2520 IH

1 Board of the bank’s intention to commence

2 such activity and either—

3 ‘‘(I) the Board has notified such

4 bank that the Board will not dis5 approve the proposed activity as un6 safe or unsound; or

7 ‘‘(II) the Board has not, within

8 60 days after receiving such notice,

9 disapproved the proposal on the basis

10 of such criteria.

11 ‘‘(iii) QUALIFICATION FOR EXCEPTION

12 FROM CROSS-MARKETING RESTRICTION.—

13 Notwithstanding subparagraph (B)(ii), a

14 bank controlled by a company described in

15 paragraph (1) that meets the requirements

16 of clause (i) may offer or market products

17 or services of an affiliate or permit the

18 bank’s products or services to be offered or

19 marketed in connection with products or

20 services of an affiliate if such products or

21 services are offered or marketed only to

22 the extent permissible for banks or finan23 cial services holding companies to provide

24 by law, regulation, or order under para25 graph (8) or (15) of subsection (c).
82

•HR 2520 IH

1 ‘‘(iv) EXCEPTION FROM DIVESTITURE

2 REQUIREMENT FOR BANKS RESTORED TO

3 WELL CAPITALIZED LEVEL.—If any bank

4 controlled by a company that meets the re5 quirements of clause (i) ceases to be well

6 capitalized, the company shall divest con7 trol of such bank in accordance with para8 graph (4) unless—

9 ‘‘(I) within 12 months after the

10 date the bank ceases to be well cap11 italized, the capital of the bank is re12 stored to the well capitalized level;

13 and

14 ‘‘(II) after the end of such 12-

15 month period, the bank remains well

16 capitalized, subject to the capital res17 toration requirements in subclause (I).

18 ‘‘(v) ACTION REQUIRED IF BANK

19 CEASES TO BE ADEQUATELY CAPITAL20 IZED.—If any bank controlled by a com21 pany that meets the requirements of clause

22 (i) ceases to be adequately capitalized, the

23 company shall, within 30 days after the

24 date as of which the bank ceases to be ade25 quately capitalized—
83

•HR 2520 IH

1 ‘‘(I) execute an agreement with

2 the Board to divest control of such

3 bank in accordance with paragraph

4 (4); or

5 ‘‘(II) restore the capital of the

6 bank to at least the adequately cap7 italized level.’’.

8 (2) QUALIFICATIONS FOR COMPANIES UNDER

9 PARAGRAPH (3)(D).—Section 4(f) of the Bank Hold10 ing Company Act of 1956 (12 U.S.C. 1843(f)) is

11 amended by adding at the end the following new

12 paragraph:

13 ‘‘(14) QUALIFICATIONS FOR COMPANIES UNDER

14 PARAGRAPH (3)(D).—A company meets the require15 ments of paragraph (3)(D)(i) if—

16 ‘‘(A) the company (based on consolidated

17 revenues) engages in activities that are financial

18 (including activities not authorized under sub19 section (c)(8)) and predominantly in—

20 ‘‘(i) banking;

21 ‘‘(ii) activities that the Board has de22 termined under subsection (c)(8) to be fi23 nancial in nature or incidental to such fi24 nancial activities;
84

•HR 2520 IH

1 ‘‘(iii) activities permitted under sub2 paragraph (A) or (B) of section 10(a)(1);

3 and

4 ‘‘(iv) other activities that would be

5 permissible for such company as a finan6 cial services holding company (other than

7 as an investment bank holding company);

8 ‘‘(B) all insured depository institutions

9 controlled by such company are well capitalized

10 and well managed;

11 ‘‘(C) the bank and any affiliate of the bank

12 that is engaged in securities activities described

13 in section 10(a) comply with the safeguards

14 contained in section 11 as if that affiliate were

15 a securities affiliate; and

16 ‘‘(D) the company has provided at least 60

17 days prior written notice to the Board and, dur18 ing that period, the Board has not disapproved

19 the proposal.’’.

20 (b) AMENDED DIVESTITURE PROCEDURE FOR CER21 TAIN COMPANIES.—Section 4(f)(4) of the Bank Holding

22 Company Act of 1956 (12 U.S.C. 1843(f)(4)) is amended

23 by adding at the end the following: ‘‘If any company de24 scribed in paragraph (1) which meets the requirements of

25 paragraph (3)(D)(i) fails to qualify for the exemption pro-
85

•HR 2520 IH

1 vided under paragraph (2), such company shall divest, in

2 accordance with this paragraph, control of each bank the

3 company controls unless, within 12 months after the date

4 that the company fails to comply with the provisions of

5 paragraph (2), the company has corrected the condition

6 or ceased the activity that led to the failure to comply.’’.

7 (c) CONVERSION OF CERTAIN NONBANK HOLDING

8 COMPANIES TO FINANCIAL SERVICES HOLDING COMPA9 NIES.—Section 4(f) of the Bank Holding Company Act

10 of 1956 (12 U.S.C. 1843(f)) is amended by inserting after

11 paragraph (14) (as added by subsection (a)(2)) the follow12 ing new paragraph:

13 ‘‘(15) CONVERSION OF CERTAIN COMPANIES TO

14 FINANCIAL SERVICES HOLDING COMPANIES.—

15 ‘‘(A) IN GENERAL.—During the 18-month

16 period beginning on the date of the enactment

17 of the Financial Services Competitiveness and

18 Regulatory Relief Act of 1995, any company

19 described in paragraph (1) may become a finan20 cial services holding company if—

21 ‘‘(i) the company (on a consolidated

22 basis) engages in activities that are finan23 cial (including activities not authorized

24 under subsection (c)(8)) and predomi25 nantly in—
86

•HR 2520 IH

1 ‘‘(I) banking;

2 ‘‘(II) activities that the Board

3 has determined under subsection

4 (c)(8) to be financial in nature or inci5 dental to such financial activities;

6 ‘‘(III) activities permitted under

7 subparagraph (A) or (B) of section

8 10(a)(1); and

9 ‘‘(IV) other activities that would

10 be permissible for such company as a

11 financial services holding company

12 (other than an investment bank hold13 ing company);

14 ‘‘(ii) all insured depository institutions

15 controlled by such company are well cap16 italized and well managed;

17 ‘‘(iii) the company provides written

18 notice to the Board under sections 4 and

19 10 at least 60 days before the company be20 comes a financial services holding com21 pany;

22 ‘‘(iv) the Board does not object to

23 such transaction before the end of such 60-

24 day period; and
87

•HR 2520 IH

1 ‘‘(v) the Board has received, from the

2 company, full payment of a fee which the

3 Board shall impose in accordance with sec4 tion 5(h).

5 ‘‘(B) RETENTION OF FINANCIAL COMPA6 NIES.—

7 ‘‘(i) IN GENERAL.—Notwithstanding

8 subsection (a), a company that becomes a

9 financial services holding company pursu10 ant to subparagraph (A) may retain direct

11 or indirect ownership or control of voting

12 shares of any company that engages solely

13 in activities that the Board finds to be fi14 nancial but which the Board has not au15 thorized under subsection (c)(8) (and such

16 other financial activities that the Board

17 has authorized) if the financial services

18 holding company acquired the shares of

19 such company, or of each company to

20 which such company is a successor, before

21 January 1, 1995.

22 ‘‘(ii) LIMITS ON EXPANSION FOLLOW23 ING REGISTRATION.—A company that be24 comes a financial services holding company

25 pursuant to this paragraph, and any com-
88

•HR 2520 IH

1 pany whose shares are owned or controlled

2 by a financial services holding company

3 pursuant to this paragraph, shall be sub4 ject to the limitations contained in para5 graphs (2)(C) and (3) of section 4(k) as if

6 the activities or shares of such company

7 were conducted or held pursuant to section

8 4(k)(2).

9 ‘‘(iii) PERIOD TO CONFORM OTHER

10 ACTIVITIES.—Notwithstanding subsection

11 (a), a company that becomes a financial

12 services holding company pursuant to sub13 paragraph (A) may retain direct or indi14 rect ownership or control of voting shares

15 of any company not otherwise permitted

16 under this section for the period provided

17 in, and subject to the conditions contained

18 in, paragraphs (2) and (3) of section 4(k).

19 ‘‘(C) ELECTION FOR REDUCED SUPER20 VISION.—Any company that becomes a financial

21 services holding company pursuant to subpara22 graph (A) may elect to be governed by the pro23 visions of paragraphs (3), (4), (5), and (6) of

24 section 5(g), subject to the requirements of

25 such section, if—
89

•HR 2520 IH

1 ‘‘(i) the company, and any insured de2 pository institution controlled by such com3 pany, meet the requirements of section

4 5(g) (other than the requirements of para5 graph (2)(A) of such section);

6 ‘‘(ii) the company does not acquire

7 more than 5 percent of the shares of any

8 additional depository institution after the

9 date that such company becomes a finan10 cial services holding company; and

11 ‘‘(iii) no depository institution con12 trolled by such company acquires, estab13 lishes, or operates an additional branch of14 fice after the date that the company be15 comes a financial services holding com16 pany.’’.

17 SEC. 107. SECURITIES COMPANY AFFILIATIONS OF FDIC–IN18 SURED BANKS.

19 (a) IN GENERAL.—Section 18 of the Federal Deposit

20 Insurance Act (12 U.S.C. 1828) is amended by adding at

21 the end the following new subsections:

22 ‘‘(s) SECURITIES AFFILIATIONS OF BANKS.—

23 ‘‘(1) IN GENERAL.—A bank shall not be an af24 filiate of any company that, directly or indirectly,
90

•HR 2520 IH

1 acts as an underwriter or dealer of any security,

2 other than—

3 ‘‘(A) a securities affiliate in accordance

4 with section 10 of the Financial Services Hold5 ing Company Act of 1995; or

6 ‘‘(B) a company that underwrites or deals

7 only in securities described in section 10(g) of

8 the Financial Services Holding Company Act of

9 1995.

10 ‘‘(2) EXCEPTIONS.—

11 ‘‘(A) CERTAIN BANKS NOT INCLUDED.—

12 For purposes of this subsection, the term ‘bank’

13 does not include—

14 ‘‘(i) an insured bank described in sub15 paragraph (D), (F), or (H) of section

16 2(c)(2) of the Financial Services Holding

17 Company Act of 1995; and

18 ‘‘(ii) a Federal branch or an insured

19 branch (as defined in section 3 of the Fed20 eral Deposit Insurance Act).

21 ‘‘(B) AFFILIATIONS WITH EDGE ACT AND

22 AGREEMENT CORPORATIONS.—Paragraph (1)

23 shall not apply with respect to the affiliation of

24 a bank with a company held pursuant to section

25 25 or 25A of the Federal Reserve Act or section
91

•HR 2520 IH

1 4(c)(13) of the Financial Services Holding

2 Company Act of 1995.

3 ‘‘(3) GRANDFATHER PROVISION.—This sub4 section shall not apply with respect to—

5 ‘‘(A) an affiliation that existed on January

6 1, 1995; or

7 ‘‘(B) any new affiliation by an insured

8 bank that has an affiliation that would be pro9 hibited if the affiliation were not covered by

10 subparagraph (A).

11 ‘‘(4) DEFINITIONS.—For purposes of this sub12 section, the following definitions shall apply:

13 ‘‘(A) BROKER.—The term ‘broker’ has the

14 meaning given to such term in section 3(a)(4)

15 of the Securities Exchange Act of 1934.

16 ‘‘(B) DEALER.—The term ‘dealer’ has the

17 meaning given to such term in section 3(a)(5)

18 of the Securities Exchange Act of 1934.

19 ‘‘(C) SECURITY.—The term ‘security’ has

20 the meaning given to such term in section 10(l)

21 of the Financial Services Holding Company Act

22 of 1995.

23 ‘‘(D) UNDERWRITER.—The term ‘under24 writer’ has the meaning given to such term in

25 section 2(11) of the Securities Act of 1933.
92

•HR 2520 IH

1 ‘‘(5) AFFILIATE.—For purposes of this sub2 section, a separately identifiable department or divi3 sion (as defined in section 3(a) of the Securities Ex4 change Act of 1934) of a bank shall be deemed to

5 be a company which is an affiliate of the bank.

6 ‘‘(t) BROKER-DEALER REGISTRATION.—An insured

7 bank may not use the United States mails or any means

8 or instrumentality of interstate commerce to act as a

9 broker or dealer without registration under the Securities

10 Exchange Act of 1934—

11 ‘‘(1) except to the extent permitted under the

12 circumstances described in paragraph (4) or (5) of

13 section 3(a) of such Act; or

14 ‘‘(2) unless otherwise exempt from registrations

15 as a broker or dealer pursuant to regulations pre16 scribed by the Securities and Exchange Commission.

17 ‘‘(u) EXAMINATION REPORTS.—The Federal banking

18 agencies shall, to the fullest extent possible, use the re19 ports of examination of any broker, dealer, investment ad20 viser, or investment company made by or on behalf of the

21 Securities and Exchange Commission and reports made

22 by or on behalf of a registered securities association or

23 national securities exchange and shall defer to such exam24 ination for compliance with Federal securities laws.
93

•HR 2520 IH

1 ‘‘(v) INTERPRETATIONS OF THE FEDERAL SECURI2 TIES LAWS.—The appropriate Federal banking agencies

3 shall defer to the Securities and Exchange Commission re4 garding all interpretations and enforcement of the Federal

5 securities laws relating to the application of the Federal

6 securities laws to the activities and conduct of brokers,

7 dealers, investment advisers, and investment companies.’’.

8 (b) STUDY OF RISKS TO DEPOSIT INSURANCE SYS9 TEM.—

10 (1) STUDY REQUIRED.—During the 6-month

11 period beginning 18 months after the date of the en12 actment of the Financial Services Competitiveness

13 and Regulatory Relief Act of 1995, the Federal De14 posit Insurance Corporation shall conduct a study of

15 the risks posed to the deposit insurance funds by—

16 (A) the affiliation of insured depository in17 stitutions with securities affiliates and other in18 stitutions described in subsection (s)(1) of sec19 tion 18 of the Federal Deposit Insurance Act

20 (as added by subsection (a) of this section); or

21 (B) any activity described in section 10(a)

22 (as added by section 103(a) of this Act) of the

23 Financial Services Holding Company Act of

24 1995 (as so redesignated by section 128(a) of

25 this Act) in which insured depository institu-
94

•HR 2520 IH

1 tions may engage in accordance with any provi2 sion of Federal or State law.

3 (2) REPORT TO CONGRESS AND GAO.—

4 (A) IN GENERAL.—Before the end of the

5 6-month period described in paragraph (1), the

6 Federal Deposit Insurance Corporation shall

7 submit a report to the Congress on the findings

8 and conclusions of the Corporation with respect

9 to the study conducted under such paragraph,

10 together with such conclusions for administra11 tive or legislative action as the Corporation may

12 determine to be appropriate.

13 (B) DETAILS OF SPECIFIC RISKS.—If the

14 Federal Deposit Insurance Corporation con15 cludes that certain kinds of activities not spe16 cifically authorized by statute for insured de17 pository institutions before the date of the en18 actment of this Act, or the affiliation of insured

19 depository institutions with securities affiliates

20 engaged in certain kinds of securities activities,

21 pose a greater risk to the deposit insurance

22 funds than activities specifically authorized by

23 statute for national banks before January 1,

24 1995, the report submitted under subparagraph
95

•HR 2520 IH

1 (A) shall contain a detailed explanation of the

2 basis for such conclusion.

3 (C) TRANSMITTAL TO GAO.—The Federal

4 Deposit Insurance Corporation shall transmit a

5 copy of the report referred to in paragraph (1)

6 to the Comptroller General.

7 (3) ACTION BY FDIC.—If the Federal Deposit

8 Insurance Corporation concludes that any activity or

9 affiliation with respect to insured depository institu10 tions poses a greater risk to any deposit insurance

11 fund than the risk posed by activities specifically au12 thorized by statute for national banks before Janu13 ary 1, 1995, the Federal Deposit Insurance Corpora14 tion shall treat such conclusion as a factor to be

15 considered in setting semiannual assessments under

16 section 7(b)(2)(A) of the Federal Deposit Insurance

17 Act.

18 (4) EVALUATION OF REPORT BY GAO.—The

19 Comptroller General shall—

20 (A) evaluate the report transmitted by the

21 Federal Deposit Insurance Corporation to the

22 Comptroller General under paragraph (2); and

23 (B) submit a report to the Congress on

24 such evaluation, including a discussion on the

25 methodology used by the Corporation to assess
96

•HR 2520 IH

1 risks posed by nonbanking activities to the de2 posit insurance funds.

3 SEC. 108. AUTHORITY TO TERMINATE GRANDFATHER

4 RIGHTS UNDER THE INTERNATIONAL BANK5 ING ACT OF 1978.

6 Section 8(c) of the International Banking Act of

7 1978 (12 U.S.C. 3106(c)) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(3) PARITY IN CONDUCT OF AUTHORIZED SE10 CURITIES ACTIVITIES.—

11 ‘‘(A) IN GENERAL.—Notwithstanding the

12 provisions of paragraph (1) or any other provi13 sion of law, any authority conferred under this

14 subsection on any foreign bank or company

15 with respect to securities activities authorized

16 for financial services holding companies in the

17 United States shall terminate 30 days following

18 approval by the Board of an application by such

19 foreign bank or company under section 10 of

20 the Financial Services Holding Company Act of

21 1995.

22 ‘‘(B) AUTHORITY TO IMPOSE CONDI23 TIONS.—If a foreign bank or company that en24 gages directly or through an affiliate in any se25 curities activity pursuant to paragraph (1) has
97

•HR 2520 IH

1 not received approval by the Board under sec2 tion 10 of the Financial Services Holding Com3 pany Act of 1995 to control a securities affiliate

4 by the end of the 3-year period beginning on

5 the effective date of such Act, the Board may

6 impose such limitations and restrictions, includ7 ing the termination of any activities conducted

8 under paragraph (1) or a requirement that such

9 activities be conducted in compliance with the

10 safeguards of section 11 of such Act, as the

11 Board considers appropriate consistent with the

12 purposes of this Act and the Financial Services

13 Holding Company Act of 1995.’’.

14 SEC. 109. EFFECT ON STATE LAWS PROHIBITING THE AF15 FILIATION OF BANKS AND SECURITIES COM16 PANIES.

17 (a) IN GENERAL.—Section 7 of the Bank Holding

18 Company Act of 1956 (12 U.S.C. 1846) is amended by

19 adding at the end the following new subsection:

20 ‘‘(c) AFFILIATIONS AND ACTIVITIES.—No State may

21 prohibit or limit—

22 ‘‘(1) the affiliation of a bank or financial serv23 ices holding company with a securities affiliate solely

24 because the securities affiliate is engaged in activi-
98

•HR 2520 IH

1 ties described in subparagraph (A) or (B) of section

2 10(a)(1); or

3 ‘‘(2) the insurance or other activities of a sub4 sidiary of a financial services holding company solely

5 because the financial services holding company is no

6 longer exempt under this Act pursuant to section

7 4(d).’’.

8 (b) BANK ACTIVITIES.—No provision of this Act, and

9 no amendment made by this Act to any other provision

10 of law (other than section 10 or 11 of the Financial Serv11 ices Holding Company Act of 1995 (as added by sections

12 103 and 104 of this Act), section 18(s) of the Federal

13 Deposit Insurance Act (as added by section 107 of this

14 Act), or any amendments made by title II of this Act),

15 may be construed as affecting the authority of any bank

16 to engage in any activity authorized for such bank under

17 the law of such bank’s home State (as defined in section

18 2(o)(4) of the Financial Services Holding Company Act

19 of 1995).

20 SEC. 110. INTERAGENCY AGREEMENT RELATING TO RETAIL

21 SALES OF CERTAIN NONDEPOSIT INVEST22 MENT PRODUCTS.

23 Section 18 of the Federal Deposit Insurance Act (12

24 U.S.C. 1828) is amended by inserting after subsection (u)
99

•HR 2520 IH

1 (as added by section 107 of this Act) the following new

2 subsection:

3 ‘‘(v) JOINT STANDARDS RELATING TO RETAIL SALES

4 OF CERTAIN NONDEPOSIT INVESTMENT PRODUCTS.—

5 ‘‘(1) IN GENERAL.—The appropriate Federal

6 banking agencies shall jointly prescribe, after con7 sulting with and considering the views of the Securi8 ties and Exchange Commission, standards applicable

9 to any depository institution which—

10 ‘‘(A) is not registered as a broker under

11 the Securities Exchange Act of 1934; and

12 ‘‘(B) effects transactions in securities, in13 cluding securities issued by an investment com14 pany or annuities.

15 ‘‘(2) SCOPE OF STANDARDS.—The standards

16 required under paragraph (1) with respect to securi17 ties and annuities referred to in such paragraph

18 shall, at a minimum, establish requirements with re19 spect to—

20 ‘‘(A) sales practices;

21 ‘‘(B) disclosures and advertising in connec22 tion with transactions in such securities and an23 nuities, including—

24 ‘‘(i) the content, form, and timing of

25 any such disclosure; and
100

•HR 2520 IH

1 ‘‘(ii) disclaimers concerning the

2 noninsured status of the security or annu3 ity;

4 ‘‘(C) the compensation of sales personnel

5 with respect to referrals or transactions;

6 ‘‘(D) the training of and qualifications for

7 personnel involved in such transactions, includ8 ing training in making an accurate judgment

9 about the suitability of a particular investment

10 product for a prospective customer; and

11 ‘‘(E) the setting in which and the cir12 cumstances under which transactions may be

13 effected, and referrals made, by sales personnel

14 with respect to such securities and annuities.

15 ‘‘(3) COMPARABILITY REQUIREMENT.—The

16 standards required under paragraph (1) shall be

17 comparable to the standards applicable to brokers

18 and dealers registered under the Securities Ex19 change Act of 1934 unless the appropriate Federal

20 banking agencies jointly determine that implementa21 tion of comparable standards is not necessary or ap22 propriate for the maintenance of fair and orderly

23 markets or the protection of investors or is not in

24 the public interest.’’.
101

•HR 2520 IH

1 SEC. 111. EFFECTIVE DATE.

2 The amendments made by this subtitle shall take ef3 fect at the end of the 90-day period beginning on the date

4 of the enactment of this Act.

5 Subtitle B—Investment Bank

6 Holding Companies

7 SEC. 116. INVESTMENT BANK HOLDING COMPANIES.

8 (a) DEFINITIONS.—

9 (1) IN GENERAL.—Section 2 of the Bank Hold10 ing Company Act of 1956 (12 U.S.C. 1842) is

11 amended by adding at the end the following new

12 subsections:

13 ‘‘(s) WHOLESALE FINANCIAL INSTITUTION.—The

14 term ‘wholesale financial institution’ means any institution

15 that is an uninsured State member bank authorized pur16 suant to section 9B of the Federal Reserve Act.

17 ‘‘(t) INVESTMENT BANK HOLDING COMPANY.—The

18 term ‘investment bank holding company’ means any finan19 cial services holding company that—

20 ‘‘(1) controls a company engaged in underwrit21 ing corporate equity securities pursuant to section

22 10;

23 ‘‘(2) controls a wholesale financial institution;

24 and

25 ‘‘(3) if the company is a foreign bank that oper26 ates a branch, agency or commercial lending com-
102

•HR 2520 IH

1 pany in the United States, or is a company that con2 trols such foreign bank, is treated as an investment

3 bank holding company because such bank or com4 pany meets the criteria in section 12(b) and has re5 ceived the determination required by such section.’’.

6 (2) DEFINITION OF BANK INCLUDES WHOLE7 SALE FINANCIAL INSTITUTION.—Section 2(c)(1) of

8 the Bank Holding Company Act of 1956 (12 U.S.C.

9 1841(c)(1)) is amended by adding at the end the fol10 lowing new subparagraph:

11 ‘‘(C) A wholesale financial institution.’’.

12 (b) INVESTMENT BANK HOLDING COMPANIES.—The

13 Bank Holding Company Act of 1956 (12 U.S.C. 1841 et

14 seq.) is amended by inserting after section 11 (as added

15 by section 104 of this Act) the following new section:

16 ‘‘SEC. 12. INVESTMENT BANK HOLDING COMPANIES.

17 ‘‘(a) PERMISSIBLE AFFILIATIONS FOR INVESTMENT

18 BANK HOLDING COMPANIES.—

19 ‘‘(1) FINANCIAL ACTIVITIES.—

20 ‘‘(A) ACTIVITIES AUTHORIZED.—An in21 vestment bank holding company may directly or

22 indirectly own or control shares of any company

23 engaged in any activity the Board has deter24 mined to be financial in nature or incidental to

25 a financial activity (other than activities ex-
103

•HR 2520 IH

1 pressly limited under subsection (c)(8)), or any

2 activity in compliance with subparagraph (B) or

3 (C).

4 ‘‘(B) INCIDENTAL ACTIVITIES.—

5 ‘‘(i) IN GENERAL.—Notwithstanding

6 subparagraph (A), the aggregate invest7 ment by an investment bank holding com8 pany in shares of companies that engage in

9 nonfinancial activities and financial activi10 ties (other than those otherwise permitted

11 under this section) shall not at any time

12 exceed 7.5 percent (or such greater per13 centage as the Board may determine to be

14 appropriate) of the consolidated total risk15 weighted assets of the investment bank

16 holding company (excluding assets of com17 panies held pursuant to this subpara18 graph), except that the amount invested by

19 the investment bank holding company in

20 any 1 company (including all affiliates of

21 such company other than preexisting affili22 ates of such investment bank holding com23 pany) may not exceed the amount which is

24 equal to 25 percent of the total capital and
104

•HR 2520 IH

1 surplus of such investment bank holding

2 company.

3 ‘‘(ii) APPLICABILITY TO SUCCESSOR

4 IN INTEREST.—Any successor to any in5 vestment bank holding company referred to

6 in clause (i) may retain any investments

7 made pursuant to this subparagraph—

8 ‘‘(I) during the 5-year period be9 ginning on the date the succession is

10 consummated; and

11 ‘‘(II) with the consent of the

12 Board, for an additional period not to

13 exceed 5 years after the 5-year period

14 referred to in subclause (I),

15 unless the Board determines that the re16 tention of such investment would jeopard17 ize the safety and soundness of any in18 sured depository institution affiliate of

19 such successor.

20 ‘‘(iii) CROSS MARKETING RESTRIC21 TIONS.—A wholesale financial institution

22 shall not—

23 ‘‘(I) offer or market, directly or

24 through any arrangement, any prod25 uct or service of an affiliate whose
105

•HR 2520 IH

1 shares are owned or controlled by the

2 investment bank holding company

3 pursuant to this subparagraph or sub4 paragraph (C); or

5 ‘‘(II) permit any of such whole6 sale financial institution’s or subsidi7 ary’s products or services to be of8 fered or marketed, directly or through

9 any arrangement, by or through any

10 such affiliate.

11 ‘‘(iv) USE OF COMMON NAME.—An in12 vestment bank holding company shall not

13 permit a wholesale financial institution to

14 adopt a name which is the same as or

15 similar to, or a variation of, the name or

16 title of an affiliate engaged in activities

17 pursuant to subparagraph (B).

18 ‘‘(C) COMMODITIES.—

19 ‘‘(i) IN GENERAL.—An investment

20 bank holding company predominantly en21 gaged as of January 1, 1995, in securities

22 activities in the United States (or any suc23 cessor to any such company) may engage

24 in, or directly or indirectly own or control

25 shares of a company engaged in, activities
106

•HR 2520 IH

1 related to the trading, sale, or investment

2 in commodities and underlying physical

3 properties that were not permissible for

4 bank holding companies to conduct in the

5 United States as of January 1, 1995, pro6 vided such investment bank holding com7 pany, or any subsidiary of such holding

8 company, was engaged directly, indirectly,

9 or through any such company in any of

10 such activities as of January 1, 1995, in

11 the United States.

12 ‘‘(ii) LIMITATION.—Notwithstanding

13 subparagraphs (A) and (B), the aggregate

14 investment by an investment bank holding

15 company in activities under this subpara16 graph (other than those otherwise per17 mitted under this section) shall not at any

18 time exceed 5 percent of the total consoli19 dated assets of the investment bank hold20 ing company.

21 ‘‘(iii) SUCCESSOR DEFINED.—For

22 purposes of this subparagraph and sub23 paragraph (B), the term ‘successor’ means,

24 with respect to any investment bank hold25 ing company described in clause (i), any
107

•HR 2520 IH

1 company that merges with, or acquires

2 control of, such investment bank holding

3 company.

4 ‘‘(D) QUALIFIED INVESTOR IN AN INVEST5 MENT BANK HOLDING COMPANY.—

6 ‘‘(i) IN GENERAL.—Notwithstanding

7 any other provision of Federal or State

8 law, a qualified investor—

9 ‘‘(I) shall not be, or be deemed to

10 be, an investment bank holding com11 pany, a financial services holding com12 pany, a bank holding company, or any

13 similar organization; and

14 ‘‘(II) shall not be deemed to con15 trol any such company or organization

16 or any subsidiary of any such com17 pany or organization (other than for

18 purposes of section 23A and 23B of

19 the Federal Reserve Act),

20 by virtue of the investor’s ownership or

21 control of shares of an investment bank

22 holding company.

23 ‘‘(ii) QUALIFIED INVESTOR DE24 FINED.—For purposes of this subpara25 graph, the term ‘qualified investor’ means
108

•HR 2520 IH

1 any United States company (including a

2 parent company and all subsidiaries of

3 which the parent company holds at least

4 80 percent of the total voting equity secu5 rities) which since February 27, 1995, has

6 directly or indirectly owned or controlled

7 shares of capital stock representing at

8 least 10 percent, and not more than 45

9 percent, of the outstanding voting shares

10 or voting power of a company that—

11 ‘‘(I) becomes an investment bank

12 holding company or a subsidiary of an

13 investment bank holding company;

14 and

15 ‘‘(II) before such company be16 came an investment bank holding

17 company or a subsidiary of an invest18 ment bank holding company, had

19 more than 50 percent of the compa20 ny’s assets employed directly or indi21 rectly in securities activities.

22 ‘‘(iii) CROSS-MARKETING AND COM23 MON NAME.—A wholesale financial institu24 tion shall not—
109

•HR 2520 IH

1 ‘‘(I) offer or market products or

2 services of a qualified investor in the

3 investment bank holding company of

4 which the wholesale financial institu5 tion is an affiliate;

6 ‘‘(II) permit the institution’s

7 products or services to be offered or

8 marketed in connection with products

9 or services of such qualified investor;

10 or

11 ‘‘(III) adopt a name which is the

12 same as or similar to, or a variation

13 of, the name or title of such qualified

14 investor.

15 ‘‘(iv) EXAMINATION AND REPORT16 ING.—Notwithstanding any other provision

17 of law, the Board may conduct examina18 tions of, or require reports from, a quali19 fied investor only to the extent that the

20 Board reasonably determines that such ex21 aminations or reports are necessary—

22 ‘‘(I) to ensure compliance with

23 this subparagraph; or

24 ‘‘(II) to the extent that the quali25 fied investor is an affiliate of a whole-
110

•HR 2520 IH

1 sale financial institution for purposes

2 of section 23A of the Federal Reserve

3 Act, to ensure compliance with restric4 tions imposed by law or regulation on

5 transactions between the qualified in6 vestor and such wholesale financial in7 stitution.

8 ‘‘(E) SPECIAL RULE.—An investment bank

9 holding company that owns and controls shares

10 of a company pursuant to subparagraph (B) or

11 (C) may not own or control shares of a com12 pany pursuant to section 4(k).

13 ‘‘(F) CONSOLIDATED TOTAL RISK-WEIGHT14 ED ASSETS.—For purposes of this paragraph,

15 the following definitions shall apply:

16 ‘‘(i) IN GENERAL.—The term ‘consoli17 dated total risk-weighted assets’ shall have

18 the meaning given to such term in regula19 tions prescribed by the Board as in effect

20 on the date of the enactment of the Finan21 cial Services Competitiveness and Regu22 latory Relief Act of 1995.

23 ‘‘(ii) APPLICATION TO FOREIGN

24 BANKS.—In the case of a foreign bank or

25 a company that owns or controls a foreign
111

•HR 2520 IH

1 bank, the term ‘consolidated total risk2 weighted assets’ means total risk-weighted

3 assets held by the foreign bank or company

4 in the United States in any United States

5 branch, agency, or commercial lending

6 company subsidiary, any depository institu7 tion controlled by the foreign bank or com8 pany, any subsidiary held under the au9 thority of this section, section 3, 4, or 10

10 (other than paragraph (9) or (13) of sec11 tion 4(c)), or section 25 or 25A of the

12 Federal Reserve Act.

13 ‘‘(2) SECURITIES ACTIVITIES.—

14 ‘‘(A) INSTITUTIONS MUST BE WELL CAP15 ITALIZED.—The Board shall disapprove a no16 tice under section 10 by an investment bank

17 holding company (or a company seeking to be18 come an investment bank holding company) to

19 acquire a securities affiliate if any wholesale fi20 nancial institution controlled by the investment

21 bank holding company is not well capitalized or

22 would not be well capitalized following the

23 transaction.

24 ‘‘(B) TRANSACTIONS WITH AFFILIATES.—
112

•HR 2520 IH

1 ‘‘(i) IN GENERAL.—A wholesale finan2 cial institution controlled by an investment

3 bank holding company shall be treated as

4 a bank for purposes of the provisions of

5 sections 23A and 23B of the Federal Re6 serve Act.

7 ‘‘(ii) OTHER RESTRICTIONS REGARD8 ING SECURITIES AFFILIATES DETERMINED

9 BY THE BOARD.—A securities affiliate of

10 an investment bank holding company, and

11 a wholesale financial institution controlled

12 by an investment bank holding company,

13 shall not be subject to the provisions of

14 section 11, except that the securities affili15 ate and wholesale financial institution shall

16 be subject to subsections (l) and (m) of

17 such section in the same manner and to

18 the same extent such paragraphs would

19 apply if the wholesale financial institution

20 were an insured depository institution.

21 ‘‘(3) LIMITATION ON AFFILIATION WITH IN22 SURED DEPOSITORY INSTITUTIONS.—An investment

23 bank holding company may not, directly or indi24 rectly, own or control—
113

•HR 2520 IH

1 ‘‘(A) any bank, other than a wholesale fi2 nancial institution;

3 ‘‘(B) any savings association;

4 ‘‘(C) any institution described in section

5 2(c)(2) (other than subparagraphs (C) and (G)

6 of such section); or

7 ‘‘(D) any institution that accepts—

8 ‘‘(i) initial deposits of $100,000 or

9 less, other than on an incidental or occa10 sional basis, or

11 ‘‘(ii) deposits that are insured under

12 the Federal Deposit Insurance Act.

13 ‘‘(4) NO DEPOSIT INSURANCE FUND LIABIL14 ITY.—No Federal deposit insurance funds may be

15 used in connection with the failure of, or any pro16 posed assistance to, a wholesale financial institution

17 or an investment bank holding company.

18 ‘‘(5) CAPITAL OF IBHC.—

19 ‘‘(A) IN GENERAL.—The Board shall not

20 impose any capital requirement on investment

21 bank holding companies or subsidiaries of such

22 companies (other than depository institutions)

23 unless any such requirement is based upon ap24 propriate risk-weighing considerations.
114

•HR 2520 IH

1 ‘‘(B) APPLICABLE ACCOUNTING PRIN2 CIPLES.—In applying any capital standard to

3 investment bank holding companies, or subsidi4 aries of such companies, the Board shall utilize

5 uniform accounting principles consistent with

6 generally accepted accounting principles in ac7 cordance with section 37(a)(2) of the Federal

8 Deposit Insurance Act.

9 ‘‘(b) QUALIFICATION OF FOREIGN BANK AS INVEST10 MENT BANK HOLDING COMPANY.—

11 ‘‘(1) IN GENERAL.—Any foreign bank that—

12 ‘‘(A) operates a branch, agency or commer13 cial lending company in the United States (and

14 any company that owns or controls such foreign

15 bank), including a foreign bank that does not

16 own or control a wholesale financial institution;

17 and

18 ‘‘(B) controls a security affiliate that en19 gages in underwriting corporate equity securi20 ties,

21 may request a determination from the Board that

22 such bank or company be treated as an investment

23 bank holding company.

24 ‘‘(2) CONDITIONS FOR TREATMENT AS AN IN25 VESTMENT BANK HOLDING COMPANY.—A foreign
115

•HR 2520 IH

1 bank and a company that owns or controls a foreign

2 bank may not be treated as an investment bank

3 holding company unless the bank and company meet

4 and continue to meet the following criteria:

5 ‘‘(A) NO INSURED DEPOSITS.—No deposits

6 held directly by a foreign bank or through an

7 affiliate are insured under the Federal Deposit

8 Insurance Act.

9 ‘‘(B) CAPITAL STANDARDS.—The foreign

10 bank meets risk-based capital standards com11 parable to the capital standards required for a

12 wholesale financial institution, giving due re13 gard to the principle of national treatment and

14 equality of competitive opportunity.

15 ‘‘(C) TRANSACTIONS WITH AFFILIATES.—

16 Transactions between a branch, agency, or com17 mercial lending company subsidiary of the for18 eign bank in the United States, and any securi19 ties affiliate or company in which the foreign

20 bank (or any company that owns or controls

21 such foreign bank) has invested pursuant to

22 subsection (a)(1)(B), comply with the provisions

23 of sections 23A and 23B of the Federal Reserve

24 Act in the same manner and to the same extent

25 as such transactions would be required to com-
116

•HR 2520 IH

1 ply with such sections if the bank were a mem2 ber bank.

3 ‘‘(3) TREATMENT AS A WHOLESALE FINANCIAL

4 INSTITUTION.—Any foreign bank which is, or is af5 filiated with a company which is, treated as an in6 vestment bank holding company under this sub7 section shall be treated as a wholesale financial insti8 tution for purposes of clauses (iii) and (iv) of sub9 section (a)(1)(B), subsection (a)(2)(B)(ii), and sec10 tion 5(g), except that the Board may adopt such

11 modifications, conditions, or exemptions as the

12 Board deems appropriate, giving due regard to the

13 principle of national treatment and equality of com14 petitive opportunity.

15 ‘‘(4) NONAPPLICABILITY OF OTHER EXEMP16 TION.—Any foreign bank or company which is treat17 ed as an investment bank holding company under

18 this subsection shall not be eligible for any exemp19 tion described in section 2(h).

20 ‘‘(c) ELIGIBILITY OF FOREIGN BANKS FOR CERTAIN

21 TREATMENT.—

22 ‘‘(1) RECIPROCAL NATIONAL TREATMENT.—

23 ‘‘(A) IN GENERAL.—A foreign bank that

24 operates a branch, agency or commercial lend25 ing company in the United States, and any
117

•HR 2520 IH

1 company that owns or controls such a foreign

2 bank, shall be eligible for the treatment af3 forded under subsection (b) or section 11(n)

4 only if the home country of such foreign bank

5 or company accords to United States banks the

6 same competitive opportunities in banking as

7 such country accords to domestic banks of such

8 country.

9 ‘‘(B) COORDINATION WITH NAFTA.—Sub10 paragraph (A) shall not apply in derogation of

11 any obligation under the North American Free

12 Trade Agreement.

13 ‘‘(C) HOME COUNTRY DEFINED.—For pur14 poses of subparagraph (A), the term ‘home

15 country’ means, with respect to any foreign

16 bank or company referred to in subparagraph

17 (A), the country under the laws of which the

18 foreign bank or company is organized.

19 ‘‘(2) PREVENTION OF EVASION.—No foreign

20 bank or bank owned by a former United States na21 tional may operate a branch or agency in the United

22 State if the predominance of the assets of such bank

23 were acquired in connection with a merger with, or

24 purchase or assumption of all or substantially all the

25 assets of, a wholesale financial institution.
118

•HR 2520 IH

1 ‘‘(d) RULE FOR FINANCIAL SERVICES HOLDING

2 COMPANIES.—For purposes of section 5(g)(2)(A)(ii), any

3 foreign bank (as defined in section 1(b) of the Inter4 national Banking Act of 1978) which is directly or indi5 rectly owned, controlled, or operated by a company that—

6 ‘‘(1) as of January 1, 1995, was registered as

7 a bank holding company; or

8 ‘‘(2) is a successor to any such bank holding

9 company,

10 shall be treated as a wholesale financial institution.’’.

11 (c) CONFORMING AMENDMENTS.—

12 (1) EXCEPTION TO DEPOSIT INSURANCE RE13 QUIREMENT.—Section 3(e) of the Bank Holding

14 Company Act of 1956 (12 U.S.C. 1842(e)) is

15 amended by adding at the end the following: ‘‘This

16 subsection shall not apply to a wholesale financial

17 institution that is controlled by an investment bank

18 holding company that controls no banks other than

19 wholesale financial institutions.’’.

20 (2) APPROPRIATE FEDERAL BANKING AGEN21 CY.—Section 3(q)(2)(A) of the Federal Deposit In22 surance Act (12 U.S.C. 1813(q)(2)(A)) is amended

23 to read as follows:

24 ‘‘(A) any State member insured bank (ex25 cept a District bank) and wholesale financial in-
119

•HR 2520 IH

1 stitution as authorized pursuant to section 9B

2 of the Federal Reserve Act;’’.

3 SEC. 117. WHOLESALE FINANCIAL INSTITUTIONS.

4 (a) IN GENERAL.—The Federal Reserve Act (12

5 U.S.C. 221 et seq.) is amended by inserting after section

6 9A the following new section:

7 ‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

8 ‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE9 SALE FINANCIAL INSTITUTION.—

10 ‘‘(1) APPLICATION REQUIRED.—

11 ‘‘(A) IN GENERAL.—Any bank incor12 porated by special law of any State, or orga13 nized under the general laws of any State, may

14 apply to the Board of Governors of the Federal

15 Reserve System to become a wholesale financial

16 institution and to subscribe to the stock of the

17 Federal reserve bank organized within the dis18 trict where the applying bank is located.

19 ‘‘(B) TREATMENT AS STATE MEMBER

20 BANK.—Any application under subparagraph

21 (A) shall be treated as an application to become

22 a State member bank under, and shall be sub23 ject to the provisions of, section 9.

24 ‘‘(2) INSURANCE TERMINATION.—No bank that

25 is insured under the Federal Deposit Insurance Act
120

•HR 2520 IH

1 may become a wholesale financial institution unless

2 it has met all requirements under that Act for vol3 untary termination of deposit insurance.

4 ‘‘(3) APPLICATION FEE.—No bank or organiza5 tion may become a wholesale financial institution

6 unless the Board has received, from the bank or or7 ganization, full payment of a fee which the Board

8 shall impose in the manner provided under section

9 5(h) of the Financial Services Holding Company Act

10 of 1995.

11 ‘‘(b) GENERAL REQUIREMENTS APPLICABLE TO

12 WHOLESALE FINANCIAL INSTITUTIONS.—

13 ‘‘(1) FEDERAL RESERVE ACT.—Except as oth14 erwise provided in this section, wholesale financial

15 institutions shall be member banks and shall be sub16 ject to the provisions of this Act that apply to mem17 ber banks to the same extent and in the same man18 ner as State member insured banks, except that a

19 wholesale financial institution may terminate mem20 bership under this Act only with the prior written

21 approval of the Board and on terms and conditions

22 that the Board determines are appropriate to carry

23 out the purposes of this Act.

24 ‘‘(2) PROMPT CORRECTIVE ACTION.—A whole25 sale financial institution shall be deemed to be an in-
121

•HR 2520 IH

1 sured depository institution for purposes of section

2 38 of the Federal Deposit Insurance Act except

3 that—

4 ‘‘(A) the relevant capital levels and capital

5 measures for each capital category shall be the

6 levels specified by the Board for wholesale fi7 nancial institutions in accordance with sub8 section (c);

9 ‘‘(B) the provisions applicable to well cap10 italized insured depository institutions shall be

11 inapplicable to wholesale financial institutions;

12 ‘‘(C) the provisions authorizing or requir13 ing an institution to be placed into receivership

14 shall not apply to a wholesale financial institu15 tion, and, instead, the Board is authorized or

16 required, as the case may be, to terminate the

17 wholesale financial institution’s membership in

18 the Federal Reserve System or place the bank

19 into conservatorship; and

20 ‘‘(D) for purposes of applying the provi21 sions of section 38 of the Federal Deposit In22 surance Act to wholesale financial institutions,

23 all references to the appropriate Federal bank24 ing agency or to the Corporation in that section

25 shall be deemed to be references to the Board.
122

•HR 2520 IH

1 ‘‘(3) ENFORCEMENT AUTHORITY.—Subsections

2 (j) and (k) of section 7, subsections (b) through (n),

3 (s), (u), and (v) of section 8, and section 19 of the

4 Federal Deposit Insurance Act shall apply to a

5 wholesale financial institution in the same manner

6 and to the same extent as such provisions apply to

7 State member insured banks and any reference in

8 such sections to an insured depository institution

9 shall be deemed, for purposes of this paragraph, to

10 be a reference to a wholesale financial institution.

11 ‘‘(4) CERTAIN OTHER STATUTES APPLICA12 BLE.—A wholesale financial institution shall be

13 deemed to be a banking institution, and the Board

14 shall be the appropriate Federal banking agency for

15 such bank and all such bank’s affiliates, for pur16 poses of the International Lending Supervision Act.

17 ‘‘(5) BANK MERGER ACT.—A wholesale finan18 cial institution shall be subject to the provisions of

19 sections 18(c) and 44 of the Federal Deposit Insur20 ance Act in the same manner and to the same extent

21 the wholesale financial institution would be subject

22 to such sections if the institution were a State mem23 ber insured bank.

24 ‘‘(6) REGISTRATION FEE.—The Board shall as25 sess an annual registration fee in the manner pro-
123

•HR 2520 IH

1 vided in section 5(h) of the Financial Services Hold2 ing Company Act of 1995 on each wholesale finan3 cial institution.

4 ‘‘(c) SPECIFIC REQUIREMENTS APPLICABLE TO

5 WHOLESALE FINANCIAL INSTITUTIONS.—

6 ‘‘(1) LIMITATIONS ON DEPOSITS.—

7 ‘‘(A) MINIMUM AMOUNT.—

8 ‘‘(i) IN GENERAL.—Pursuant to such

9 regulations as the Board may prescribe, no

10 wholesale financial institution may receive

11 initial deposits of $100,000 or less, other

12 than on an incidental and occasional basis.

13 ‘‘(ii) LIMITATION ON DEPOSITS OF

14 LESS THAN $100,000.—No bank may be

15 treated as a wholesale financial institution

16 if the total amount of the initial deposits

17 of $100,000 or less at such bank constitute

18 more than 5 percent of the bank’s total de19 posits.

20 ‘‘(B) NO DEPOSIT INSURANCE.—No depos21 its held by a wholesale financial institution shall

22 be insured deposits under the Federal Deposit

23 Insurance Act.

24 ‘‘(C) ADVERTISING AND DISCLOSURE.—

25 The Board shall prescribe regulations pertain-
124

•HR 2520 IH

1 ing to advertising and disclosure by wholesale

2 financial institutions to ensure that each deposi3 tor is notified that deposits at the wholesale fi4 nancial institution are not federally insured or

5 otherwise guaranteed by the United States Gov6 ernment.

7 ‘‘(2) SPECIAL CAPITAL REQUIREMENTS APPLI8 CABLE TO WHOLESALE FINANCIAL INSTITUTIONS.—

9 ‘‘(A) MINIMUM CAPITAL LEVELS.—

10 ‘‘(i) IN GENERAL.—The Board shall,

11 by regulation, adopt capital requirements

12 for wholesale financial institutions—

13 ‘‘(I) to account for the status of

14 wholesale financial institutions as in15 stitutions that accept deposits that

16 are not insured under the Federal De17 posit Insurance Act; and

18 ‘‘(II) to provide for the safe and

19 sound operation of the wholesale fi20 nancial institution without undue risk

21 to creditors or other persons, includ22 ing Federal reserve banks, engaged in

23 transactions with the bank.

24 ‘‘(ii) MINIMUM TIER 1 CAPITAL

25 RATIO.—The minimum ratio of tier 1 cap-
125

•HR 2520 IH

1 ital to total risk-weighted assets of whole2 sale financial institutions shall be not less

3 than the level required for a State member

4 insured bank to be well capitalized unless

5 the Board determines otherwise, consistent

6 with safety and soundness.

7 ‘‘(B) CAPITAL CATEGORIES FOR PROMPT

8 CORRECTIVE ACTION.—For purposes of apply9 ing section 38 of the Federal Deposit Insurance

10 Act with respect to any wholesale financial in11 stitution, the Board shall, by regulation, estab12 lish, for each relevant capital measure specified

13 by the Board under subparagraph (A), the lev14 els at which a wholesale financial institution is

15 well capitalized, adequately capitalized,

16 undercapitalized, significantly undercapitalized,

17 and critically undercapitalized.

18 ‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE

19 TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi20 tion to any requirement otherwise applicable to State

21 member banks or applicable, under this section, to

22 wholesale financial institutions, the Board may pre23 scribe, by regulation or order, for wholesale financial

24 institutions—
126

•HR 2520 IH

1 ‘‘(A) limitations on transactions with affili2 ates to prevent an affiliate from gaining access

3 to, or the benefits of, credit from a Federal re4 serve bank, including overdrafts at a Federal

5 reserve bank;

6 ‘‘(B) special clearing balance requirements;

7 and

8 ‘‘(C) any additional requirements that the

9 Board determines to be appropriate or nec10 essary to—

11 ‘‘(i) promote the safety and soundness

12 of the wholesale financial institution, or

13 ‘‘(ii) protect creditors and other per14 sons, including Federal reserve banks, en15 gaged in transactions with the wholesale fi16 nancial institution.

17 ‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL

18 INSTITUTIONS.—The Board may, by regulation or

19 order, exempt any wholesale financial institution

20 from any provision applicable to a State member

21 bank that is not a wholesale financial institution, if

22 the Board finds that such exemption is not incon23 sistent with—
127

•HR 2520 IH

1 ‘‘(A) the promotion of the safety and

2 soundness of the wholesale financial institution;

3 and

4 ‘‘(B) the protection of creditors and other

5 persons, including Federal reserve banks, en6 gaged in transactions with the wholesale finan7 cial institution.

8 ‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This

9 section shall not be construed as limiting the

10 Board’s authority over member banks under any

11 other provision of law, or to create any obligation for

12 any Federal reserve bank to make, increase, renew,

13 or extend any advances or discount under this Act

14 to any member bank or other depository institution.

15 ‘‘(d) CONSERVATORSHIP AUTHORITY.—

16 ‘‘(1) IN GENERAL.—The Board may appoint a

17 conservator to take possession and control of a

18 wholesale financial institution to the same extent

19 and in the same manner as the Comptroller of the

20 Currency may appoint a conservator for a national

21 bank under section 203 of the Bank Conservation

22 Act, and the conservator shall exercise the same

23 powers, functions, and duties, subject to the same

24 limitations, as are provided under such Act for con25 servators of national banks.
128

•HR 2520 IH

1 ‘‘(2) BOARD AUTHORITY.—The Board shall

2 have the same authority with respect to any con3 servator appointed under paragraph (1) and the

4 wholesale financial institution for which such con5 servator has been appointed as the Comptroller of

6 the Currency has under the Bank Conservation Act

7 with respect to a conservator appointed under such

8 Act and a national bank for which the conservator

9 has been appointed.

10 ‘‘(e) DEFINITIONS.—For purposes of this section, the

11 following definitions shall apply:

12 ‘‘(1) WHOLESALE FINANCIAL INSTITUTION.—

13 The term ‘wholesale financial institution’ means a

14 bank whose application to become a wholesale finan15 cial institution and a State member bank has been

16 approved by the Board under this section.

17 ‘‘(2) DEPOSIT.—The term ‘deposit’ has the

18 meaning given to such term by the Board under this

19 Act.

20 ‘‘(3) STATE MEMBER INSURED BANK.—The

21 term ‘State member insured bank’ means a State

22 member bank which is an insured bank (as defined

23 in section 3(h) of the Federal Deposit Insurance

24 Act).
129

•HR 2520 IH

1 ‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and

2 (e) of section 43 of the Federal Deposit Insurance Act

3 shall not apply to any wholesale financial institution.’’.

4 (b) VOLUNTARY TERMINATION OF INSURED STATUS

5 BY CERTAIN INSTITUTIONS.—

6 (1) SECTION 8 DESIGNATIONS.—Section 8(a) of

7 the Federal Deposit Insurance Act (12 U.S.C.

8 1818(a)) is amended—

9 (A) by striking paragraph (1); and

10 (B) by redesignating paragraphs (2)

11 through (9) as paragraphs (1) through (8), re12 spectively.

13 (2) VOLUNTARY TERMINATION OF INSURED

14 STATUS.—The Federal Deposit Insurance Act (12

15 U.S.C. 1811 et seq.) is amended by inserting after

16 section 8 the following new section:

17 ‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN18 SURED DEPOSITORY INSTITUTION.

19 ‘‘(a) IN GENERAL.—Except as provided in subsection

20 (b), an insured State bank or a national bank may volun21 tarily terminate such bank’s status as an insured deposi22 tory institution in accordance with regulations of the Cor23 poration if—

24 ‘‘(1) the bank provides written notice of the

25 bank’s intent to terminate such insured status—
130

•HR 2520 IH

1 ‘‘(A) to the Corporation and the Board of

2 Governors of the Federal Reserve System not

3 less than 6 months before the effective date of

4 such termination; and

5 ‘‘(B) to all depositors at such bank, not

6 less than 6 months before the effective date of

7 the termination of such status; and

8 ‘‘(2) either—

9 ‘‘(A) the deposit insurance fund of which

10 such bank is a member equals or exceeds the

11 fund’s designated reserve ratio as of the date

12 the bank provides a written notice under para13 graph (1) and the Corporation determines that

14 the fund will equal or exceed the applicable des15 ignated reserve ratio for the 2 semiannual as16 sessment periods immediately following such

17 date; or

18 ‘‘(B) the Corporation and the Board of

19 Governors of the Federal Reserve System ap20 prove the termination of the bank’s insured sta21 tus and the bank pays an exit fee in accordance

22 with subsection (e).

23 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply

24 with respect to—

25 ‘‘(1) an insured savings association;
131

•HR 2520 IH

1 ‘‘(2) an insured branch that is required to be

2 insured under subsection (a) or (b) of section 6 of

3 the International Banking Act of 1978; or

4 ‘‘(3) any institution described in section 2(c)(2)

5 of the Bank Holding Company Act of 1956.

6 ‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—

7 Any bank that voluntarily elects to terminate the bank’s

8 insured status under subsection (a) shall not be eligible

9 for insurance on any deposits or any assistance authorized

10 under this Act after the period specified in subsection

11 (f)(1).

12 ‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI13 NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING

14 ACTIVITIES.—Any depository institution which voluntarily

15 terminates such institution’s status as an insured deposi16 tory institution under this section may not, upon termi17 nation of insurance, accept any deposits unless the institu18 tion is a wholesale financial institution under section 9B

19 of the Federal Reserve Act.

20 ‘‘(e) EXIT FEES.—

21 ‘‘(1) IN GENERAL.—Any bank that voluntarily

22 terminates such bank’s status as an insured deposi23 tory institution under this section shall pay an exit

24 fee in an amount that the Corporation determines is

25 sufficient to account for the institution’s pro rata
132

•HR 2520 IH

1 share of the amount (if any) which would be re2 quired to restore the relevant deposit insurance fund

3 to the fund’s designated reserve ratio as of the date

4 the bank provides a written notice under subsection

5 (a)(1).

6 ‘‘(2) PROCEDURES.—The Corporation shall pre7 scribe, by regulation, procedures for assessing any

8 exit fee under this subsection.

9 ‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED

10 AS OF TERMINATION.—

11 ‘‘(1) TRANSITION PERIOD.—The insured depos12 its of each depositor in a State bank or a national

13 bank on the effective date of the voluntary termi14 nation of the bank’s insured status, less all subse15 quent withdrawals from any deposits of such deposi16 tor, shall continue to be insured for a period of not

17 less than 6 months and not more than 2 years, as

18 determined by the Corporation. During such period,

19 no additions to any such deposits, and no new de20 posits in the depository institution made after the ef21 fective date of such termination shall be insured by

22 the Corporation.

23 ‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS

24 AND DUTIES.—During the period specified in para25 graph (1) with respect to any bank, the bank shall
133

•HR 2520 IH

1 continue to pay assessments under section 7 as if

2 the bank were an insured depository institution. The

3 bank shall, in all other respects, be subject to the

4 authority of the Corporation and the duties and obli5 gations of an insured depository institution under

6 this Act during such period, and in the event that

7 the bank is closed due to an inability to meet the de8 mands of the bank’s depositors during such period,

9 the Corporation shall have the same powers and

10 rights with respect to such bank as in the case of

11 an insured depository institution.

12 ‘‘(g) ADVERTISEMENTS.—

13 ‘‘(1) IN GENERAL.—A bank that voluntarily

14 terminates the bank’s insured status under this sec15 tion shall not advertise or hold itself out as having

16 insured deposits, except that the bank may advertise

17 the temporary insurance of deposits under sub18 section (f) if, in connection with any such advertise19 ment, the advertisement also states with equal prom20 inence that additions to deposits and new deposits

21 made after the effective date of the termination are

22 not insured.

23 ‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,

24 AND SECURITIES.—Any certificate of deposit or

25 other obligation or security issued by a State bank
134

•HR 2520 IH

1 or a national bank after the effective date of the vol2 untary termination of the bank’s insured status

3 under this section shall be accompanied by a con4 spicuous, prominently displayed notice that such cer5 tificate of deposit or other obligation or security is

6 not insured under this Act.

7 ‘‘(h) NOTICE REQUIREMENTS.—

8 ‘‘(1) NOTICE TO THE CORPORATION.—The no9 tice required under subsection (a)(1)(A) shall be in

10 such form as the Corporation may require.

11 ‘‘(2) NOTICE TO DEPOSITORS.—The notice re12 quired under subsection (a)(1)(B) shall be—

13 ‘‘(A) sent to each depositor’s last address

14 of record with the bank; and

15 ‘‘(B) in such manner and form as the Cor16 poration finds to be necessary and appropriate

17 for the protection of depositors.’’.

18 (3) DEFINITION.—Section 19(b)(1)(A)(i) of the

19 Federal Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is

20 amended after ‘‘such Act’’ by inserting ‘‘, or any

21 wholesale financial institution as defined in section

22 9B of this Act’’.

23 (c) REPORTS ON DISCOUNTS AND ADVANCES TO

24 WHOLESALE FINANCIAL INSTITUTIONS.—Section 10B of
135

•HR 2520 IH

1 the Federal Reserve Act (12 U.S.C. 347(b)) is amended

2 by adding at the end the following new subsection:

3 ‘‘(c) REPORTS ON DISCOUNTS AND ADVANCES TO

4 WHOLESALE FINANCIAL INSTITUTIONS.—

5 ‘‘(1) IN GENERAL.—The Board shall submit a

6 report to the Congress at the end of any year in

7 which any wholesale financial institution has ob8 tained a discount, advance, or other extension of

9 credit from a Federal reserve bank.

10 ‘‘(2) CONTENTS.—Any report submitted under

11 paragraph (1) shall explain the circumstances and

12 need for any discount, advance, or other extension of

13 credit to a wholesale financial institution during the

14 period covered by the report, including the type and

15 amount of credit extended and the amount of credit

16 remaining outstanding as of the date of the report.’’.

17 Subtitle C—Financial Activities

18 SEC. 121. FINANCIAL ACTIVITIES.

19 Section 4(c)(8) of the Bank Holding Company Act

20 of 1956 (12 U.S.C. 1843(c)(8)) is amended—

21 (1) by striking ‘‘shares of any company’’ and all

22 that follows through ‘‘for a bank holding company to

23 provide’’ and inserting ‘‘shares of any company the

24 activities of which the Board after due notice has de25 termined (by order, regulation, or advisory opinion)
136

•HR 2520 IH

1 to be financial in nature or incidental to such finan2 cial activities. In determining whether an activity is

3 financial in nature or incidental to financial activi4 ties, the Board shall take into account changes or

5 reasonably expected changes in the marketplace in

6 which financial services holding companies compete

7 as well as changes or reasonably expected changes

8 in the technology by which these services are deliv9 ered. In addition, the Board shall take into account

10 activities considered financial activities or banking or

11 financial operations for purposes of the regulation

12 of the Board designated as ‘Regulation K’ (12

13 C.F.R. 211.23 (f)(5)(iii)(B)) as in effect on the date

14 of the enactment of the Financial Services Competi15 tiveness and Regulatory Relief Act of 1995. Any ac16 tivity that the Board has determined, by order or

17 regulation that is in effect on such date to be so

18 closely related to banking or managing or controlling

19 banks as to be a proper incident thereto shall be

20 deemed to be of a financial nature for purposes of

21 this paragraph without further action by the Board

22 (subject to the same terms and conditions contained

23 in such order or regulation, unless modified by the

24 Board), but for purposes of this subsection it shall

25 not be closely related to banking or managing or
137

•HR 2520 IH

1 controlling banks or financial in nature or incidental

2 to a financial activity for a financial services holding

3 company to provide’’;

4 (2) in the 3d sentence, by inserting ‘‘and be5 tween activities commenced by affiliates of different

6 classes of banks’’ before the period at the end; and

7 (3) by striking the 2d sentence.

8 SEC. 122. NO PRIOR APPROVAL REQUIRED FOR WELL CAP9 ITALIZED AND WELL MANAGED FINANCIAL

10 SERVICES HOLDING COMPANIES.

11 Section 4(j) of the Bank Holding Company Act of

12 1956 (12 U.S.C. 1843(j)) is amended—

13 (1) in paragraph (1), by striking ‘‘No’’ and in14 serting ‘‘Except as provided in paragraph (3) or sec15 tion 10(b)(3), no’’; and

16 (2) by adding at the end the following new

17 paragraphs:

18 ‘‘(3) NO NOTICE REQUIRED FOR CERTAIN

19 TRANSACTIONS.—Notwithstanding paragraph (1), no

20 notice under subsection (c)(8) or (a)(2)(B) is re21 quired for a proposal by a financial services holding

22 company to engage in any activity (other than an ac23 tivity described in subparagraph (A) or (B) of sec24 tion 10(a)(1)) or acquire or retain the shares or as-
138

•HR 2520 IH

1 sets of any company (other than a securities affili2 ate) if the proposal qualifies under paragraph (4).

3 ‘‘(4) CRITERIA FOR STATUTORY APPROVAL.—A

4 proposal qualifies under this paragraph if all of the

5 following criteria are met:

6 ‘‘(A) FINANCIAL CRITERIA.—Both before

7 and immediately after the proposed trans8 action—

9 ‘‘(i) the acquiring financial services

10 holding company is well capitalized;

11 ‘‘(ii) the lead depository institution of

12 such holding company is well capitalized;

13 ‘‘(iii) well capitalized depository insti14 tutions control at least 80 percent of the

15 aggregate total risk-weighted assets of de16 pository institutions controlled by such

17 holding company; and

18 ‘‘(iv) no depository institution con19 trolled by such holding company is

20 undercapitalized.

21 ‘‘(B) MANAGERIAL CRITERIA.—

22 ‘‘(i) WELL MANAGED.—At the time of

23 the transaction, the acquiring financial

24 services holding company, the lead deposi25 tory institution of such holding company,
139

•HR 2520 IH

1 and depository institutions that control at

2 least 80 percent of the aggregate total

3 risk-weighted assets of depository institu4 tions controlled by such holding company

5 are well managed.

6 ‘‘(ii) LIMITATION ON POORLY MAN7 AGED INSTITUTIONS.—No depository insti8 tution which is controlled by the acquiring

9 financial services holding company has re10 ceived any of the lowest 2 composite rat11 ings at the later of the institution’s most

12 recent examination or subsequent review.

13 ‘‘(iii) RECENTLY ACQUIRED INSTITU14 TIONS.—Depository institutions acquired

15 by the financial services holding company

16 during the 12-month period ending on the

17 date of the proposed transaction may be

18 excluded for purposes of clause (ii) if—

19 ‘‘(I) the financial services holding

20 company has developed a plan accept21 able to the appropriate Federal bank22 ing agency for the institution to re23 store the capital and management of

24 the institution; and
140

•HR 2520 IH

1 ‘‘(II) all such depository institu2 tions represent, in the aggregate, less

3 than 25 percent of the total risk4 weighted assets of all depository insti5 tutions controlled by the financial

6 services holding company.

7 ‘‘(C) ACTIVITIES PERMISSIBLE.—Following

8 consummation of the proposed transaction, the

9 financial services holding company engages di10 rectly or through a subsidiary solely in—

11 ‘‘(i) activities that are permissible

12 under subsection (c)(8), as determined by

13 the Board by any regulation, order, or ad14 visory opinion under such subsection that

15 is in effect at the time of the proposed

16 transaction, subject to all of the restric17 tions, terms, and conditions of such sub18 section and such regulation, order, or advi19 sory opinion; and

20 ‘‘(ii) such other activities as are other21 wise permissible under this Act, subject to

22 the restrictions, terms and conditions, in23 cluding any prior notice or approval re24 quirements, provided in this Act.

25 ‘‘(D) SIZE OF ACQUISITION.—
141

•HR 2520 IH

1 ‘‘(i) ASSET SIZE.—The book value of

2 the total risk-weighted assets acquired does

3 not exceed 10 percent of the consolidated

4 total risk-weighted assets of the acquiring

5 financial services holding company.

6 ‘‘(ii) CONSIDERATION.—The gross

7 consideration to be paid for the securities

8 or assets does not exceed 15 percent of the

9 consolidated tier 1 capital of the acquiring

10 financial services holding company.

11 ‘‘(E) NOTICE NOT OTHERWISE WAR12 RANTED.—For proposals described in para13 graph (5)(B), the Board has not, before the

14 conclusion of the period described in such para15 graph, advised the financial services holding

16 company that a notice under paragraph (1) is

17 required.

18 ‘‘(5) NOTIFICATION.—

19 ‘‘(A) COMMENCEMENT OF ACTIVITIES AP20 PROVED BY RULE.—A financial services holding

21 company that qualifies under paragraph (4)

22 and proposes to engage de novo, directly or

23 through a subsidiary, in any activity that is per24 missible under subsection (c)(8), as determined
142

•HR 2520 IH

1 by the Board by regulation, may commence that

2 activity without prior notice to the Board.

3 ‘‘(B) SUBSEQUENT NOTICE.—A financial

4 services holding company that commences an

5 activity under subsection (c)(8) without prior

6 notice to the Board shall provide written notice

7 to the Board no later than 10 business days

8 after commencing the activity.

9 ‘‘(C) ACTIVITIES PERMITTED BY ORDER

10 AND ACQUISITIONS.—

11 ‘‘(i) IN GENERAL.—At least 12 busi12 ness days prior to commencing any activity

13 (other than an activity described in sub14 paragraph (A)) or acquiring shares or as15 sets of any company in a proposal that

16 qualifies under paragraph (4), the financial

17 services holding company shall provide

18 written notice to the Board of the pro19 posal, unless the Board determines that no

20 notice or a shorter notice period is appro21 priate.

22 ‘‘(ii) DESCRIPTION OF PROPOSED AC23 TIVITIES.—A notice under clause (i) shall

24 include a description of the proposed ac-
143

•HR 2520 IH

1 tivities and the terms of any proposed ac2 quisition.

3 ‘‘(6) ADJUSTMENT OF AMOUNTS.—The Board

4 may, by regulation, adjust the amounts and the

5 manner in which the percentage of depository insti6 tutions is calculated under subparagraph (B)(i),

7 (B)(iii)(II), or (D) of paragraph (4) if the Board de8 termines that any such adjustment is consistent with

9 safety and soundness and the purposes of this Act.

10 ‘‘(7) EXPEDITED PROCEDURE FOR NEW ACTIVI11 TIES.—

12 ‘‘(A) EXPEDITED PREACQUISITION RE13 VIEW.—After the end of the 12-day period re14 ferred to in paragraph (5)(C) and subject to

15 any final ruling under subparagraph (B), a fi16 nancial services holding company may acquire a

17 company engaged in activities that the company

18 believes are financial in nature for purposes of

19 subsection (c)(8) and that the Board has not

20 previously reviewed under such subsection if—

21 ‘‘(i) the proposal qualifies under all of

22 the criteria in paragraph (4) other than

23 paragraph (4)(C);

24 ‘‘(ii) the financial services holding

25 company provides the notice required
144

•HR 2520 IH

1 under paragraph (5)(C), and includes with

2 such notice an explanation of the facts and

3 circumstances that provide a reasonable

4 basis for concluding that the proposed ac5 tivities are financial in nature or incidental

6 to such financial activities; and

7 ‘‘(iii) before the end of such 12-day

8 period, the Board has not—

9 ‘‘(I) required a notice under

10 paragraph (1) with respect to the pro11 posed transaction; or

12 ‘‘(II) advised the financial serv13 ices holding company that the com14 pany has failed to provide a reason15 able basis for concluding that the pro16 posed activities are financial in nature

17 or incidental to such financial activi18 ties.

19 ‘‘(B) POSTACQUISITION REVIEW.—

20 ‘‘(i) NOTICE PROCEDURE.—A finan21 cial services holding company which is per22 mitted to make an acquisition under this

23 paragraph shall file a notice with the

24 Board in accordance with paragraph (1)

25 before the end of the 30-day period begin-
145

•HR 2520 IH

1 ning on the date of the consummation of

2 the acquisition.

3 ‘‘(ii) LIMITED REVIEW.—The Board’s

4 review of a postconsummation notice re5 quired under this subparagraph shall be

6 limited to determining whether the pro7 posed activities are permissible under sub8 section (c)(8), including whether the pro9 posal meets the criteria in paragraph

10 (2)(A).

11 ‘‘(iii) CONDITIONAL ACTION.—No pro12 vision of this paragraph shall be construed

13 as limiting in any way the authority of the

14 Board under this section to impose condi15 tions on the conduct of any activity or the

16 ownership of any company.

17 ‘‘(iv) DIVESTITURE OF IMPERMIS18 SIBLE ACTIVITIES.—If the Board deter19 mines that any proposed activity is not

20 permissible under subsection (c)(8), the fi21 nancial services holding company shall ter22 minate the activity or divest the company

23 acquired in reliance on this paragraph be24 fore the end of the 2-year period beginning

25 on the date of such determination.
146

•HR 2520 IH

1 ‘‘(C) INITIAL DECISION NOT PREJUDICIAL

2 TO SUBSEQUENT DETERMINATION.—A decision

3 by the Board under subparagraph (A) not to

4 require a notice under paragraph (1) during the

5 12-day period referred to in such subparagraph

6 shall not prejudice the Board’s decision under

7 subparagraph (B).’’.

8 SEC. 123. STREAMLINED EXAMINATION AND REPORTING

9 REQUIREMENTS FOR ALL FINANCIAL SERV10 ICES HOLDING COMPANIES.

11 Section 5(c) of the Bank Holding Company Act of

12 1956 (12 U.S.C. 1844(c)) is amended to read as follows—

13 ‘‘(c) REPORTS AND EXAMINATIONS.—

14 ‘‘(1) PURPOSES.—

15 ‘‘(A) IN GENERAL.—The purpose of this

16 subsection is to authorize the Board, through

17 reports and examinations, to gather information

18 from a financial services holding company and

19 the subsidiaries of any such holding company

20 regarding the structure, activities, and financial

21 condition of the financial services holding com22 pany and such subsidiaries so that the Board

23 can monitor risks within the holding company

24 system that could adversely affect any deposi25 tory institution subsidiary of the holding com-
147

•HR 2520 IH

1 pany and may monitor and enforce compliance

2 with this Act.

3 ‘‘(B) PURPOSE NOT TO IMPOSE ADDI4 TIONAL BURDENS ON HOLDING COMPANIES.—It

5 is the intended purpose of this subsection that

6 the Board shall—

7 ‘‘(i) exercise the Board’s authority to

8 collect information under this section in a

9 manner that is the least burdensome to fi10 nancial services holding companies and the

11 subsidiaries of such companies; and

12 ‘‘(ii) rely, to the fullest extent pos13 sible, on reports prepared for and examina14 tions conducted by or for other Federal

15 and State supervisors.

16 ‘‘(C) PURPOSE TO REQUIRE CAREFULLY

17 TAILORED EXAMINATIONS.—It is the intended

18 purpose of this subsection that the Board shall

19 tailor the focus and scope of any examination

20 under this section to a financial services holding

21 company or to any subsidiary of such company

22 which, because of financial conditions, activities,

23 operations of such subsidiary, the transactions

24 between such subsidiary and other affiliates, or

25 the size of any such subsidiary poses a potential
148

•HR 2520 IH

1 material risk to a depository institution subsidi2 ary of such holding company.

3 ‘‘(2) REPORTS.—

4 ‘‘(A) IN GENERAL.—The Board from time

5 to time may require any financial services hold6 ing company and any subsidiary of such com7 pany to submit reports under oath to keep the

8 Board informed as to—

9 ‘‘(i) the company’s or the subsidiary’s

10 activities, financial condition, policies, sys11 tems for monitoring and controlling finan12 cial and operational risks, and transactions

13 with depository institution subsidiaries of

14 the holding company; and

15 ‘‘(ii) the extent to which the company

16 or subsidiary has complied with the provi17 sions of this Act and regulations prescribed

18 and orders issued under this Act.

19 ‘‘(B) USE OF EXISTING REPORTS.—

20 ‘‘(i) IN GENERAL.—The Board shall,

21 to the fullest extent possible, accept re22 ports in fulfillment of the Board’s report23 ing requirements under this paragraph

24 that a financial services holding company

25 or any subsidiary of such company has
149

•HR 2520 IH

1 been required to provide to other Federal

2 and State supervisors or to appropriate

3 self-regulatory organizations.

4 ‘‘(ii) AVAILABILITY.—A financial serv5 ices holding company or a subsidiary of

6 such company shall provide to the Board,

7 at the request of the Board, a report re8 ferred to in clause (i).

9 ‘‘(3) EXAMINATIONS.—

10 ‘‘(A) LIMITED USE OF EXAMINATION AU11 THORITY.—The Board may make examinations

12 of each financial services holding company and

13 each subsidiary of such company in order to—

14 ‘‘(i) inform the Board of the nature of

15 the operations and financial condition of

16 the financial services holding company and

17 such subsidiaries;

18 ‘‘(ii) inform the Board of the—

19 ‘‘(I) financial and operational

20 risks within the financial services

21 holding company system that may af22 fect any depository institution owned

23 by such holding company; and

24 ‘‘(II) the systems of the holding

25 company and such subsidiaries for
150

•HR 2520 IH

1 monitoring and controlling those

2 risks; and

3 ‘‘(iii) monitor compliance with the

4 provisions of this Act and those governing

5 transactions and relationships between any

6 depository institution controlled by a finan7 cial services holding company and any of

8 the company’s other subsidiaries.

9 ‘‘(B) RESTRICTED FOCUS OF EXAMINA10 TIONS.—The Board shall, to the fullest extent

11 possible, limit the focus and scope of any exam12 ination of a financial services holding company

13 to—

14 ‘‘(i) the holding company; and

15 ‘‘(ii) to any subsidiary (other than a

16 depository institution subsidiary) of the

17 holding company which, because of the

18 size, condition, or activities of the subsidi19 ary, the nature or size of transactions be20 tween such subsidiary and any depository

21 institution affiliate, or the centralization of

22 functions within the holding company sys23 tem, could have a materially adverse effect

24 on the safety and soundness of any deposi-
151

•HR 2520 IH

1 tory institution affiliate of the subsidiary

2 or of the holding company.

3 ‘‘(C) DEFERENCE TO BANK EXAMINA4 TIONS.—The Board shall, to the fullest extent

5 possible, use the report of examinations of de6 pository institutions made by the Comptroller of

7 the Currency, the Federal Deposit Insurance

8 Corporation, the Office of Thrift Supervision or

9 the appropriate State depository institution su10 pervisory authority for the purposes of this sec11 tion.

12 ‘‘(D) DEFERENCE TO OTHER EXAMINA13 TIONS.—The Board shall, to the fullest extent

14 possible, use the reports of examination made

15 of—

16 ‘‘(i) any registered broker or dealer by

17 or on behalf of the Securities Exchange

18 Commission, and

19 ‘‘(ii) any other subsidiary that the

20 Board finds to be comprehensively super21 vised under relevant Federal or State law

22 by a Federal or state agency or authority.

23 ‘‘(E) CONFIDENTIALITY OF REPORTED IN24 FORMATION.—
152

•HR 2520 IH

1 ‘‘(i) IN GENERAL.—Notwithstanding

2 any other provision of law, the Board shall

3 not be compelled to disclose any informa4 tion required to be reported under this

5 paragraph, or any information supplied to

6 the Board by any domestic or foreign regu7 latory agency, that relates to the financial

8 or operational condition of any financial

9 services holding company or any subsidiary

10 of such company.

11 ‘‘(ii) COMPLIANCE WITH REQUESTS

12 FOR INFORMATION.—No provision of this

13 subparagraph shall be construed as author14 izing the Board to withhold information

15 from Congress, or preventing the Board

16 from complying with a request for informa17 tion from any other Federal department or

18 agency for purposes within the scope of

19 such department’s or agency’s jurisdiction,

20 or from complying with an order of a court

21 of competent jurisdiction in an action

22 brought by the United States or the

23 Board.

24 ‘‘(iii) COORDINATION WITH OTHER

25 LAW.—For purposes of section 552 of title
153

•HR 2520 IH

1 5, United States Code, this subparagraph

2 shall be considered to be a statute de3 scribed in subsection (b)(3)(B) of such sec4 tion.

5 ‘‘(iv) DESIGNATION OF CONFIDENTIAL

6 INFORMATION.—In prescribing regulations

7 to carry out the requirements of this sub8 section, the Board shall designate informa9 tion described in or obtained pursuant to

10 this paragraph as confidential information.

11 ‘‘(F) COSTS.—The cost of any examination

12 conducted by the Board under this section may

13 be assessed against, and made payable by, such

14 holding company.’’.

15 SEC. 124. HOLDING COMPANY SUPERVISION FOR FINAN16 CIAL SERVICES HOLDING COMPANIES EN17 GAGED PRIMARILY IN NONBANKING ACTIVI18 TIES.

19 Section 5 of the Bank Holding Company Act of 1956

20 (12 U.S.C. 1844) is amended by adding at the end the

21 following new subsection:

22 ‘‘(g) REDUCED SUPERVISION OF COMPANIES CON23 TROLLING PRINCIPALLY NONDEPOSITORY INSTITU24 TIONS.—

25 ‘‘(1) ELECTION.—
154

•HR 2520 IH

1 ‘‘(A) IN GENERAL.—Any financial services

2 holding company that qualifies under paragraph

3 (2) may make an election to be governed by the

4 approval, capital, reporting and examination re5 quirements of paragraphs (3), (4), (5) and (6)

6 by—

7 ‘‘(i) filing a written notice of such

8 election with the Board; and

9 ‘‘(ii) if applicable, providing a written

10 guarantee to the Federal Deposit Insur11 ance Corporation pursuant to paragraph

12 (2).

13 ‘‘(B) EFFECTIVE PERIOD OF ELECTION.—

14 An election under subparagraph (A) shall re15 main in effect—

16 ‘‘(i) so long as the financial services

17 holding company continues to qualify

18 under paragraph (2); or

19 ‘‘(ii) until the financial services hold20 ing company revokes the election.

21 ‘‘(2) CRITERIA FOR ELECTION.—A financial

22 services holding company may make an election

23 under paragraph (1) if the company meets all of the

24 following criteria:
155

•HR 2520 IH

1 ‘‘(A) COMPANY PRINCIPALLY CONTROLS

2 NONDEPOSITORY COMPANIES.—

3 ‘‘(i) FINANCIAL SERVICES HOLDING

4 COMPANIES WITH DEPOSITORY INSTITU5 TIONS.—In the case of a financial services

6 holding company (other than an invest7 ment bank holding company), the consoli8 dated total risk-weighted assets of all de9 pository institutions and foreign banks (as

10 defined in section 1(b)(7) of the Inter11 national Banking Act of 1978) controlled

12 by the financial services holding com13 pany—

14 ‘‘(I) constitute less than 10 per15 cent of the consolidated total risk16 weighted assets of such company; and

17 ‘‘(II) are less than

18 $5,000,000,000.

19 ‘‘(ii) INVESTMENT BANK HOLDING

20 COMPANIES.—In the case of an investment

21 bank holding company, the consolidated

22 total risk-weighted assets of all wholesale

23 financial institutions controlled by the in24 vestment bank holding company—
156

•HR 2520 IH

1 ‘‘(I) constitute less than 25 per2 cent of the consolidated total risk3 weighted assets of such company; and

4 ‘‘(II) are less than

5 $15,000,000,000.

6 ‘‘(iii) INFLATION ADJUSTMENT.—The

7 dollar limitation contained in clauses

8 (i)(II) and (ii)(II) shall be adjusted annu9 ally after December 31, 1995, by the an10 nual percentage increase in the Consumer

11 Price Index for Urban Wage Earners and

12 Clerical Workers published by the Bureau

13 of Labor Statistics.

14 ‘‘(iv) AUTHORITY TO INCREASE LIM15 ITS.—The Board may increase any the

16 percentages referred to in clauses (i)(I)

17 and (ii)(I) and the dollar amounts de18 scribed in clauses (i)(II) and (ii)(II) as the

19 Board may determine to be appropriate.

20 ‘‘(B) WELL CAPITALIZED INSTITUTIONS.—

21 Each depository institution controlled by the fi22 nancial services holding company is well capital23 ized.

24 ‘‘(C) WELL MANAGED INSTITUTIONS.—
157

•HR 2520 IH

1 ‘‘(i) IN GENERAL.—Each depository

2 institution controlled by the financial serv3 ices holding company received a CAMEL

4 composite rating of 1 or 2 (or an equiva5 lent rating under an equivalent rating sys6 tem) in the most recent examination of

7 such institution.

8 ‘‘(ii) EXCLUSION FOR NEWLY AC9 QUIRED INSTITUTIONS.—A depository in10 stitution acquired by a financial services

11 holding company during the 12-month pe12 riod ending on the date of the election by

13 such company under paragraph (1) may be

14 excluded for purposes of clause (i) if the fi15 nancial services holding company has de16 veloped a plan acceptable to the appro17 priate Federal banking agency (for such

18 institution) to restore the capital and man19 agement of the institution.

20 ‘‘(D) HOLDING COMPANY GUARANTEE.—

21 ‘‘(i) IN GENERAL.—The financial

22 services holding company provides a writ23 ten guarantee acceptable to the Federal

24 Deposit Insurance Corporation to maintain

25 the capital levels of each insured deposi-
158

•HR 2520 IH

1 tory institution controlled by the financial

2 services holding company at not less than

3 the levels required for such institution to

4 remain well capitalized.

5 ‘‘(ii) LIMITATION ON LIABILITY.—The

6 liability of a financial services holding com7 pany under a guarantee provided under

8 this subparagraph shall not exceed an

9 amount equal to 10 percent of the total

10 risk-weighted assets of the insured deposi11 tory institution, measured as of the date

12 that the institution becomes

13 undercapitalized.

14 ‘‘(iii) DURATION OF GUARANTEE.—

15 Notwithstanding paragraph (1), a financial

16 services holding company that has elected

17 treatment under this subsection shall con18 tinue to be bound by the guarantee made

19 under this subsection until released in ac20 cordance with this subparagraph.

21 ‘‘(iv) RELEASE FROM LIABILITY.—

22 The Board shall release a financial services

23 holding company from the guarantee appli24 cable with respect to any depository insti25 tution subsidiary of such company—
159

•HR 2520 IH

1 ‘‘(I) upon the written request of

2 the financial services holding company

3 to revoke the company’s election

4 under paragraph (1) if the Board de5 termines that each depository institu6 tion controlled by the financial serv7 ices holding company is well capital8 ized and well managed at the time of

9 such revocation;

10 ‘‘(II) in the case of a financial

11 services holding company which no

12 longer meets the requirements of sub13 paragraph (A), upon a determination

14 by the Board that each depository in15 stitution controlled by the financial

16 services holding company is well cap17 italized and well managed;

18 ‘‘(III) upon the written request

19 of the financial services holding com20 pany following the divestiture of con21 trol of the depository institution in a

22 transaction that does not require Fed23 eral assistance if the Board deter24 mines that, immediately following the
160

•HR 2520 IH

1 divestiture, the depository institution

2 is or will be well capitalized; or

3 ‘‘(IV) upon a determination by

4 the Board, after consultation with the

5 Federal Deposit Insurance Corpora6 tion, that, subject to the limit on li7 ability provided in clause (ii), the fi8 nancial services holding company has

9 fully performed under the guarantee.

10 ‘‘(E) RESPONSIVENESS TO COMMUNITY

11 NEEDS.—The lead insured depository institu12 tion subsidiary of the financial services holding

13 company and insured depository institutions

14 controlling at least 80 percent of the aggregate

15 total risk-weighted assets of insured depository

16 institutions controlled by the financial services

17 holding company have achieved a ‘satisfactory

18 record of meeting community credit needs’, or

19 better, during the most recent examination of

20 such insured depository institutions.

21 ‘‘(3) NO NOTICE OR APPROVAL REQUIRED FOR

22 CERTAIN PURPOSES UNDER PARAGRAPHS (8), (13),

23 OR (15) OF SECTION 4(c).—

24 ‘‘(A) IN GENERAL.—Notwithstanding

25 paragraphs (8), (13), and, in the case of an in-
161

•HR 2520 IH

1 vestment bank holding company, (15) of section

2 4(c), a financial services holding company that

3 has in effect an election under paragraph (1),

4 and any subsidiary of such holding company,

5 may, without prior notice to, or the approval of,

6 the Board under paragraph (8), (13), or, in the

7 case of an investment bank holding company,

8 (15) of section 4(c), engage de novo in any ac9 tivity, or acquire shares of any company en10 gaged in any activity, if—

11 ‘‘(i) the Board has determined, by

12 order or regulation in effect at the time

13 the company or subsidiary commences to

14 engage in such activity or acquire such

15 shares, that the activity is permissible for

16 a financial services holding company or a

17 subsidiary of such company to engage in

18 under paragraph (8) or (13) of section 4(c)

19 (and regulations prescribed under such

20 paragraphs); and

21 ‘‘(ii) the activity is conducted in com22 pliance with all conditions and limitations

23 applicable to such activity under any regu24 lation, order, or advisory opinion pre25 scribed or issued by the Board.
162

•HR 2520 IH

1 ‘‘(B) SUBSEQUENT NOTICE.—A financial

2 services holding company that commences to

3 engage in an activity, or makes an acquisition,

4 in accordance with subparagraph (A) shall in5 form the Board of such fact, in writing, not

6 later than 10 days after commencing the activ7 ity or consummating the acquisition.

8 ‘‘(4) CAPITAL.—

9 ‘‘(A) IN GENERAL.—The Board shall not

10 (by regulation or order), directly or indirectly,

11 establish or apply minimum capital require12 ments to a financial services holding company

13 which has in effect an election under paragraph

14 (1) unless the Board concludes, on the basis of

15 all information available to the Board, that the

16 financial services holding company is not main17 taining sufficient financial resources to meet

18 fully any guarantee required under paragraph

19 (2).

20 ‘‘(B) CRITERIA FOR CONSIDERATION.—For

21 purposes of making a determination under sub22 paragraph (A), the Board shall consider, in ad23 dition to any other relevant considerations, the

24 financial condition and the adequacy of the cap25 ital of each of the depository institutions con-
163

•HR 2520 IH

1 trolled by the financial services holding com2 pany.

3 ‘‘(5) REPORTS.—

4 ‘‘(A) IN GENERAL.—The reporting require5 ments contained in subsection (c)(2) shall apply

6 to a financial services holding company which

7 qualifies under this subsection, to the extent

8 provided by the Board.

9 ‘‘(B) EXEMPTIONS FROM REPORTING RE10 QUIREMENTS.—

11 ‘‘(i) IN GENERAL.—The Board may,

12 by regulation or order, exempt any com13 pany or class of companies, under such

14 terms and conditions and for such periods

15 as the Board shall provide in such regula16 tion or order, from the provisions of this

17 paragraph and any regulations prescribed

18 under this paragraph.

19 ‘‘(ii) CRITERIA FOR CONSIDER20 ATION.—In granting any exemption under

21 clause (i), the Board shall consider, among

22 other factors—

23 ‘‘(I) whether information of the

24 type required under this paragraph is

25 available from a supervisory agency
164

•HR 2520 IH

1 (as defined in section 1101(7) of the

2 Right to Financial Privacy Act of

3 1978), the Commodity Futures Trad4 ing Commission, or a foreign regu5 latory body of a similar type;

6 ‘‘(II) the primary business of the

7 company; and

8 ‘‘(III) the nature and extent of

9 domestic or foreign regulations of the

10 company’s activities.

11 ‘‘(6) EXAMINATIONS.—

12 ‘‘(A) LIMITED USE OF EXAMINATION AU13 THORITY FOR FINANCIAL SERVICES HOLDING

14 COMPANIES.—The Board shall not examine,

15 under this section, any financial services hold16 ing company described in paragraph (2)(A)(i)

17 for which an election is in effect under para18 graph (1) or any subsidiary (other than a de19 pository institution) of such holding company

20 unless—

21 ‘‘(i) the Board determines, on the

22 basis of all information available to the

23 Board, that—

24 ‘‘(I) the operations or activities

25 of the financial services holding com-
165

•HR 2520 IH

1 pany or any subsidiary of such com2 pany, or any transaction involving

3 such company or subsidiary and an

4 affiliated depository institution, may

5 pose a material risk to the safety and

6 soundness of any depository institu7 tion owned by such holding company;

8 or

9 ‘‘(II) the financial services hold10 ing company does not appear to have

11 sufficient resources to meet the guar12 antee required under paragraph (2);

13 or

14 ‘‘(ii) the Board is unable to accom15 plish the purposes described in subsection

16 (c)(3)(A) without such examinations.

17 ‘‘(B) LIMITED USE OF EXAMINATION AU18 THORITY FOR INVESTMENT BANK HOLDING

19 COMPANIES.—The Board shall not examine,

20 under this section, any investment bank holding

21 company described in paragraph (2)(A)(ii)

22 which has an election in effect under paragraph

23 (1) or any subsidiary (other than a depository

24 institution) of such holding company unless—
166

•HR 2520 IH

1 ‘‘(i) the Board determines that the op2 erations or activities of the investment

3 bank holding company or any subsidiary of

4 such company, or any transaction involving

5 such company or subsidiary and an affili6 ated depository institution, may pose a ma7 terial risk to the safety and soundness of

8 any depository institution owned by such

9 holding company; or

10 ‘‘(ii) the Board is unable to determine

11 from reports the nature of the operations,

12 financial condition, activities, or effective13 ness of the risk management systems of

14 the investment bank holding company or

15 any subsidiary of such company, or to as16 sess compliance with the provisions of this

17 Act and those governing transactions and

18 relationships between any depository insti19 tution controlled by the investment bank

20 holding company and the investment bank

21 holding company or any of such subsidi22 aries.

23 ‘‘(C) RESTRICTED FOCUS AND DEFERENCE

24 IN EXAMINATIONS.—The Board shall limit the

25 focus and scope of any examination, under this
167

•HR 2520 IH

1 section, of a financial services holding company

2 or investment bank holding company for which

3 an election is in effect under paragraph (1) or

4 of any subsidiary (other than a depository insti5 tution) of such holding company and shall defer

6 to examinations conducted by the Securities Ex7 change Commission or other supervisors in ac8 cordance with subparagraphs (B), (C), and (D)

9 of subsection (c)(3).’’.

10 SEC. 125. CONVERSION OF UNITARY SAVINGS AND LOAN

11 HOLDING COMPANIES TO FINANCIAL SERV12 ICES HOLDING COMPANIES.

13 The Bank Holding Company Act of 1956 (12 U.S.C.

14 1841 et seq.) is amended by inserting after section 5 the

15 following new section:

16 ‘‘SEC. 6. CONVERSION OF UNITARY SAVINGS AND LOAN

17 HOLDING COMPANIES TO FINANCIAL SERV18 ICES HOLDING COMPANIES.

19 ‘‘(a) STREAMLINED PROCEDURE FOR CONVER20 SION.—

21 ‘‘(1) IN GENERAL.—During the 18-month pe22 riod beginning on the date of the enactment of the

23 Financial Services Competitiveness and Regulatory

24 Relief Act of 1995, no approval shall be required

25 under section 3(a) or paragraph (8) or (13) of sec-
168

•HR 2520 IH

1 tion 4(c) for any qualified savings and loan holding

2 company to become a financial services holding com3 pany for any company that, both prior to January

4 1, 1995, and on the date of enactment of the Finan5 cial Services Competitiveness and Regulatory Relief

6 Act of 1995, is a savings and loan holding company

7 if the requirements of paragraph (2) are met.

8 ‘‘(2) ELIGIBILITY REQUIREMENTS.—A qualified

9 savings and loan holding company shall be eligible to

10 become a financial services holding company pursu11 ant to paragraph (1) if—

12 ‘‘(A) the company becomes a financial

13 services holding company as the result of the

14 conversion of a savings association controlled by

15 such company as of the date of enactment of

16 the Financial Services Competitiveness and

17 Regulatory Relief Act of 1995 into a bank;

18 ‘‘(B) the company is adequately capitalized

19 before and immediately after the conversion re20 ferred to in subparagraph (A);

21 ‘‘(C) all depository institutions controlled

22 by such company are well capitalized before and

23 immediately after such conversion;
169

•HR 2520 IH

1 ‘‘(D) all depository institutions controlled

2 by such company are well managed before the

3 conversion;

4 ‘‘(E) the Board would not be prohibited

5 under any provision of section 3(d) from ap6 proving the transaction;

7 ‘‘(F) the activities of the company and of

8 each subsidiary of the company comply with

9 this Act (and regulations prescribed under this

10 Act); and

11 ‘‘(G) the company provides the Board with

12 at least 30 days written notice of the proposed

13 conversion, and, before the expiration of such

14 30-day period, the Board has not objected to

15 the company becoming a financial services hold16 ing company based on the criteria contained in

17 this subsection.

18 ‘‘(3) QUALIFIED SAVINGS AND LOAN HOLDING

19 COMPANY DEFINED.—For purposes of this sub20 section, the term ‘qualified savings and loan holding

21 company’ means any company which became a sav22 ings and loan holding company before January 1,

23 1995, and is a savings and loan holding company as

24 of the date of the enactment of the Financial Serv-
170

•HR 2520 IH

1 ices Competitiveness and Regulatory Relief Act of

2 1995.

3 ‘‘(b) LIMITED RETENTION OF EXISTING INVEST4 MENTS.—Any holding company which converts to a finan5 cial services holding company in accordance with sub6 section (a) may retain direct or indirect ownership or con7 trol of voting shares of any company as provided in, and

8 subject to, section 4(k) if—

9 ‘‘(1) the holding company controlled 1 or more

10 savings associations in accordance with section

11 10(c)(3) of the Home Owners Loan Act before Jan12 uary 1, 1995, and as of the date of the enactment

13 of the Financial Services Competitiveness and Regu14 latory Relief Act of 1995;

15 ‘‘(2) the investment in voting shares and the fi16 nancial services holding company meet the require17 ments of section 4(k) (other than paragraph

18 (1)(A)(iii) of such section); and

19 ‘‘(3) more than 75 percent of the revenues of

20 the financial services holding company for each of

21 the 2 calendar years before the date such company

22 became a financial services holding company involved

23 securities activities described in subparagraphs (A)

24 and (B) of section 10(a)(1) and activities that the
171

•HR 2520 IH

1 Board has determined to be permissible under sec2 tion 4(c)(8).

3 ‘‘(c) CONVERSION FEE.—No qualified savings and

4 loan holding company may become a financial services

5 holding company pursuant to this section unless the Board

6 has received, from such company, full payment of a fee

7 which the Board shall impose in accordance with section

8 5(h).’’.

9 SEC. 126. FINANCIAL SERVICES ADVISORY COMMITTEE.

10 (a) ESTABLISHMENT.—There is hereby established

11 the Financial Services Advisory Committee (hereinafter in

12 this section referred to as the ‘‘Committee’’).

13 (b) MEMBERSHIP.—

14 (1) IN GENERAL.—The Committee shall consist

15 of 9 members, appointed as follows from among in16 dividuals who are not officers or employees of the

17 Federal Government and who are especially qualified

18 to serve on such committee by virtue of their edu19 cation, training, or experience:

20 (A) 1 member appointed by the Secretary

21 of the Treasury.

22 (B) 2 members appointed by the Comptrol23 ler of the Currency.

24 (C) 2 members appointed by the Director

25 of the Office of Thrift Supervision.
172

•HR 2520 IH

1 (D) 2 members appointed by the Board of

2 Governors of the Federal Reserve System.

3 (E) 2 members appointed by the Board of

4 Directors of the Federal Deposit Insurance Cor5 poration.

6 (2) REPRESENTATION OF SMALL AND INDE7 PENDENT DEPOSITORY INSTITUTIONS.—Of the

8 members appointed under subparagraphs (B), (C),

9 (D), and (E) of paragraph (1), 1 of the 2 members

10 appointed under each such paragraph shall be ap11 pointed from among individuals who are especially

12 qualified to represent the interests of depository in13 stitutions which—

14 (A) have total assets of less than

15 $500,000,000; or

16 (B) are not controlled by any depository

17 institution holding company.

18 (c) VACANCIES.—Any vacancy on the Committee

19 shall be filled in the same manner in which the original

20 appointment was made.

21 (d) PAY AND EXPENSES.—Members of the Commit22 tee shall serve without pay, but each member shall be re23 imbursed for expenses incurred in connection with attend24 ance of such members at meetings of the Committee by
173

•HR 2520 IH

1 the agency which appointed such member to the Commit2 tee.

3 (e) TERMS.—Members shall be appointed for terms

4 of 1 year.

5 (f) AUTHORITY OF THE COMMITTEE.—The Commit6 tee may select a chairperson, vice chairperson, and sec7 retary, and adopt methods of procedure, and shall have

8 power—

9 (1) to confer with each Federal banking agency

10 on general and special business conditions and regu11 latory and other matters relating to the financial

12 services industry in the United States and the im13 pact of this Act, and the amendments made by this

14 Act, on the financial service industry, especially with

15 regard to depository institutions described in sub16 section (b)(2); and

17 (2) to request information from, and to make

18 recommendations to, each of the Federal banking

19 agencies with respect to matters within the jurisdic20 tion of such agency.

21 (g) MEETINGS.—The Committee shall meet at least

22 2 times each year at the call of the chairperson or a major23 ity of the members.

24 (h) REPORTS.—The Committee shall submit a semi25 annual written report to the Committee on Banking and
174

•HR 2520 IH

1 Financial Services of the House and to the Committee on

2 Banking, Housing, and Urban Affairs of the Senate. Such

3 report shall describe the activities of the Committee for

4 such semiannual period and contain such recommenda5 tions as the Committee considers appropriate.

6 (i) PROVISION OF STAFF AND OTHER RESOURCES.—

7 Each of the Federal banking agencies shall provide the

8 Committee with the use of such resources, including staff,

9 as the Committee reasonably shall require to carry out its

10 duties, including the preparation and submission of re11 ports to Congress, under this section.

12 (j) DEFINITIONS.—For purposes of this section, the

13 terms ‘‘insured depository institution’’ and ‘‘Federal bank14 ing agencies’’ have the meaning given to such terms in

15 section 3 of the Federal Deposit Insurance Act.

16 (k) FEDERAL ADVISORY COMMITTEE ACT DOES NOT

17 APPLY.—The Federal Advisory Committee Act shall not

18 apply to the Committee.

19 (l) SUNSET.—The Committee shall cease to exist 10

20 years after the enactment of this section.

21 SEC. 127. COORDINATION WITH STATE LAW.

22 Except as specifically provided in section 109, no pro23 vision of this Act, and no amendment made by this Act

24 to any other provision of law, may be construed as super25 seding any provision of the law of any State which imposes
175

•HR 2520 IH

1 additional requirements or establishes higher standards

2 for the safe and sound operation and condition of deposi3 tory institutions (as defined in section 3 of the Federal

4 Deposit Insurance Act) and the protection of consumers

5 than the requirements imposed or the standards estab6 lished under this Act and the amendments made by this

7 Act to other provisions of law (including capital standards

8 and other safeguards placed on affiliates).

9 SEC. 128. CONFORMING AMENDMENTS TO THE BANK HOLD10 ING COMPANY ACT OF 1956.

11 (a) SHORT TITLE; TABLE OF CONTENTS.—The first

12 section of the Bank Holding Company Act of 1956 (12

13 U.S.C. 1841 nt.) is amended to read as follows:

14 ‘‘SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

15 ‘‘(a) SHORT TITLE.—This Act may be cited as the

16 ‘Financial Services Holding Company Act of 1995’.

17 ‘‘(b) TABLE OF CONTENTS.—The table of contents

18 for this Act is as follows:

‘‘Sec. 1. Short title; table of contents.

‘‘Sec. 2. Definitions.

‘‘Sec. 3. Acquisition of bank shares or assets.

‘‘Sec. 4. Interests in nonbanking organizations.

‘‘Sec. 5. Administration.

‘‘Sec. 6. Conversion of unitary savings and loan holding companies to financial

services holding companies.

‘‘Sec. 7. Reservation of rights to States.

‘‘Sec. 8. Penalties.

‘‘Sec. 9. Judicial review.

‘‘Sec. 10. Securities activities.

‘‘Sec. 11. Safeguards relating to securities activities.

‘‘Sec. 12. Investment bank holding companies and other financial activities.

‘‘Sec. 13. Saving provision.

‘‘Sec. 14. Separability of provisions.
176

•HR 2520 IH

1 ‘‘(c) REFERENCES IN OTHER LAWS.—Any reference

2 in any Federal or State law to a provision of the Bank

3 Holding Company Act of 1956 shall be deemed to be a

4 reference to the corresponding provision of this Act.’’.

5 (b) DEFINITIONS.—

6 (1) Subsection (n) of section 2 of the Bank

7 Holding Company Act of 1956 (12 U.S.C. 1841(n))

8 is amended by inserting ‘‘ ‘depository institution’, ’’

9 before ‘‘ ‘insured depository institution’ ’’.

10 (2) Subsection (o) of section 2 of the Bank

11 Holding Company Act of 1956 (12 U.S.C. 1841(o))

12 is amended—

13 (A) by striking paragraph (1) and insert14 ing the following new paragraph:

15 ‘‘(1) LEAD DEPOSITORY INSTITUTION.—The

16 term ‘lead depository institution’ means the largest

17 depository institution controlled by the financial

18 services holding company, based on a comparison of

19 the average total assets controlled by each deposi20 tory institution during the previous 12-month pe21 riod.’’; and

22 (B) by adding at the end the following new

23 paragraphs:

24 ‘‘(8) INSURED DEPOSITORY INSTITUTION FOR

25 CERTAIN SECTIONS.—Notwithstanding subsection
177

•HR 2520 IH

1 (n), the terms ‘depository institution’ and ‘insured

2 depository institution’ include, for purposes of para3 graph (1) and sections 4(k), 10, and 11, any branch,

4 agency, or commercial lending company operated in

5 the United States by a foreign bank.

6 ‘‘(9) WELL MANAGED.—The term ‘well man7 aged’ means—

8 ‘‘(A) in the case of any company or deposi9 tory institution which receives examinations, the

10 achievement of—

11 ‘‘(i) a CAMEL composite rating of 1

12 or 2 (or an equivalent rating under an

13 equivalent rating system) in connection

14 with the most recent examination or subse15 quent review of such company or institu16 tion; and

17 ‘‘(ii) at least a satisfactory rating for

18 management, if such rating is given; or

19 ‘‘(B) in the case of a company or deposi20 tory institution that has not received an exam21 ination rating, the existence and use of manage22 rial resources which the Board determines are

23 satisfactory.’’.

24 (3) Section 2 of the Bank Holding Company

25 Act of 1956 (12 U.S.C. 1841) (as amended by sec-
178

•HR 2520 IH

1 tion 116(a)(1) of this Act) is amended by inserting

2 after subsection (o) the following new subsections:

3 ‘‘(p) SECURITIES AFFILIATE.—The term ‘securities

4 affiliate’ means any company—

5 ‘‘(1) that is (or is required to be) registered

6 under the Securities Exchange Act of 1934 as a

7 broker or dealer; and

8 ‘‘(2) the acquisition or retention of the shares

9 or assets of which the Board has approved under

10 section 10.

11 ‘‘(q) CAPITAL TERMS.—

12 ‘‘(1) DEPOSITORY INSTITUTIONS.—With respect

13 to depository institutions, the terms ‘well capital14 ized,’ ‘adequately capitalized’ and ‘undercapitalized’

15 have the meanings given to such terms in accord16 ance with section 38(b) of the Federal Deposit In17 surance Act.

18 ‘‘(2) FINANCIAL SERVICES HOLDING COM19 PANY.—The following definitions shall apply with re20 spect to financial services holding companies:

21 ‘‘(A) ADEQUATELY CAPITALIZED.—The

22 term ‘adequately capitalized’ means a level of

23 capitalization which meets or exceeds the re24 quired minimum level established by the Board
179

•HR 2520 IH

1 for each relevant capital measure for financial

2 services holding companies.

3 ‘‘(B) WELL CAPITALIZED.—The term ‘well

4 capitalized’ means a level of capitalization

5 which meets or exceeds the required capital lev6 els established by the Board for well capitalized

7 financial services holding companies.

8 ‘‘(3) OTHER CAPITAL TERMS.—The terms ‘tier

9 1’ and ‘risk-weighted assets’ have the meaning given

10 those terms in the capital guidelines or regulations

11 established by the Board for financial services hold12 ing companies.

13 ‘‘(r) FOREIGN BANK TERMS.—For purposes of sub14 sections (s) and (u), sections 4(k), 10, and 11, and sub15 sections (b) and (c) of section 12—

16 ‘‘(1) the terms ‘agency’, ‘branch’, and ‘commer17 cial lending company’ have the same meaning as in

18 section 1(b) of the International Banking Act of

19 1978.

20 ‘‘(2) the term ‘foreign bank’ means a foreign

21 bank (as defined in section 1(b) of the International

22 Banking Act of 1978) which operates a branch,

23 agency or commercial lending company, or owns or

24 controls a bank, in the United States.’’.
180

•HR 2520 IH

1 (c) AMENDMENT REGARDING CONDITIONAL AP2 PROVAL OF NOTICES.—Section 4(a)(2) of the Bank Hold3 ing Company Act of 1956 (12 U.S.C. 1843(a)(2)) is

4 amended by striking ‘‘paragraph (8)’’ and all that follows

5 through ‘‘issued by the Board under such paragraph’’ and

6 inserting ‘‘subsection (c)(8) or section 4(k), 10, or 11,

7 subject to all the conditions specified in those provisions

8 or in any order or regulation issued by the Board under

9 those provisions’’.

10 (d) AMENDMENT TO NOTICE PROCEDURES.—Section

11 4(j) of the Bank Holding Company Act of 1956 (12

12 U.S.C. 1843(j)) (as amended by section 122 of this title)

13 is amended—

14 (1) in paragraph (1)(A), by striking ‘‘subsection

15 (c)(8) or (a)(2)’’ and inserting ‘‘subsection (a)(2),

16 (c)(8), (c)(15), or (k)’’;

17 (2) in paragraph (1)(E)—

18 (A) by striking ‘‘subsection (c)(8) or

19 (a)(2)’’ and inserting ‘‘subsection (a)(2), (c)(8),

20 (c)(15), or (k)’’; and

21 (B) by striking the last sentence and in22 serting the following: ‘‘In no event may the

23 Board, without the agreement of the financial

24 services holding company submitting the notice,

25 extend the notice period under this subpara-
181

•HR 2520 IH

1 graph beyond the period that ends 180 days

2 after the date that a notice is filed with the

3 Board or the relevant Federal reserve bank in

4 accordance with the regulations of the Board.’’;

5 and

6 (3) in paragraph (2), by redesignating subpara7 graphs (B) and (C) as subparagraphs (C) and (D),

8 respectively, and inserting after subparagraph (A)

9 the following new subparagraph:

10 ‘‘(B) CRITERIA FOR NOTICES INVOLVING

11 SECURITIES AFFILIATES.—In considering any

12 notice that involves the acquisition of shares of

13 a securities affiliate pursuant to section

14 4(c)(15), the Board shall apply the criteria and

15 safeguards contained in this paragraph and in

16 sections 10 and 11.’’.

17 (e) ELIMINATION OF OBSOLETE PROVISIONS.—The

18 Bank Holding Company Act of 1956 (12 U.S.C. 1841

19 through 1849) is amended—

20 (1) in section 4(a)(2)—

21 (A) by striking ‘‘or in the case of a com22 pany’’ and ending ‘‘after December 31, 1980,’’;

23 and
182

•HR 2520 IH

1 (B) by striking the sentence beginning

2 ‘‘Notwithstanding any other provision of this

3 paragraph’’;

4 (2) in section 4(b), by striking ‘‘After two years

5 from the date of enactment of this Act, no’’ and in6 serting ‘‘No’’; and

7 (3) in section 5(a)—

8 (A) by striking ‘‘Within one hundred and

9 eighty days after the date of enactment of this

10 Act, or within’’ and inserting ‘‘Within’’; and

11 (B) by striking ‘‘whichever is later,’’.

12 (f) CONFORMING AMENDMENTS.—The Bank Holding

13 Company Act of 1956 (12 U.S.C. 1841 et seq.) is amend14 ed as follows:

15 (1) In section 3(c)(4), by striking ‘‘one-bank

16 holding company’’ each place such term appears and

17 inserting ‘‘1-bank financial services holding com18 pany’’.

19 (2) In section 3(f)(5), by striking ‘‘bank holding

20 company’’ the first and second time such term ap21 pears and inserting ‘‘financial services holding com22 pany’’.

23 (3) In section 4(i)(3)(A), by striking ‘‘is ac24 quired’’ and inserting ‘‘was acquired’’.
183

•HR 2520 IH

1 (4) By striking ‘‘bank holding companies’’ each

2 place such appears in the following sections and in3 serting ‘‘financial services holding companies’’:

4 (A) Section 3(d).

5 (B) Section 4(f).

6 (C) Section 7(a).

7 (5) By striking ‘‘bank holding company’s’’ each

8 place such term appears in section 4(c)(14) and in9 serting ‘‘financial services holding company’s’’.

10 (6) By striking ‘‘bank holding company’’ each

11 place such term appears in the following sections

12 and inserting ‘‘financial services holding company’’:

13 (A) Subsections (a), (d), (e), (g), (h), and

14 (o) of section 2.

15 (B) Subsections (a), (b), (d), (f)(1), (f)(2),

16 and (f)(3) of section 3.

17 (C) Subsections (a), (d), (e), (g), (h), and

18 (j) of section 4.

19 (D) Clause (ii) in the portion of section

20 4(c) which precedes paragraph (1) of such sec21 tion.

22 (E) Paragraphs (2), (3), (7), (8), (10),

23 (11), (12)(A), and (14) of section 4(c).

24 (F) Paragraphs (4), (5), and (9) of section

25 4(f).
184

•HR 2520 IH

1 (G) Paragraphs (1) and (2) of section 4(i).

2 (H) Sections 5, 7(b), 8, and 11.

3 (7) In section 4(f)(1), by striking ‘‘bank holding

4 company’’ the 2d place such term appears and in5 serting ‘‘financial services holding company’’.

6 (8) In the headings for section 3(f) and 4(f), by

7 striking ‘‘BANK HOLDING’’ and inserting ‘‘FINAN8 CIAL SERVICES HOLDING’’.

9 (9) In the heading the heading for section

10 2(o)(7), by striking ‘‘BANK’’ and inserting ‘‘FINAN11 CIAL SERVICES’’.

12 (g) TREATMENT OF EXISTING BANK HOLDING COM13 PANIES.—Section 2(a)(6) of the Bank Holding Company

14 Act of 1956 (12 U.S.C. 1841(a)(6)) is amended by insert15 ing at the end the following: ‘‘Any company that was a

16 bank holding company on the day before the date of enact17 ment of the Financial Services Competitiveness and Regu18 latory Relief Act of 1995 shall, for purposes of this chap19 ter, be deemed to have been a financial services holding

20 company as of the date on which the company became a

21 bank holding company.’’.

22 (h) OTHER REFERENCES.—Any reference in any

23 Federal law to ‘‘bank holding company’’ or ‘‘bank holding

24 companies’’ as those terms were defined under the Bank

25 Holding Company Act of 1956 before the enactment of
185

•HR 2520 IH

1 this Act shall be deemed to include a reference to ‘‘finan2 cial services holding company’’ and ‘‘financial services

3 holding companies’’, respectively, as such terms are de4 fined under the Financial Services Holding Company Act

5 of 1995.

6 SEC. 129. CONFORMING AMENDMENTS TO THE BANK HOLD7 ING COMPANY ACT AMENDMENTS OF 1970.

8 Section 106 of the Bank Holding Company Act

9 Amendments of 1970 (12 U.S.C. 1971 through 1978) is

10 amended by striking ‘‘bank holding company’’ each place

11 such term appears and inserting ‘‘financial services hold12 ing company’’.

13 SEC. 130. CREDIT CARDS FOR BUSINESS PURPOSES.

14 Section 2(c)(2)(F) of the Bank Holding Company Act

15 of 1956 (relating to the definition of credit card banks)

16 is amended—

17 (1) in clause (i), by inserting ‘‘including the

18 provision of credit card accounts for business pur19 poses’’ before the semicolon; and

20 (2) in clause (v), by inserting ‘‘(other than the

21 provision of credit card accounts for business pur22 poses in connection with the credit card operations

23 referred to in clause (i))’’ before the period.
186

•HR 2520 IH

1 SEC. 131. DISPOSITION OF FORECLOSED ASSETS.

2 Section 4(c)(2) of the Bank Holding Company Act

3 of 1956 (12 U.S.C. 1843(c)(2)) is amended—

4 (1) by striking ‘‘for not more than one year at

5 a time’’; and

6 (2) by striking ‘‘but no such extensions shall ex7 tend beyond a date five years’’ and inserting ‘‘and,

8 in the case of a financial services holding company

9 which has not disposed of such shares within 5 years

10 of the date such shares were acquired, the Board

11 may, upon the application of such company, grant

12 additional exemptions if, in the Board’s judgment,

13 such extension would not be detrimental to the pub14 lic interest and either the financial services holding

15 company has made a good faith attempt to dispose

16 of such shares during such 5-year period or the dis17 posal of such shares during such 5-year period

18 would have been detrimental to the company, but

19 the aggregate duration of such extensions shall not

20 extend 10 years’’.
187

•HR 2520 IH

1 Subtitle D—Interagency Banking

2 and Financial Services Advisory

3 Committee

4 SEC. 141. INTERAGENCY BANKING AND FINANCIAL SERV5 ICES ADVISORY COMMITTEE.

6 (a) ESTABLISHMENT; COMPOSITION.—There is es7 tablished the Banking and Financial Services Advisory

8 Committee which shall consist of 6 members as follows:

9 (1) The Secretary of the Treasury.

10 (2) The Chairman of the Board of Governors of

11 the Federal Reserve System.

12 (3) The Chairperson of the Board of Directors

13 of the Federal Deposit Insurance Corporation.

14 (4) The Chairman of the Securities and Ex15 change Commission.

16 (5) The Chairperson of the Commodities Fu17 tures Trading Commission.

18 (6) The Comptroller of the Currency.

19 (b) CHAIRPERSON.—The chairperson of the Commit20 tee shall be the Secretary of the Treasury.

21 (c) DESIGNATION OF OFFICERS AND EMPLOYEES.—

22 The members of the Committee may, from time to time,

23 designate other officers or employees of their respective

24 agencies to carry out their duties on the Committee.
188

•HR 2520 IH

1 (d) COMPENSATION AND EXPENSES.—Each member

2 of the Committee shall serve without additional compensa3 tion but shall be entitled to reasonable expenses incurred

4 in carrying out official duties as a member.

5 (e) FUNCTION OF THE COMMITTEE.—

6 (1) IN GENERAL.—The Committee shall meet

7 as appropriate to consider matters of mutual inter8 est to the members and to consider making rec9 ommendations to the Board of Governors of the

10 Federal Reserve System regarding the types of ac11 tivities that may be financial in nature for purposes

12 of the Financial Services Holding Company Act and

13 to the Comptroller of the Currency regarding the

14 types of activities that may be incidental to banking

15 for purposes of section 5136 of the Revised Statutes

16 of the United States.

17 (2) CONSIDERATION OF RECOMMENDATIONS.—

18 The Board of Governors of the Federal Reserve Sys19 tem and the Comptroller of the Currency, as appro20 priate, shall take into account any recommendation

21 made to the respective agency by the Committee

22 and, if the agency does not adopt the recommenda23 tion, shall provide a written explanation to the Com24 mittee.
189

•HR 2520 IH

1 (f) IMPROVING THE SUPERVISION, EFFICIENCY, AND

2 COMPETITIVENESS OF THE FINANCIAL SERVICES INDUS3 TRY.—

4 (1) IN GENERAL.—The Committee shall seek to

5 improve the supervision, efficiency, and competitive6 ness of the financial services industry by making

7 recommendations for such legislative or administra8 tive action as the Committee determines to be appro9 priate to the Congress, each agency or office rep10 resented by a member on the Committee, and other

11 agencies or departments of the United States, in12 cluding recommendations for changes in law and in

13 the regulations, policies, and procedures of any de14 partment or agency.

15 (2) PRINTING IN FEDERAL REGISTER.—Rec16 ommendations from paragraph (1) shall be printed

17 in the Federal Register and submitted to the Com18 mittee on Banking and Financial Services of the

19 House of Representatives and the Committee on

20 Banking, Housing, and Urban Affairs of the Senate.

21 Subtitle E—Application and

22 Registration Fees

23 SEC. 151. AUTHORITY TO IMPOSE FEES.

24 Section 5 of the Bank Holding Company Act of 1956

25 (12 U.S.C. 1844) is amended by inserting after subsection
190

•HR 2520 IH

1 (g) (as added by section 124 of the bill) the following new

2 subsection:

3 ‘‘(h) FEES.—In connection with the administration

4 of this Act, the Board may impose fees on any financial

5 services holding company, or any company controlled di6 rectly or indirectly by such holding company—

7 ‘‘(1) for such purposes as the Board determines

8 to be reasonable and appropriate; and

9 ‘‘(2) in amounts, determined by the Board,

10 which are at least sufficient to meet the Board’s ex11 penses in carrying out this Act with respect to the

12 activity, application, examination, or other incident

13 or status (of such company) for which a fee is im14 posed under this subsection.’’.

15 TITLE II—FUNCTIONAL

16 REGULATION

17 Subtitle A—Brokers and Dealers

18 SEC. 201. DEFINITION OF BROKER.

19 Section 3(a)(4) of the Securities Exchange Act of

20 1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:

21 ‘‘(4) BROKER.—

22 ‘‘(A) IN GENERAL.—The term ‘broker’

23 means any person engaged in the business of

24 effecting transactions in securities for the ac25 count of others.
191

•HR 2520 IH

1 ‘‘(B) EXCLUSION OF BANKS.—The term

2 ‘broker’ does not include a bank unless such

3 bank—

4 ‘‘(i) publicly solicits the business of

5 effecting securities transactions for the ac6 count of others; or

7 ‘‘(ii) is compensated for such business

8 by the payment of commissions or similar

9 remuneration based on effecting trans10 actions in securities (other than fees cal11 culated as a percentage of assets under

12 management) in excess of the bank’s incre13 mental costs directly attributable to

14 effecting such transactions (hereafter re15 ferred to as ‘incentive compensation’).

16 ‘‘(C) EXEMPTION FOR CERTAIN BANK AC17 TIVITIES.—A bank shall not be considered to be

18 a broker because the bank engages in any of

19 the following activities under the conditions de20 scribed:

21 ‘‘(i) THIRD PARTY BROKERAGE AR22 RANGEMENTS.—The bank enters into a

23 contractual or other arrangement with a

24 broker or dealer registered under this title

25 under which the broker or dealer offers
192

•HR 2520 IH

1 brokerage services on or off the premises

2 of the bank if—

3 ‘‘(I) such broker or dealer is

4 clearly identified as the person per5 forming the brokerage services;

6 ‘‘(II) the broker or dealer per7 forms brokerage services in an area

8 that is clearly marked and, unless

9 made impossible by space or personnel

10 considerations, physically separate

11 from the routine deposit-taking activi12 ties of the bank;

13 ‘‘(III) any materials used by the

14 bank to advertise or promote generally

15 the availability of brokerage services

16 under the contractual or other ar17 rangement clearly indicate that the

18 brokerage services are being provided

19 by the broker or dealer and not by the

20 bank;

21 ‘‘(IV) any materials used by the

22 bank to advertise or promote generally

23 the availability of brokerage services

24 under the contractual or other ar25 rangement are in compliance with the
193

•HR 2520 IH

1 Federal securities laws before dis2 tribution;

3 ‘‘(V) bank employees perform

4 only clerical or ministerial functions in

5 connection with brokerage trans6 actions, including scheduling appoint7 ments with the associated persons of

8 a broker or dealer and, on behalf of a

9 broker or dealer, transmitting orders

10 or handling customers funds or secu11 rities, except that bank employees who

12 are not so qualified may describe in

13 general terms investment vehicles

14 under the contractual or other ar15 rangement and accept customer or16 ders on behalf of the broker or dealer

17 if such employees have received train18 ing that is substantially equivalent to

19 the training required for personnel

20 qualified to sell securities pursuant to

21 the requirements of a self-regulatory

22 organization (as defined in section

23 3(a) of the Securities Exchange Act of

24 1934);
194

•HR 2520 IH

1 ‘‘(VI) bank employees do not di2 rectly receive incentive compensation

3 for any brokerage transaction unless

4 such employees are associated persons

5 of a broker or dealer and are qualified

6 pursuant to the requirements of a

7 self-regulatory organization (as so de8 fined) except that the bank employees

9 may receive nominal cash and

10 noncash compensation for customer

11 referrals if the cash compensation is a

12 1-time fee of a fixed dollar amount

13 and the payment of the fee is not con14 tingent on whether the referral results

15 in a transaction;

16 ‘‘(VII) such services are provided

17 by the broker or dealer on a basis in

18 which all customers which receive any

19 services are fully disclosed to the

20 broker or dealer; and

21 ‘‘(VIII) the broker or dealer in22 forms each customer that the broker23 age services are provided by the

24 broker or dealer and not by the bank

25 and that the securities are not depos-
195

•HR 2520 IH

1 its or other obligations of the bank,

2 are not guaranteed by the bank, and

3 are not insured by the Federal De4 posit Insurance Corporation.

5 ‘‘(ii) TRUST ACTIVITIES.—The bank

6 engages in trust activities (including

7 effecting transactions in the course of such

8 trust activities) permissible for national

9 banks under the first section of the Act of

10 September 28, 1962, or for State banks

11 under relevant State trust statutes or law

12 (including securities safekeeping, self-di13 rected individual retirement accounts, or

14 managed agency accounts or other func15 tionally equivalent accounts of a bank) un16 less the bank—

17 ‘‘(I) publicly solicits brokerage

18 business, other than by advertising

19 that it effects transactions in securi20 ties in conjunction with advertising its

21 other trust activities; or

22 ‘‘(II) receives incentive com23 pensation for such brokerage activi24 ties.
196

•HR 2520 IH

1 ‘‘(iii) PERMISSIBLE SECURITIES

2 TRANSACTIONS.—The bank effects trans3 actions in exempted securities, other than

4 municipal securities, in commercial paper,

5 bankers acceptances, commercial bills,

6 qualified Canadian Government obligations

7 as defined in section 5136 of the Revised

8 Statues, obligations of the Washington

9 Metropolitan Area Transit Authority which

10 are guaranteed by the Secretary of Trans11 portation under section 9 of the National

12 Capital Transportation Act of 1969, obli13 gations of the North American Develop14 ment Bank, and obligations of any local

15 public agency (as defined in section 110(h)

16 of the Housing Act of 1949) or any public

17 housing agency (as defined in the United

18 States Housing Act of 1937) that are ex19 pressly authorized by section 5136 of the

20 Revised Statutes of the United States as

21 permissible for a national bank to under22 write or deal in.

23 ‘‘(iv) MUNICIPAL SECURITIES.—The

24 bank effects transactions in municipal se25 curities.
197

•HR 2520 IH

1 ‘‘(v) EMPLOYEE AND SHAREHOLDER

2 BENEFIT PLANS.—The bank effects trans3 actions as part of any bonus, profit-shar4 ing, pension, retirement, thrift, savings, in5 centive, stock purchase, stock ownership,

6 stock appreciation, stock option, dividend

7 reinvestment, or similar plan for employees

8 or shareholders of an issuer or its subsidi9 aries.

10 ‘‘(vi) SWEEP ACCOUNTS.—The bank

11 effects transactions as part of a program

12 for the investment or reinvestment of bank

13 deposit funds into any no-load, open-end

14 management investment company reg15 istered under the Investment Company Act

16 of 1940 that holds itself out as a money

17 market fund.

18 ‘‘(vii) AFFILIATE TRANSACTIONS.—

19 The bank effects transactions for the ac20 count of any affiliate of the bank, as de21 fined in section 2 of the Financial Services

22 Holding Company Act of 1995.

23 ‘‘(viii) PRIVATE SECURITIES OFFER24 INGS.—The bank—
198

•HR 2520 IH

1 ‘‘(I) effects sales as part of a pri2 mary offering of securities by an is3 suer, not involving a public offering,

4 pursuant to section 3(b), 4(2), or 4(6)

5 of the Securities Act of 1933 and the

6 rules and regulations issued there7 under; and

8 ‘‘(II) effects such sales exclu9 sively to an accredited investor, as de10 fined in section 3 of the Securities Act

11 of 1933.

12 ‘‘(ix) DE MINIMIS EXEMPTION.—If the

13 bank does not have a subsidiary or affiliate

14 registered as a broker or dealer under sec15 tion 15, the bank effects, other than in

16 transactions referred to in clauses (i)

17 through (viii), not more than—

18 ‘‘(I) 800 transactions in any cal19 endar year in securities for which a

20 ready market exists, and

21 ‘‘(II) 200 other transactions in

22 securities in any calendar year.

23 ‘‘(x) SAFEKEEPING AND CUSTODY

24 SERVICES.—The bank, as part of cus25 tomary banking activities—
199

•HR 2520 IH

1 ‘‘(I) provides safekeeping or cus2 tody services with respect to securi3 ties, including the exercise of warrants

4 or other rights on behalf of customers;

5 ‘‘(II) clears or settles trans6 actions in securities;

7 ‘‘(III) effects securities lending

8 or borrowing transactions with or on

9 behalf of customers as part of services

10 provided to customers pursuant to

11 subclauses (I) and (II) or invests cash

12 collateral pledged in connection with

13 such transactions; or

14 ‘‘(IV) holds securities pledged by

15 1 customer to another customer or se16 curities subject to resale agreements

17 between customers or facilitates the

18 pledging or transfer of such securities

19 by book entry.

20 ‘‘(xi) BANKING PRODUCTS.—The bank

21 effects transactions in products that—

22 ‘‘(I) are described in section

23 10(l)(3)(B) of the Financial Services

24 Holding Company Act of 1995; or
200

•HR 2520 IH

1 ‘‘(II) have been exempted by the

2 Board of Governors of the Federal

3 Reserve System pursuant to section

4 10(l)(3)(C) of such Act.

5 ‘‘(D) EXEMPTION FOR ENTITIES SUBJECT

6 TO SECTION 15(e).—The term ‘broker’ does not

7 include a bank that—

8 ‘‘(i) was, immediately prior to the en9 actment of the Financial Services Competi10 tiveness and Regulatory Relief Act of

11 1995, subject to section 15(e); and

12 ‘‘(ii) is subject to such restrictions

13 and requirements as the Commission con14 siders appropriate.’’.

15 SEC. 202. DEFINITION OF DEALER.

16 Section 3(a)(5) of the Securities Exchange Act of

17 1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:

18 ‘‘(5) DEALER.—

19 ‘‘(A) IN GENERAL.—The term ‘dealer’

20 means any person engaged in the business of

21 buying and selling securities for such person’s

22 own account through a broker or otherwise.

23 ‘‘(B) EXCEPTION FOR PERSON NOT EN24 GAGED IN THE BUSINESS OF DEALING.—The

25 term ‘dealer’ does not include a person that
201

•HR 2520 IH

1 buys or sells securities for such person’s own

2 account, either individually or in a fiduciary ca3 pacity, but not as a part of a regular business.

4 ‘‘(C) EXEMPTION FOR CERTAIN BANK AC5 TIVITIES.—A bank shall not be considered to be

6 a dealer because the bank engages in any of the

7 following activities under the conditions de8 scribed:

9 ‘‘(i) The bank buys and sells commer10 cial paper, bankers acceptances, exempted

11 securities (other than municipal securities),

12 qualified Canadian Government obligations

13 as defined in section 5136 of the Revised

14 Statues, obligations of the Washington

15 Metropolitan Area Transit Authority which

16 are guaranteed by the Secretary of Trans17 portation under section 9 of the National

18 Capital Transportation Act of 1969, obli19 gations of the North American Develop20 ment Bank, and obligations of any local

21 public agency (as defined in section 110(h)

22 of the Housing Act of 1949) or any public

23 housing agency (as defined in the United

24 States Housing Act of 1937) that are ex25 pressly authorized by section 5136 of the
202

•HR 2520 IH

1 Revised Statutes of the United States as

2 permissible for a national bank to under3 write or deal in.

4 ‘‘(ii) The bank buys and sells munici5 pal securities.

6 ‘‘(iii) The bank buys and sells securi7 ties for investment purposes for the bank

8 or for accounts for which the bank acts as

9 a trustee or fiduciary.

10 ‘‘(iv) The bank—

11 ‘‘(I) has not been affiliated with

12 a securities affiliate under section 10

13 of the Financial Services Holding

14 Company Act of 1995 for more than

15 1 year; and

16 ‘‘(II) engages in the issuance or

17 sale, through a grantor trust or other18 wise, of securities backed by or rep19 resenting an interest in notes, drafts,

20 acceptances, loans, leases, receivables,

21 other obligations, or pools of any such

22 obligations originated or purchased by

23 the bank or any affiliate of the bank.

24 ‘‘(v) The bank buys and sells products

25 that—
203

•HR 2520 IH

1 ‘‘(I) are described in section

2 10(l)(3)(B) of the Financial Services

3 Holding Company Act of 1995; or

4 ‘‘(II) have been exempted by the

5 Board of Governors of the Federal

6 Reserve System pursuant to section

7 10(l)(3)(C) of such Act.’’.

8 SEC. 203. POWER TO EXEMPT FROM THE DEFINITIONS OF

9 BROKER AND DEALER.

10 Section 3 of the Securities Exchange Act of 1934 (15

11 U.S.C. 78c) is amended by adding at the end the follow12 ing:

13 ‘‘(e) EXEMPTION FROM DEFINITION OF BROKER OR

14 DEALER.—The Commission, by regulation or order, upon

15 its own motion or upon application, may conditionally or

16 unconditionally exclude any person or class of persons

17 from the definitions of ‘broker’ or ‘dealer’, if the Commis18 sion finds that such exclusion is consistent with the public

19 interest, the protection of investors, and the purposes of

20 this title.’’.

21 SEC. 204. MARGIN REQUIREMENTS.

22 (a) Section 7(d) of the Securities Exchange Act of

23 1934 (15 U.S.C. 15g(d)) is amended by striking ‘‘or (E)’’

24 and inserting ‘‘(E) to a loan to a broker or dealer by a

25 member bank or any other person that has entered into
204

•HR 2520 IH

1 an agreement pursuant to section 8(a) if the proceeds of

2 the loan are to be used in the ordinary course of the bro3 ker’s or dealer’s business other than for the purpose of

4 funding the purchase of securities for the account of such

5 broker or dealer, or (F)’’.

6 (b) Section 8(a) of the Securities and Exchange Act

7 of 1934 is amended—

8 (1) by striking ‘‘nonmember bank’’ and insert9 ing ‘‘person other than a member bank’’; and

10 (2) by striking ‘‘such bank’’ in the second sen11 tence and inserting ‘‘such person’’.

12 SEC. 205. EFFECTIVE DATE.

13 This subtitle shall become effective 270 days after the

14 date of enactment of this Act.

15 Subtitle B—Bank Investment

16 Company Activities

17 SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY

18 AFFILIATED BANK.

19 (a) MANAGEMENT COMPANIES.—Section 17(f) of the

20 Investment Company Act of 1940 (15 U.S.C. 80a–17(f))

21 is amended—

22 (1) by redesignating paragraphs (1), (2), and

23 (3) as subparagraphs (A), (B), and (C), respectively;

24 (2) by striking ‘‘(f) Every registered’’ and in25 serting ‘‘(f) CUSTODY OF SECURITIES.—
205

•HR 2520 IH

1 ‘‘(1) Every registered’’;

2 (3) by designating the 2d, 3d, 4th, and 5th sen3 tences of such subsection as paragraphs (2) through

4 (5), respectively, and indenting the left margin of

5 such paragraphs appropriately; and

6 (4) by adding at the end the following new

7 paragraph:

8 ‘‘(6) Notwithstanding any provision of this sub9 section, if a bank described in paragraph (1) or an

10 affiliated person of such bank is an affiliated person,

11 promoter, organizer, or sponsor of, or principal un12 derwriter for the registered company, such bank may

13 serve as custodian under this subsection in accord14 ance with such rules, regulations, or orders as the

15 Commission may prescribe, consistent with the pro16 tection of investors, after consulting in writing with

17 the appropriate Federal banking agency, as defined

18 in section 3 of the Federal Deposit Insurance Act.’’.

19 (b) UNIT INVESTMENT TRUSTS.—Section 26(a)(1) of

20 the Investment Company Act of 1940 (15 U.S.C. 80a–

21 26(a)(1)) is amended by inserting before the semicolon at

22 the end the following: ‘‘, except that, if the trustee or cus23 todian described in this subsection is an affiliated person

24 of such underwriter or depositor, the Commission may

25 adopt rules and regulations or issue orders, consistent
206

•HR 2520 IH

1 with the protection of investors, prescribing the conditions

2 under which such trustee or custodian may serve, after

3 consulting in writing with the appropriate Federal bank4 ing agency (as defined in section 3 of the Federal Deposit

5 Insurance Act)’’.

6 (c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)

7 of the Investment Company Act of 1940 (15 U.S.C. 80a–

8 35(a)) is amended—

9 (1) in paragraph (1), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (2), by striking the period at

12 the end and inserting ‘‘; or ‘‘; and

13 (3) by inserting after paragraph (2) the follow14 ing:

15 ‘‘(3) as custodian.’’.

16 SEC. 212. USE OF UNDERWRITING PROCEEDS.

17 Section 10(f) of the Investment Company Act of

18 1940 (15 U.S.C. 80a–10(f)) is amended—

19 (1) in the 1st sentence, by striking ‘‘issuer) a

20 principal underwriter’’ and inserting ‘‘issuer)—

21 ‘‘(1) a principal underwriter’’; and

22 (2) by striking ‘‘for the issuer. The Commis23 sion’’ and inserting ‘‘for the issuer; or

24 ‘‘(2) if the registration statement, or any other

25 offering document pursuant to which the security is
207

•HR 2520 IH

1 issued, states that any material part of the proceeds

2 will be used to discharge indebtedness owed to the

3 adviser of such registered investment company or

4 any person controlling, controlled by, or under com5 mon control with the adviser.

6 The Commission’’.

7 SEC. 213. LENDING TO AN AFFILIATED INVESTMENT COM8 PANY.

9 Section 18 of the Investment Company Act of 1940

10 (15 U.S.C. 80a–18) is amended by adding at the end the

11 following:

12 ‘‘(l) Notwithstanding any provision of this section, it

13 shall be unlawful for any affiliated person of a registered

14 investment company or any affiliated person of such a per15 son to loan money to such investment company in con16 travention of such rules, regulations, or orders as the

17 Commission may prescribe in the public interest and con18 sistent with the protection of investors.’’.

19 SEC. 214. INDEPENDENT DIRECTORS.

20 (a) IN GENERAL.—Section 2(a)(19)(A) of the Invest21 ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A))

22 is amended—

23 (1) by striking clause (v) and inserting the fol24 lowing new clause:
208

•HR 2520 IH

1 ‘‘(v) any person (other than a reg2 istered investment company) that, at any

3 time during the preceding 6 months, has

4 executed any portfolio transactions for, en5 gaged in any principal transactions with,

6 or distributed shares for—

7 ‘‘(I) the investment company,

8 ‘‘(II) any other investment com9 pany having the same investment ad10 viser as such investment company or

11 holding itself out to investors as a re12 lated company for purposes of invest13 ment or investor services, or

14 ‘‘(III) any account over which the

15 investment company’s investment ad16 viser has brokerage placement discre17 tion,

18 or any affiliated person of such a person,’’;

19 (2) by redesignating clause (vi) as clause (vii);

20 and

21 (3) by inserting after clause (v) the following

22 new clause:

23 ‘‘(vi) any person (other than a reg24 istered investment company) that, at any
209

•HR 2520 IH

1 time during the preceding 6 months, has

2 loaned money to—

3 ‘‘(I) the investment company,

4 ‘‘(II) any other investment com5 pany having the same investment ad6 viser as such investment company or

7 holding itself out to investors as a re8 lated company for purposes of invest9 ment or investor services, or

10 ‘‘(III) any account for which the

11 investment company’s investment ad12 viser has borrowing authority,

13 or any affiliated person of such a person,

14 or’’.

15 (b) AFFILIATION OF DIRECTORS.—Section 10(c) of

16 the Investment Company Act of 1940 (15 U.S.C. 80a–

17 10(c)) is amended by striking ‘‘bank, except’’ and insert18 ing ‘‘bank (and its subsidiaries) or any single financial

19 services holding company (and its affiliates and subsidi20 aries), as those terms are defined in the Financial Services

21 Holding Company Act of 1995, except’’.

22 (c) EFFECTIVE DATE.—The provisions of subsection

23 (a) of this section shall become effective 1 year after the

24 date of enactment of this subtitle.
210

•HR 2520 IH

1 SEC. 215. ADDITIONAL SEC DISCLOSURE AUTHORITY.

2 (a) MISREPRESENTATION.—Section 35(a) of the In3 vestment Company Act of 1940 (15 U.S.C. 80a–34(a)) is

4 amended to read as follows:

5 ‘‘(a) MISREPRESENTATION OF GUARANTEES.—

6 ‘‘(1) IN GENERAL.—It shall be unlawful for any

7 person, issuing or selling any security of which a

8 registered investment company is the issuer, to rep9 resent or imply in any manner whatsoever that such

10 security or company—

11 ‘‘(A) has been guaranteed, sponsored, rec12 ommended, or approved by the United States,

13 or any agency, instrumentality or officer of the

14 United States;

15 ‘‘(B) has been insured by the Federal De16 posit Insurance Corporation; or

17 ‘‘(C) is guaranteed by or is otherwise an

18 obligation of any bank or insured depository in19 stitution.

20 ‘‘(2) DISCLOSURES.—Any person issuing or

21 selling the securities of a registered investment com22 pany shall prominently disclose that the investment

23 company or any security issued by the investment

24 company—

25 ‘‘(A) is not insured by the Federal Deposit

26 Insurance Corporation;
211

•HR 2520 IH

1 ‘‘(B) is not guaranteed by an affiliated in2 sured depository institution; and

3 ‘‘(C) is not otherwise an obligation of any

4 bank or insured depository institution,

5 in accordance with such rules, regulations, or orders

6 as the Commission may prescribe as reasonably nec7 essary or appropriate in the public interest for the

8 protection of investors, after consulting in writing

9 with the appropriate Federal banking agencies.

10 ‘‘(3) DEFINITIONS.—The terms ‘insured deposi11 tory institution’ and ‘appropriate Federal banking

12 agency’ have the meanings given to such terms in

13 section 3 of the Federal Deposit Insurance Act.’’.

14 (b) DECEPTIVE USE OF NAMES.—Section 35(d) of

15 the Investment Company Act of 1940 (15 U.S.C. 80a–

16 34(d)) is amended to read as follows:

17 ‘‘(d)(1) It shall be unlawful for any registered invest18 ment company to adopt as part of the name or title of

19 such company, or of any securities of which it is the issuer,

20 any word or words that the Commission finds are materi21 ally deceptive or misleading. The Commission may adopt

22 such rules or regulations or issue such orders as are nec23 essary or appropriate to prevent the use of deceptive or

24 misleading names or titles by investment companies.
212

•HR 2520 IH

1 ‘‘(2) It shall be deceptive and misleading for any reg2 istered investment company—

3 ‘‘(A) that is an affiliated person of a bank or

4 an affiliated person of such a person, or

5 ‘‘(B) for which a bank or an affiliated person

6 of a bank acts as investment adviser, sponsor, pro7 moter, or principal underwriter,

8 to adopt, as part of the name or title of such company,

9 or of any security of which it is an issuer, any word that

10 is the same or similar to, or a variation of, the name or

11 title of such bank or affiliated person thereof, in con12 travention of such rules, regulations, or orders as the

13 Commission may prescribe as necessary or appropriate in

14 the public interest or for the protection of investors.’’.

15 SEC. 216. DEFINITION OF BROKER UNDER THE INVEST16 MENT COMPANY ACT OF 1940.

17 Section 2(a)(6) of the Investment Company Act of

18 1940 (15 U.S.C. 80a–2(a)(6)) is amended to read as fol19 lows:

20 ‘‘(6) The term ‘broker’ has the same meaning

21 as in the Securities Exchange Act of 1934, except

22 that such term does not include any person solely by

23 reason of the fact that such person is an underwriter

24 for 1 or more investment companies.’’.
213

•HR 2520 IH

1 SEC. 217. DEFINITION OF DEALER UNDER THE INVEST2 MENT COMPANY ACT OF 1940.

3 Section 2(a)(11) of the Investment Company Act of

4 1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol5 lows:

6 ‘‘(11) The term ‘dealer’ has the same meaning

7 as in the Securities Exchange Act of 1934, but does

8 not include an insurance company or investment

9 company.’’.

10 SEC. 218. REMOVAL OF THE EXCLUSION FROM THE DEFINI11 TION OF INVESTMENT ADVISER FOR BANKS

12 THAT ADVISE INVESTMENT COMPANIES.

13 (a) INVESTMENT ADVISER.—Section 202(a)(11) of

14 the Investment Advisers Act of 1940 (15 U.S.C. 80b–

15 2(a)(11)) is amended in subparagraph (A), by striking

16 ‘‘investment company’’ and inserting ‘‘investment com17 pany, except that the term ‘investment adviser’ includes

18 any bank or financial services holding company to the ex19 tent that such bank or financial services holding company

20 acts as an investment adviser to a registered investment

21 company, or if, in the case of a bank, such services are

22 performed through a separately identifiable department or

23 division, the department or division, and not the bank it24 self, shall be deemed to be the investment adviser’’.

25 (b) SEPARATELY IDENTIFIABLE DEPARTMENT OR

26 DIVISION.—Section 202(a) of the Investment Advisers Act
214

•HR 2520 IH

1 of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at

2 the end the following:

3 ‘‘(25) The term ‘separately identifiable depart4 ment or division’ of a bank means a unit—

5 ‘‘(A) that is under the direct supervision of

6 an officer or officers designated by the board of

7 directors of the bank as responsible for the day8 to-day conduct of the bank’s investment adviser

9 activities for 1 or more investment companies,

10 including the supervision of all bank employees

11 engaged in the performance of such activities;

12 and

13 ‘‘(B) for which all of the records relating

14 to its investment adviser activities are sepa15 rately maintained in or extractable from such

16 unit’s own facilities or the facilities of the bank,

17 and such records are so maintained or other18 wise accessible as to permit independent exam19 ination and enforcement of this Act or the In20 vestment Company Act of 1940 and rules and

21 regulations promulgated under this Act or the

22 Investment Company Act of 1940.’’.
215

•HR 2520 IH

1 SEC. 219. DEFINITION OF BROKER UNDER THE INVEST2 MENT ADVISERS ACT OF 1940.

3 Section 202(a)(3) of the Investment Advisers Act of

4 1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol5 lows:

6 ‘‘(3) The term ‘broker’ has the same meaning

7 as in the Securities Exchange Act of 1934.’’.

8 SEC. 220. DEFINITION OF DEALER UNDER THE INVEST9 MENT ADVISERS ACT OF 1940.

10 Section 202(a)(7) of the Investment Advisers Act of

11 1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol12 lows:

13 ‘‘(7) The term ‘dealer’ has the same meaning as

14 in the Securities Exchange Act of 1934, but does

15 not include an insurance company or investment

16 company.’’.

17 SEC. 221. INTERAGENCY CONSULTATION.

18 The Investment Advisers Act of 1940 (15 U.S.C.

19 80b–1 et seq.) is amended by inserting after section 210

20 the following new section:

21 ‘‘SEC. 210A. CONSULTATION.

22 ‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA23 TION.—

24 ‘‘(1) The appropriate Federal banking agency

25 shall provide the Commission upon request the re26 sults of any examination, reports, records, or other
216

•HR 2520 IH

1 information as each may have access to with respect

2 to the investment advisory activities of any financial

3 services holding company, bank, or separately identi4 fiable department or division of a bank, that is reg5 istered under section 203 of this title, or, in the case

6 of a financial services holding company or bank, that

7 has a subsidiary or a separately identifiable depart8 ment or division registered under that section, to the

9 extent necessary for the Commission to carry out its

10 statutory responsibilities.

11 ‘‘(2) The Commission shall provide to the ap12 propriate Federal banking agency upon request the

13 results of any examination, reports, records, or other

14 information with respect to the investment advisory

15 activities of any financial services holding company,

16 bank, or separately identifiable department or divi17 sion of a bank, any of which is registered under sec18 tion 203 of this title, to the extent necessary for the

19 agency to carry out its statutory responsibilities.

20 ‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing

21 herein shall limit in any respect the authority of the appro22 priate Federal banking agency with respect to such finan23 cial services holding company, bank, or department or di24 vision under any provision of law.
217

•HR 2520 IH

1 ‘‘(c) DEFINITION.—For purposes of this section, the

2 term ‘appropriate Federal banking agency’ shall have the

3 same meaning as in section 3 of the Federal Deposit In4 surance Act.’’.

5 SEC. 222. TREATMENT OF BANK COMMON TRUST FUNDS.

6 (a) SECURITIES ACT OF 1933.—Section 3(a)(2) of

7 the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is

8 amended by striking ‘‘or any interest or participation in

9 any common trust fund or similar fund maintained by a

10 bank exclusively for the collective investment and reinvest11 ment of assets contributed thereto by such bank in its ca12 pacity as trustee, executor, administrator, or guardian’’

13 and inserting ‘‘or any interest or participation in any com14 mon trust fund or similar fund that is excluded from the

15 definition of the term ‘investment company’ under section

16 3(c)(3) of the Investment Company Act of 1940’’.

17 (b) SECURITIES EXCHANGE ACT OF 1934.—Section

18 3(a)(l2)(A)(iii) of the Securities Exchange Act of 1934

19 (15 U.S.C. 78c(a)(l2)(A)(iii)) is amended to read as fol20 lows:

21 ‘‘(iii) any interest or participation in any

22 common trust fund or similar fund that is ex23 cluded from the definition of the term ‘invest24 ment company’ under section 3(c)(3) of the In25 vestment Company Act of 1940;’’.
218

•HR 2520 IH

1 (c) INVESTMENT COMPANY ACT OF 1940.—Section

2 3(c)(3) of the Investment Company Act of 1940 (15

3 U.S.C. 80a–3(c)(3)) is amended by inserting before the

4 period the following: ‘‘, if—

5 ‘‘(A) such fund is employed by the bank

6 solely as an aid to the administration of trusts,

7 estates, or other accounts created and main8 tained for a fiduciary purpose;

9 ‘‘(B) except in connection with the ordi10 nary advertising of the bank’s fiduciary serv11 ices, interests in such fund are not—

12 ‘‘(i) advertised; or

13 ‘‘(ii) offered for sale to the general

14 public; and

15 ‘‘(C) fees and expenses charged by such

16 fund are not in contravention of fiduciary prin17 ciples established under applicable Federal or

18 State law’’.

19 SEC. 223. INVESTMENT ADVISERS PROHIBITED FROM HAV20 ING CONTROLLING INTEREST IN REG21 ISTERED INVESTMENT COMPANY.

22 Section 15 of the Investment Company Act of 1940

23 (15 U.S.C. 80a–15) is amended by adding at the end the

24 following new subsection:
219

•HR 2520 IH

1 ‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM2 PANY PROHIBITED.—

3 ‘‘(1) IN GENERAL.—If any investment adviser

4 to a registered investment company, or an affiliated

5 person of that investment adviser, holds a control6 ling interest in that registered investment company

7 in a trustee or fiduciary capacity, such person

8 shall—

9 ‘‘(A) if it holds the shares in a trustee or

10 fiduciary capacity with respect to any employee

11 benefit plan subject to the Employee Retire12 ment Income Security Act of 1974, transfer the

13 power to vote the shares of the investment com14 pany through to another person acting in a fi15 duciary capacity with respect to the plan who is

16 not an affiliated person of that investment ad17 viser or any affiliated person thereof; or

18 ‘‘(B) if it holds the shares in a trustee or

19 fiduciary capacity with respect to any other per20 son or entity other than an employee benefit

21 plan subject to the Employee Retirement In22 come Security Act of 1974—

23 ‘‘(i) transfer the power to vote the

24 shares of the investment company through

25 to—
220

•HR 2520 IH

1 ‘‘(I) the beneficial owners of the

2 shares;

3 ‘‘(II) another person acting in a

4 fiduciary capacity who is not an affili5 ated person of that investment adviser

6 or any affiliated person thereof; or

7 ‘‘(III) any person authorized to

8 receive statements and information

9 with respect to the trust who is not an

10 affiliated person of that investment

11 adviser or any affiliated person there12 of;

13 ‘‘(ii) vote the shares of the investment

14 company held by it in the same proportion

15 as shares held by all other shareholders of

16 the investment company; or

17 ‘‘(iii) vote the shares of the invest18 ment company as otherwise permitted

19 under such rules, regulations, or orders as

20 the Commission may prescribe for the pro21 tection of investors.

22 ‘‘(2) EXEMPTION.—Paragraph (1) shall not

23 apply to any investment adviser to a registered in24 vestment company, or an affiliated person of that in25 vestment adviser, holding shares of the investment
221

•HR 2520 IH

1 company in a trustee or fiduciary capacity if that

2 registered investment company consists solely of as3 sets of held in such capacities.

4 ‘‘(3) SAFE HARBOR.—No investment adviser to

5 a registered investment company or any affiliated

6 person of such investment adviser shall be deemed to

7 have acted unlawfully or to have breached a fidu8 ciary duty under State or Federal law solely by rea9 son of acting in accordance with clause (i), (ii), or

10 (iii) of paragraph (1)(B).

11 ‘‘(4) CHURCH PLAN EXEMPTION.—Paragraph

12 (1) shall not apply to any investment adviser to a

13 registered investment company, or an affiliated per14 son of that investment adviser, holding shares in

15 such a capacity, if such investment adviser or such

16 affiliated person is an organization described in sec17 tion 414(e)(3)(A) of the Internal Revenue Code of

18 1986.’’.

19 SEC. 224. CONFORMING CHANGE IN DEFINITION.

20 Section 2(a)(5) of the Investment Company Act of

21 1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking

22 ‘‘(A) a banking institution organized under the laws of the

23 United States’’ and inserting ‘‘(A) a depository institution

24 (as defined in section 3 of the Federal Deposit Insurance

25 Act) or a branch or agency of a foreign bank (as such
222

•HR 2520 IH

1 terms are defined in section 101(b) of the International

2 Banking Act of 1978)’’.

3 SEC. 225. EFFECTIVE DATE.

4 This subtitle shall take effect 270 days after the date

5 of the enactment of this Act.

6 TITLE III—BANK INSURANCE

7 ACTIVITIES

8 SEC. 301. AUTHORITY OF THE COMPTROLLER OF THE CUR9 RENCY.

10 (a) STATE SUPERVISION.—Chapter 1 of Title LXII

11 of the Revised Statutes of the United States (12 U.S.C.

12 21 et seq.) is amended—

13 (1) by redesignating section 5136A as section

14 5136C; and

15 (2) by inserting after section 5136 (12 U.S.C.

16 24) the following new section:

17 ‘‘SEC. 5136A. STATE SUPERVISION OF INSURANCE.

18 ‘‘(a) STATE LICENSING OF INSURANCE ACTIVI19 TIES.—

20 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

21 and subject to the provisions of subsection (f), no

22 provision of section 5136, any other section of this

23 title, or section 13 of the Federal Reserve Act may

24 be construed as limiting or otherwise impairing the

25 authority of any State to regulate—
223

•HR 2520 IH

1 ‘‘(A) the extent to which, and the manner

2 in which, a national bank may engage within

3 the State in insurance activities pursuant to

4 section 5136B of this chapter or section 13 of

5 the Federal Reserve Act;

6 ‘‘(B) the manner in which a national bank

7 may engage within the State in insurance ac8 tivities pursuant to section 5136(b)(2)(B) of

9 the Revised Statutes of the United States; or

10 ‘‘(C) the manner in which a national bank

11 may engage within the State in insurance ac12 tivities pursuant to section 5136(b)(2)(A) of the

13 Revised Statutes of the United States through,

14 and limited to, consumer disclosure require15 ments or licensing requirements, procedures,

16 and qualifications as described in paragraph

17 (2)(C).

18 ‘‘(2) PROHIBITION ON STATE DISCRIMINATION

19 AGAINST NATIONAL BANKS.—Notwithstanding para20 graph (1)—

21 ‘‘(A) PROVIDING INSURANCE AS AGENT OR

22 BROKER.—No State may impose any insurance

23 regulatory requirement relating to providing in24 surance as an agent or broker that treats a na25 tional bank differently than all other persons
224

•HR 2520 IH

1 who are authorized to provide insurance as

2 agents or brokers in such State, unless there is

3 a legitimate and reasonable State regulatory

4 purpose for the requirement for which there is

5 no less restrictive alternative.

6 ‘‘(B) PROVIDING INSURANCE AS PRIN7 CIPAL, AGENT, OR BROKER.—

8 ‘‘(i) No State may impose on a na9 tional bank any insurance regulatory re10 quirement relating to providing insurance

11 as principal, agent, or broker that treats

12 the national bank more restrictively than

13 any other depository institution (as defined

14 in section 3(c)(1) of the Federal Deposit

15 Insurance Act, 12 U.S.C. 1813(c)(1)) op16 erating in the State.

17 ‘‘(ii) Nothing in this subparagraph

18 shall affect the validity of a State law

19 that—

20 ‘‘(I) prevents a national bank

21 from engaging in insurance activities

22 within the State to as great an extent

23 as a savings association (as defined in

24 section 3(b)(1) of the Federal Deposit

25 Insurance Act, 12 U.S.C. 1813(b)(1))
225

•HR 2520 IH

1 may engage in such activities within

2 the State; and

3 ‘‘(II) was in effect on June 1,

4 1995.

5 ‘‘(C) LICENSING QUALIFICATIONS AND

6 PROCEDURES.—No State may discriminate

7 against a national bank with respect to the fol8 lowing requirements, procedures, and qualifica9 tions as such requirements, procedures, and

10 qualifications relate to the authority of the na11 tional bank to provide insurance in such State

12 as an agent or broker:

13 ‘‘(i) License application and process14 ing procedures.

15 ‘‘(ii) Character, experience, and edu16 cational qualifications for licenses.

17 ‘‘(iii) Testing and examination re18 quirements for licenses.

19 ‘‘(iv) Fee requirements for licenses.

20 ‘‘(v) Continuing education require21 ments.

22 ‘‘(vi) Types of licenses required.

23 ‘‘(vii) Standards and requirements for

24 renewal of licenses.
226

•HR 2520 IH

1 ‘‘(b) AUTHORITY OF THE COMPTROLLER OF THE

2 CURRENCY.—A national bank may not provide insurance

3 as a principal, agent, or broker except as specifically pro4 vided in this section, the paragraph designated as the

5 ‘Seventh’ of section 5136(a) of this chapter, section

6 5136(b) or 5136B of this chapter, or section 13 of the

7 Federal Reserve Act.

8 ‘‘(c) PRESERVATION OF FEDERALLY AUTHORIZED

9 BANK ACTIVITIES IN PERMISSIVE STATES.—No provision

10 of this section may be construed as affecting the authority,

11 pursuant to section 5136B of this chapter or section 13

12 of the Federal Reserve Act, of a national bank to act as

13 insurance agent or broker consistent with State law.

14 ‘‘(d) PRESERVATION OF NATIONAL BANK AUTHOR15 ITY CONSISTENT WITH STATE BANK AUTHORITY.—Ex16 cept as provided in subsection (a)(2)(B), no provision of

17 this section or section 5136(b)(1) shall have the effect of

18 enabling a State to deny a national bank authority that

19 the bank otherwise possesses to provide a product in a

20 State, including as agent, broker, or principal, where the

21 bank is not providing the product in the State other than

22 to an extent and in a manner that a State bank (as de23 fined in section 3(a)(2) of the Federal Deposit Insurance

24 Act, 12 U.S.C. 1813(a)(2)) is permitted by the law of the

25 State to provide such product, except that nothing in this
227

•HR 2520 IH

1 subsection shall be construed as granting any new author2 ity to a national bank to provide any product because the

3 law of the State has authorized State banks to provide

4 such product.

5 ‘‘(e) DEFINITIONS.—For purposes of this section,

6 sections 5136 and 5136B, and section 13 of the Federal

7 Reserve Act, the following definitions shall apply:

8 ‘‘(1) INSURANCE.—The term ‘insurance’ means

9 any product defined or regulated as insurance, con10 sistent with the relevant State insurance law, by the

11 insurance regulatory authority of the State in which

12 such product is sold, solicited, or underwritten, in13 cluding any annuity contract the income on which is

14 tax deferred under section 72 of the Internal Reve15 nue Code of 1986.

16 ‘‘(2) STATE.—The term ‘State’ has the same

17 meaning as in section 3(a)(3) of the Federal Deposit

18 Insurance Act.

19 ‘‘(f) GRANDFATHER PROVISION.—

20 ‘‘(1) IN GENERAL.—Any national bank which—

21 ‘‘(A) before January 1, 1995, was provid22 ing insurance as agent or broker under section

23 13 of the Federal Reserve Act may provide in24 surance as an agent or broker under such sec25 tion, to no less extent and in a no more restric-
228

•HR 2520 IH

1 tive manner as such bank was providing insur2 ance as agent or broker under such section on

3 January 1, 1995, notwithstanding contrary

4 State law, subject to final, controlling judgment

5 in a pending action; or

6 ‘‘(B) notwithstanding subparagraph (A), is

7 a party to a pending action and before January

8 1, 1995, was providing insurance as agent or

9 broker under section 13 of the Federal Reserve

10 Act may provide insurance as an agent or

11 broker under such section notwithstanding con12 trary State law, subject to final, controlling

13 judgment in such pending action.

14 ‘‘(2) TERMINATION.—This subsection shall

15 cease to apply with respect to any national bank de16 scribed in paragraph (1) if—

17 ‘‘(A) the bank is subject to an acquisition,

18 merger, consolidation, or change in control,

19 other than a transaction to which section

20 18(c)(12) of the Federal Deposit Insurance Act

21 applies; or

22 ‘‘(B) any financial services holding com23 pany which directly or indirectly controls such

24 bank is subject to an acquisition, merger, con25 solidation, or change in control, other than a
229

•HR 2520 IH

1 transaction in which the beneficial ownership of

2 such financial services holding company or of a

3 financial services holding company which con4 trols such company does not change as a result

5 of the transaction.

6 ‘‘(g) PRESERVATION OF BANKING PRODUCTS.—No

7 provision of this section shall be construed as affecting the

8 ability of a national bank, or a subsidiary of a national

9 bank, to engage in any activity, including any activity au10 thorized pursuant to the paragraph designated the ‘‘Sev11 enth’’ of section 5136(a), that is part of, and not merely

12 incidental to, the business of banking.’’.

13 (b) INTERPRETIVE AUTHORITY OF THE COMPTROL14 LER OF THE CURRENCY.—Section 5136 of the Revised

15 Statutes of the United States (12 U.S.C. 24) is amend16 ed—

17 (1) by striking ‘‘Upon duly making and filing

18 articles of association’’ and inserting ‘‘(a) IN GEN19 ERAL.—Upon duly making and filing articles of as20 sociation’’; and

21 (2) by adding at the end the following new sub22 section:

23 ‘‘(b) INTERPRETIVE AUTHORITY OF THE COMPTROL24 LER OF THE CURRENCY.—
230

•HR 2520 IH

1 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

2 it shall not be incidental to banking for a national

3 bank to provide insurance as a principal, agent, or

4 broker.

5 ‘‘(2) SCOPE OF APPLICATION.—Notwithstand6 ing paragraph (1), it shall be incidental to banking

7 for a national bank to engage in the following activi8 ties:

9 ‘‘(A) Providing, as an agent or broker, any

10 annuity contract the income on which is tax de11 ferred under section 72 of the Internal Revenue

12 Code of 1986.

13 ‘‘(B) Providing, as a principal, agent, or

14 broker, any type of insurance, other than an

15 annuity or title insurance, which the Comptrol16 ler of the Currency specifically determined, be17 fore May 1, 1995, to be incidental to banking

18 with respect to national banks, except that

19 paragraph (1) shall not apply with respect to

20 any national bank providing title insurance as

21 an agent if the bank was actively and lawfully

22 engaged in such activity as an agent as of May

23 15, 1995.’’.

24 (c) TECHNICAL AND CONFORMING AMENDMENTS.—
231

•HR 2520 IH

1 (1) The 11th undesignated paragraph of section

2 13 of the Federal Reserve Act (12 U.S.C. 92) is

3 amended by inserting ‘‘, and subject to section

4 5136A of the Revised Statutes of the United

5 States,’’ after ‘‘the laws of the United States’’.

6 (2) The paragraph designated the ‘‘Seventh’’ of

7 section 5136 of the Revised Statutes of the United

8 States (12 U.S.C. 24) is amended by striking ‘‘sub9 ject to law,’’ and inserting ‘‘subject to subsection

10 (b), section 5136A, and any other provision of law,’’.

11 (3) Section 1306 of title 18, United States

12 Code, is amended by striking ‘‘5136A’’ and inserting

13 ‘‘5136C’’.

14 (d) CLERICAL AMENDMENT.—The table of sections

15 for chapter 1 of title LXII of the Revised Statutes of the

16 United States is amended—

17 (1) by redesignating the item relating to section

18 5136A as section 5136C; and

19 (2) by inserting after the item relating to sec20 tion 5136 the following new item:

‘‘5136A. State supervision of insurance.’’.

21 (e) PRESERVATION OF FINANCIAL SERVICES HOLD22 ING COMPANY INSURANCE AUTHORITY.—No provision of

23 this section, and no amendment made by this section to

24 any other provision of law, may be construed as affecting

25 the authority of a financial services holding company to
232

•HR 2520 IH

1 engage in insurance agency activity pursuant to section

2 4(c) of the Financial Services Holding Company Act of

3 1995.

4 (f) CONGRESSIONAL PURPOSES; SUNSET PROVISION;

5 CONGRESSIONAL REVIEW.—

6 (1) PURPOSES.—The purposes of this section

7 are to clarify State authority to regulate and super8 vise bank insurance activities (in addition to the

9 Federal banking agencies) and to place a morato10 rium on further efforts by the Comptroller of the

11 Currency to authorize national banks to engage in

12 new insurance powers without rolling back the sta13 tus quo, except that no provision of this section shall

14 prohibit national banks, or subsidiaries of national

15 banks, from engaging in any activity, including any

16 activity authorized pursuant to the paragraph des17 ignated the ‘‘Seventh’’ of section 5136(a), that is

18 part of, and not merely incidental to, the business

19 of banking. Accordingly, it is not the purpose of this

20 section to affect the ability of a national bank (or a

21 subsidiary of a national bank) to engage in any core

22 banking activity.

23 (2) SUNSET OF CERTAIN AUTHORITY.—The

24 amendments made by this section shall not apply
233

•HR 2520 IH

1 after the end of the 5-year period beginning on the

2 date of the enactment of this Act.

3 (3) CONGRESSIONAL REVIEW OF DEVELOP4 MENTS IN, AND THE COMPETITIVENESS OF, THE FI5 NANCIAL SERVICE INDUSTRY.—It is the intent of the

6 Congress to conduct a thorough and ongoing review

7 of the competitiveness of, and the relationships be8 tween, the banking, securities, and insurance sectors

9 of the financial services industry during the 5-year

10 period described in paragraph (2) for the purpose of

11 determining whether additional legislation is needed.

12 SEC. 302. NATIONAL BANK COMMUNITY DEVELOPMENT IN13 SURANCE ACTIVITIES.

14 (a) IN GENERAL.—Chapter 1 of Title LXII of the

15 Revised Statutes of the United States (12 U.S.C. 21 et

16 seq.) is amended by inserting after section 5136A (as

17 added by section 440(a) of this Act) the following new sec18 tion:

19 ‘‘SEC. 5136B. INSURANCE SALES IN EMPOWERMENT ZONES.

20 ‘‘(a) AUTHORITY TO SELL INSURANCE AS AGENT

21 FROM EMPOWERMENT ZONES.—The Comptroller of the

22 Currency may approve an application by a national bank

23 maintaining a main office or full-service branch in an

24 empowerment zone to act as an agent or broker from such

25 office or branch for any fire, life, or other insurance com-
234

•HR 2520 IH

1 pany authorized to do business in the State in which the

2 customer is located if—

3 ‘‘(1) the bank provides sufficient evidence that

4 the availability of competitively priced insurance in

5 the empowerment zone is inadequate; and

6 ‘‘(2) the insurance is sold only in the

7 empowerment zone.

8 ‘‘(b) APPLICATION OF STATE LAW.—State laws

9 which regulate conducting the business of insurance shall

10 apply to national banks and their employees that sell in11 surance as agent or broker under this section to the same

12 extent as such laws apply to other entities and persons

13 not affiliated with depository institutions except—

14 ‘‘(1) in any case in which the Comptroller of

15 the Currency determines, after notice to and com16 ment by the appropriate State insurance officials,

17 that the application of a State law would have an

18 unreasonably discriminatory effect upon the sale of

19 insurance by national banks or their employees in

20 comparison with the effect the application of the

21 State law would have with respect to sale of insur22 ance by other entities; or

23 ‘‘(2) when State law by its own terms does not

24 apply to national banks or employees of such banks.
235

•HR 2520 IH

1 ‘‘(c) AUTHORITY OF COMPTROLLER OF THE CUR2 RENCY.—

3 ‘‘(1) IN GENERAL.—The Comptroller of the

4 Currency may prescribe regulations governing sales

5 of insurance by national banks pursuant to this sec6 tion.

7 ‘‘(2) ENFORCEMENT OF STATE LAW.—The pro8 visions of any State law to which a national bank is

9 subject under this section shall be enforced with re10 spect to such bank by the Comptroller of the Cur11 rency.

12 ‘‘(d) DEFINITIONS.—

13 ‘‘(1) EMPOWERMENT ZONE.—The term

14 ‘empowerment zone’ means an area that meets the

15 standards for designation as an empowerment zone

16 or enterprise community under section 1392 of the

17 Internal Revenue Code of 1986 or an Indian res18 ervation.

19 ‘‘(2) FULL-SERVICE BRANCH.—The term ‘full20 service branch’ means a staffed facility which has

21 been approved as a branch and offers loan and de22 posit services.

23 ‘‘(3) INDIAN RESERVATION.—The term ‘Indian

24 reservation’ has the meaning given such term by sec-
236

•HR 2520 IH

1 tion 168(j)(6) of the Internal Revenue Code of

2 1986.’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 for chapter 1 of title LXII of the Revised Statutes of the

5 United States is amended by inserting after the item relat6 ing to section 5136A (as added by section 440(d) of this

7 title) the following new item:

‘‘5136B. Insurance sales in empowerment zones.’’.

8 TITLE IV—REDUCTIONS IN GOV9 ERNMENT OVERREGULATION

10 Subtitle A—The Home Mortgage

11 Process

12 SEC. 401. REGULATORY AUTHORITY OVER DISCLOSURES

13 AND ESCROW ACCOUNTS UNDER RESPA

14 TRANSFERRED TO FEDERAL RESERVE

15 BOARD.

16 (a) IN GENERAL.—Sections 4, 5, 6, and 10(d) of the

17 Real Estate Settlement Procedures Act of 1974 (12

18 U.S.C. 2601 et seq.) are amended by striking ‘‘Secretary’’

19 each place such term appears and inserting ‘‘Board’’.

20 (b) CLARIFICATION OF PURPOSE.—Section 2(b)(2) of

21 the Real Estate Settlement Procedures Act of 1974 (12

22 U.S.C. 2601(b)(2)) is amended by inserting the following

23 before the semicolon at the end: ‘‘without—

24 ‘‘(A) directly regulating settlement services

25 prices; or
237

•HR 2520 IH

1 ‘‘(B) directly regulating wages to bona fide

2 employees that are not designed as a subterfuge

3 to facilitate kickbacks among affiliated compa4 nies’’.

5 (c) BOARD DEFINED.—Section 3 of the Real Estate

6 Settlement Procedures Act of 1974 (12 U.S.C. 2602) is

7 amended—

8 (1) by striking ‘‘and’’ at the end of paragraph

9 (7);

10 (2) by striking the period at the end of para11 graph (8) and inserting ‘‘; and’’; and

12 (3) by adding at the end the following new

13 paragraph:

14 ‘‘(9) the term ‘Board’ means the Board of Gov15 ernors of the Federal Reserve System.’’.

16 (d) NEGOTIATED REGULATIONS UNDER SECTIONS 8

17 AND 9.—Section 8 of the Real Estate Settlement Proce18 dures Act of 1974 (12 U.S.C. 2607) is amended by adding

19 at the end the following new subsection:

20 ‘‘(e) NEGOTIATED REGULATIONS.—

21 ‘‘(1) IN GENERAL.—The Secretary may not

22 publish a proposed or final regulation under this sec23 tion and section 9 after the date of the enactment

24 of the Financial Services Competitiveness and Regu25 latory Relief Act of 1995 unless the Secretary has
238

•HR 2520 IH

1 used the negotiated rulemaking procedure estab2 lished under subchapter III of chapter 5 of title 5,

3 United States Code, to attempt to negotiate and de4 velop the rule.

5 ‘‘(2) CONSISTENCY WITH PURPOSE.—Any regu6 lation prescribed in accordance with paragraph (1)

7 shall be consistent with the purposes of this title as

8 set forth in section 2.’’.

9 (e) ADMINISTRATIVE ENFORCEMENT OF PROHIBI10 TION AGAINST KICKBACKS AND UNEARNED FEES.—Sec11 tion 8 of the Real Estate Settlement Procedures Act of

12 1974 (12 U.S.C. 2607) is amended by adding after sub13 section (e) (as added by subsection (d) of this section) the

14 following new subsection:

15 ‘‘(f) ADMINISTRATIVE ENFORCEMENT.—

16 ‘‘(1) IN GENERAL.—Compliance with the re17 quirements of this section and sections 9 and 12

18 shall be enforced under this Act—

19 ‘‘(A) in the case of an insured depository

20 institution (as defined in section 3 of the Fed21 eral Deposit Insurance Act), by the appropriate

22 Federal banking agency (as defined in such sec23 tion);

24 ‘‘(B) in the case of an insured credit union

25 (as defined in section 101(7) of the Federal
239

•HR 2520 IH

1 Credit Union Act), by the National Credit

2 Union Administration;

3 ‘‘(C) in the case of a financial services

4 holding company (as defined in section 2 of the

5 Financial Services Holding Company Act of

6 1995) and any affiliate of any such holding

7 company (other than an insured depository in8 stitution), by the Board;

9 ‘‘(D) in the case of a savings and loan

10 holding company (as defined in section 10 of

11 the Home Owners’ Loan Act) and any affiliate

12 of any such holding company (other than an in13 sured depository institution), by the Director of

14 the Office of Thrift Supervision; and

15 ‘‘(E) in the case of any other person, by

16 the Secretary.

17 ‘‘(2) SPECIAL RULES RELATING TO DETER18 MINATION OF APPROPRIATE REGULATOR.—

19 ‘‘(A) CASES OF MORE THAN 1 APPRO20 PRIATE REGULATOR.—If, under paragraph (1),

21 a company may be regulated by more than 1

22 agency, the Board shall determine which agency

23 shall be the responsible agency, notwithstanding

24 paragraph (1).
240

•HR 2520 IH

1 ‘‘(B) CASES INVOLVING JOINT VENTURES,

2 PARTNERSHIPS, AND OTHER AFFILIATED BUSI3 NESS ARRANGEMENTS.—If any insured deposi4 tory institution is involved in a joint venture,

5 partnership, or other affiliated business ar6 rangement with any person who is not an in7 sured depository institution, the agency respon8 sible for enforcing this section and sections 9

9 and 12 with respect to such insured depository

10 institution shall be the agency with such re11 sponsibility with respect to such joint venture,

12 partnership, or other affiliated business ar13 rangement.

14 ‘‘(3) INTERAGENCY COOPERATION AND EN15 FORCEMENT GUIDELINES.—All the agencies referred

16 to in any subparagraph of paragraph (1) shall co17 operate with each other to develop enforcement

18 guidelines and other means for achieving effective

19 compliance with this section and sections 9 and 12.

20 ‘‘(4) PREFERENCE FOR CIVIL ENFORCEMENT

21 OVER CRIMINAL ENFORCEMENT.—As part of the co22 operative efforts required under paragraph (3), the

23 agencies referred to in paragraph (1) shall consider

24 means for achieving compliance with this section and

25 section 9 through the exercise of administrative en-
241

•HR 2520 IH

1 forcement authority under this subsection without

2 resorting to criminal enforcement actions under sub3 section (d) except in appropriate cases.

4 ‘‘(5) EFFECTIVE DATE.—Paragraphs (1) and

5 (2) shall not take effect until joint interagency co6 operation and enforcement guidelines are adopted by

7 all the agencies to which paragraphs (1) and (2)

8 apply and the enforcement authority of the Sec9 retary with respect to this section and sections 9 and

10 12 shall continue until such paragraphs take ef11 fect.’’.

12 (f) INCREASED SCIENTER REQUIREMENT FOR CRIMI13 NAL PENALTY.—Section 8(d) of the Real Estate Settle14 ment Procedures Act of 1974 (12 U.S.C. 2607(d)) is

15 amended—

16 (1) in paragraph (1), by inserting ‘‘willfully’’

17 after ‘‘persons who’’; and

18 (2) in paragraph (3), by striking ‘‘was not in19 tentional and’’.

20 (g) REDESIGNATION OF CONTROLLED BUSINESS AR21 RANGEMENTS AS AFFILIATED BUSINESS ARRANGE22 MENTS.—The Real Estate Settlement Procedures Act of

23 1974 (12 U.S.C. 2601 et seq.) is amended—
242

•HR 2520 IH

1 (1) in section 3(7), by striking ‘‘controlled busi2 ness arrangement’’ and inserting ‘‘affiliated business

3 arrangement’’; and

4 (2) in subsections (c)(4) and (d)(6) of section

5 8, by striking ‘‘controlled business arrangements’’

6 and inserting ‘‘affiliated business arrangements’’.

7 (h) TECHNICAL AND CONFORMING AMENDMENTS.—

8 (1) Section 4(a) of the Real Estate Settlement

9 Procedures Act of 1974 (12 U.S.C. 2603(a)) is

10 amended by striking ‘‘Federal Home Loan Bank

11 Board’’ and inserting ‘‘Director of the Office of

12 Thrift Supervision’’.

13 (2) Section 8(d)(4) of the Real Estate Settle14 ment Procedures Act of 1974 (12 U.S.C.

15 2607(d)(4)) is amended by inserting ‘‘any other

16 agency described in subsection (f)(1),’’ after ‘‘the

17 Secretary,’’.

18 (3) Section 10(c)(1)(C) of the Real Estate Set19 tlement Procedures Act of 1974 (12 U.S.C.

20 2609(c)(1)(C)) is amended by striking ‘‘Not later

21 than the expiration of the 90-day period beginning

22 on the date of the enactment of the Cranston-Gon23 zalez National Affordable Housing Act, the’’ and in24 serting ‘‘The’’.
243

•HR 2520 IH

1 (4) Section 16 of the Real Estate Settlement

2 Procedures Act of 1974 (12 U.S.C. 2614) is amend3 ed by striking ‘‘Secretary,’’ and inserting ‘‘Board, an

4 agency referred to in any subparagraph of section

5 8(f)(1),’’.

6 (5) Section 18 of the Real Estate Settlement

7 Procedures Act of 1974 (12 U.S.C. 2616) is amend8 ed—

9 (A) by striking ‘‘Secretary is authorized

10 to’’ and inserting ‘‘Board and Secretary may

11 jointly’’;

12 (B) by striking ‘‘Secretary’’ each place

13 such term appears other than the 1st place and

14 inserting ‘‘Board and Secretary’’; and

15 (C) by striking ‘‘determines that such

16 laws’’ and inserting ‘‘determine that such

17 laws’’.

18 (6) Section 19(a) of the Real Estate Settlement

19 Procedures Act of 1974 (12 U.S.C. 2617(a)) is

20 amended to read as follows:

21 ‘‘(a) REGULATIONS.—

22 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

23 the Secretary and the Board may prescribe such

24 regulations, make such interpretations, and grant

25 such reasonable exemptions for classes of trans-
244

•HR 2520 IH

1 actions, as may be necessary to achieve the purposes

2 of this Act.

3 ‘‘(2) APPLICATION.—

4 ‘‘(A) BOARD.—The authority of the Board

5 under paragraph (1) shall apply with respect

6 to—

7 ‘‘(i) sections 4, 5, 6, 10, and 12; and

8 ‘‘(ii) sections 3, 7, 17, and 18 to the

9 extent such sections are applicable with re10 spect to the sections described in clause (i).

11 ‘‘(B) SECRETARY.—The authority of the

12 Secretary under paragraph (1) shall apply with

13 respect to—

14 ‘‘(i) sections 8 and 9; and

15 ‘‘(ii) sections 3, 7, 17, and 18 to the

16 extent such sections are applicable with re17 spect to the sections described in clause

18 (i).’’.

19 (7) Section 19(b) of the Real Estate Settlement

20 Procedures Act of 1974 (12 U.S.C. 2617(b)) is

21 amended by inserting ‘‘, the Board,’’ after ‘‘the Sec22 retary’’.

23 (8) Section 19(c) of the Real Estate Settlement

24 Procedures Act of 1974 (12 U.S.C. 2617(c)) is

25 amended—
245

•HR 2520 IH

1 (A) in paragraph (1)—

2 (i) by striking ‘‘Secretary’’ the 1st

3 place such term appears and inserting

4 ‘‘Board, with respect to any action to en5 force section 4, 5, 6, or 10, and each agen6 cy referred to in any subparagraph of sec7 tion 8(f)(1), with respect to any action to

8 enforce section 8, 9, or 12,’’; and

9 (ii) by striking ‘‘Secretary’’ each place

10 such term appears other than the 1st place

11 and inserting ‘‘Board or such other agen12 cy’’; and

13 (B) in paragraph (2), by striking ‘‘Sec14 retary’’ and inserting ‘‘Board or an agency re15 ferred to in any subparagraph of section

16 8(f)(1)’’.

17 (9) The heading for section 19 of the Real Es18 tate Settlement Procedures Act of 1974 (12 U.S.C.

19 2617) is amended to read as follows:

20 ‘‘AUTHORITY OF THE SECRETARY AND THE FEDERAL

21 RESERVE BOARD’’.

22 (i) REPEAL OF OBSOLETE PROVISIONS.—The Real

23 Estate Settlement Procedures Act of 1974 (12 U.S.C.

24 2601 et seq.) is amended by striking sections 13, 14, and

25 15.
246

•HR 2520 IH

1 SEC. 402. SIMPLIFICATION AND UNIFICATION OF DISCLO2 SURES REQUIRED UNDER RESPA AND TILA

3 FOR MORTGAGE TRANSACTIONS.

4 (a) IN GENERAL.—With respect to credit trans5 actions which are subject to the Real Estate Settlement

6 Procedures Act of 1974 and the Truth in Lending Act,

7 the Board of Governors of the Federal Reserve System

8 shall take such action as may be necessary before the end

9 of the 3-month period beginning on the date of the enact10 ment of this Act—

11 (1) to simplify the disclosures applicable to such

12 transactions under such Acts, including the timing

13 of the disclosures; and

14 (2) to provide a single format for such disclo15 sures which will satisfy the requirements of each

16 such Act with respect to such transactions.

17 (b) REGULATIONS.—To the extent that it is nec18 essary to prescribe any regulation in order to effect any

19 changes required to be made under subsection (a), the pro20 posed regulation shall be published in the Federal Register

21 before the end of the 3-month period referred to in sub22 section (a).

23 (c) RECOMMENDATIONS FOR LEGISLATION.—If the

24 Board of Governors of the Federal Reserve System finds

25 that legislative action may be necessary or appropriate in

26 order to simplify and unify the disclosure requirements
247

•HR 2520 IH

1 under the Real Estate Settlement Procedures Act of 1974

2 and the Truth in Lending Act, the Board shall submit

3 a report containing recommendations to the Congress con4 cerning such action.

5 SEC. 403. INCREASED REGULATORY FLEXIBILITY UNDER

6 THE TRUTH IN LENDING ACT.

7 (a) REGULATORY FLEXIBILITY.—Section 104 of the

8 Truth in Lending Act (15 U.S.C. 1603) is amended by

9 adding at the end the following new paragraph:

10 ‘‘(7) Transactions for which the Board, by reg11 ulation, determines that coverage under the Act is

12 not needed to carry out the purposes of the Act.’’.

13 (b) EXEMPTIVE AUTHORITY.—Section 105 of the

14 Truth in Lending Act (15 U.S.C. 1604) is amended—

15 (1) by redesignating subsections (b), (c), and

16 (d) as subsections (c), (d), and (e), respectively; and

17 (2) by inserting after subsection (a) the follow18 ing new subsection:

19 ‘‘(b) EXEMPTIVE AUTHORITY.—

20 ‘‘(1) IN GENERAL.—The Board shall exempt

21 from all or parts of this title any class of trans22 actions for which, in the Board’s judgment, coverage

23 under all or part of this title does not provide a

24 measurable benefit to consumers in the form of use25 ful information or protection.
248

•HR 2520 IH

1 ‘‘(2) FACTORS TO BE CONSIDERED.—In deter2 mining which classes of transactions to exempt in

3 whole or in part, the Board shall consider, among

4 other factors, the following:

5 ‘‘(A) The amount of the loan or closing

6 costs and whether the disclosures, right of re7 scission, and other provisions are necessary,

8 particularly for small loans.

9 ‘‘(B) Whether the requirements of this title

10 complicate, hinder, or make more expensive the

11 credit process for the class of transactions.

12 ‘‘(C) The status of the borrower, including,

13 the borrowers’ related financial arrangements,

14 the financial sophistication of the borrower rel15 ative to the type of transaction, and the impor16 tance of the credit and related supporting prop17 erty to the borrower.’’.

18 SEC. 404. REDUCTIONS IN RESPA REGULATORY BURDENS;

19 CLARIFYING AMENDMENTS.

20 (a) UNNECESSARY DISCLOSURE.—Section 6(a) of the

21 Real Estate Settlement Procedures Act of 1974 (12

22 U.S.C. 2605) is amended to read as follows:

23 ‘‘(a) DISCLOSURE TO APPLICANT RELATING TO AS24 SIGNMENT, SALE, OR TRANSFER OF LOAN SERVICING.—
249

•HR 2520 IH

1 ‘‘(1) IN GENERAL.—Each person who makes a

2 federally related mortgage loan shall disclose to each

3 person who applies for any such loan, at the time of

4 application for the loan, whether the servicing of any

5 such loan may be assigned, sold, or transferred to

6 any other person at any time while such loan is out7 standing.

8 ‘‘(2) SIGNATURE OF APPLICANT.—Any disclo9 sure of the information required under paragraph

10 (1) shall not be effective for purposes of this section

11 unless the disclosure is accompanied by a written

12 statement, in such form as the Secretary shall de13 velop before the expiration of the 180-day period be14 ginning on the date of the enactment of the Finan15 cial Services Competitiveness and Regulatory Relief

16 Act of 1995, that the applicant has read and under17 stood the disclosure and that is evidenced by the sig18 nature of the applicant at the place where such

19 statement appears in the application.’’.

20 (b) EFFECTIVE DATE.—The amendments made by

21 subsection (a) shall take effect 180 days after the date

22 of the enactment of this Act.

23 (c) SECOND MORTGAGES.—Section 3(1)(A) of the

24 Real Estate Settlement Procedures Act of 1974 (12
250

•HR 2520 IH

1 U.S.C. 2602(1)(A)) is amended by striking ‘‘or subordi2 nate’’.

3 (d) CONSISTENCY OF RESPA AND TRUTH IN LEND4 ING ACT EXEMPTION OF BUSINESS LOANS.—Section 7 of

5 the Real Estate Settlement Procedures Act of 1974 (12

6 U.S.C. 2606) is amended—

7 (1) by inserting ‘‘(a) IN GENERAL.—’’ before

8 ‘‘This Act’’; and

9 (2) by inserting at the end the following new

10 subsection:

11 ‘‘(b) INTERPRETATION.—In issuing regulations pur12 suant to section 19(a) of this Act, the Board shall ensure

13 that, with regard to subsection (a), the exemption for busi14 ness credit includes all business credit which is exempt

15 from the Truth in Lending Act in accordance with section

16 226.3(a) of the regulations prescribed by the Board known

17 as ‘regulation Z’ (12 C.F.R. 226.3(a)), as in effect on the

18 date of enactment of the Financial Services Competitive19 ness and Regulatory Relief Act of 1995.’’.

20 SEC. 405. DISCLOSURES FOR ADJUSTABLE RATE MORT21 GAGES.

22 (a) IN GENERAL.—Section 127A(a)(2)(G) of the

23 Truth in Lending Act (15 U.S.C. 1637a(a)(2)(G)) is

24 amended by inserting before the semicolon ‘‘, or a state25 ment that the monthly payment may increase or decrease
251

•HR 2520 IH

1 significantly due to increases in the annual percentage

2 rate’’.

3 (b) TECHNICAL AND CONFORMING AMENDMENT.—

4 Section 127A(b)(3) of the Truth in Lending Act (15

5 U.S.C. 1637a(b)(3)) is amended by striking ‘‘required

6 under’’ and inserting ‘‘referred to in’’.

7 (c) ALTERNATIVE TO HISTORICAL EXAMPLE.—Sec8 tion 128(a) of the Truth in Lending Act (15 U.S.C.

9 1638(a)) is amended by inserting at the end the following

10 new paragraph:

11 ‘‘(14) In any variable rate transaction secured

12 by the consumer’s principal dwelling with a term

13 greater than 1 year, at the creditors’ option, a state14 ment that the monthly payment may increase or de15 crease substantially, or a historical example illustrat16 ing the effects of interest rate changes implemented

17 according to the loan program.’’.

18 (d) ENSURING HONORING OF LOCK-IN PROMISES.—

19 Section 128(b) of the Truth in Lending Act (15 U.S.C.

20 1638(b)) is amended by adding at the end the following

21 new paragraph:

22 ‘‘(3) In the case of a residential mortgage trans23 action, the disclosures under subsection (a) shall include

24 the following:
252

•HR 2520 IH

1 ‘‘(A) The note rate and points, and a state2 ment, if applicable, that these terms are subject to

3 change.

4 ‘‘(B) A statement that the creditor must in5 clude the disclosed note rate and points in the credit

6 agreement unless, in relation to either or both of

7 those terms—

8 ‘‘(i) the disclosure clearly and conspicu9 ously indicates that the term is subject to

10 change, or

11 ‘‘(ii) in the case of any term to which

12 clause (i) does not apply—

13 ‘‘(I) the creditor has clearly and con14 spicuously indicated that the term is condi15 tioned on closing the transaction within a

16 prescribed time;

17 ‘‘(II) the creditor has promptly and

18 clearly communicated to the consumer the

19 information and documentation that the

20 consumer is required to provide to the

21 creditor; and

22 ‘‘(III) the consumer has failed to pro23 vide such information and documentation

24 within a reasonable time after receiving

25 that communication.’’.
253

•HR 2520 IH

1 SEC. 406. TREATMENT OF CERTAIN DEBT CANCELLATION

2 AND DEFICIENCY WAIVER CONTRACTS.

3 Section 106(c) of the Truth in Lending Act (15

4 U.S.C. 1605(c)) is amended to read as follows:

5 ‘‘(c) TREATMENT OF CERTAIN DEBT CANCELLATION

6 AND DEFICIENCY WAIVER CONTRACTS.—Charges or pre7 miums for any insurance or for any voluntary

8 noninsurance product, written in connection with any

9 consumer credit transaction, that provides protections

10 against loss of or damage to property or against part or

11 all of the debtor’s liability for amounts in excess of the

12 value of the collateral securing the debtor’s obligation, or

13 against liability arising out of the ownership or use of

14 property, shall be included in the finance charge unless

15 a clear and specific statement in writing is furnished by

16 the creditor to the person to whom the credit is extended,

17 setting forth the cost of the insurance or product if ob18 tained from or through the creditor, and stating that the

19 person to whom credit is extended may choose the person

20 through which the insurance or product is to be ob21 tained.’’.

22 SEC. 407. RECOVERY OF FEES.

23 Section 125(b) of the Truth in Lending Act (15

24 U.S.C. 1635) is amended—
254

•HR 2520 IH

1 (1) in the 1st sentence, by inserting ‘‘, except

2 any charge for an appraisal report or credit report’’

3 after ‘‘other charge’’; and

4 (2) in the 2d sentence, by striking ‘‘otherwise’’

5 and inserting ‘‘as otherwise required under this sub6 section’’.

7 SEC. 408. HOME OWNERSHIP DEBT COUNSELING NOTIFICA8 TION.

9 Section 106(c) of the Housing and Urban Develop10 ment Act of 1968 (12 U.S.C. 1701x(c)) is amended by

11 striking paragraph (5).

12 SEC. 409. HOME MORTGAGE DISCLOSURE ACT.

13 (a) Section 309 of the Home Mortgage Disclosure

14 Act of 1975 (12 U.S.C. 2808) is amended—

15 (1) in the 2d sentence, by striking

16 ‘‘$10,000,000’’ and inserting ‘‘$50,000,000’’; and

17 (2) by inserting at the end the following new

18 sentences: ‘‘The Board may also, by regulation, ex19 empt from the provisions of this Act institutions

20 specified in section 303(2)(A) which have total as21 sets as of their last full fiscal year of $50,000,000

22 or greater where the burden of complying with this

23 Act on such institutions outweighs the usefulness of

24 the information required to be disclosed. The exemp25 tions provided under this section shall not be appli-
255

•HR 2520 IH

1 cable to an institution which the Board, by order,

2 has found a reasonable basis to believe is not fulfill3 ing its obligations to serve the housing needs of the

4 communities and neighborhoods in which it is lo5 cated. An institution subject to such an order shall

6 be required to comply with the requirements of this

7 Act for loans made after the time that the order is

8 issued at such time and for such period as the

9 Board deems appropriate. The dollar amount in this

10 section shall be adjusted annually after December

11 31, 1994, by the annual percentage increase in the

12 Consumer Price Index for Urban Wage Earners and

13 Clerical Workers published by the Bureau of Labor

14 Statistics.’’.

15 (b) Section 304 of the Home Mortgage Disclosure

16 Act of 1975 (12 U.S.C. 2803) is amended by adding at

17 the end the following new subsection:

18 ‘‘(m) OPPORTUNITY TO REDUCE COMPLIANCE BUR19 DEN.—

20 ‘‘(1) A depository institution shall be considered

21 to have satisfied the public availability requirements

22 of subsection (a) if such institution keeps the infor23 mation required under that subsection at its home

24 office and provides notice at the branch locations

25 specified in such subsection that such information is
256

•HR 2520 IH

1 available upon request from the home office of the

2 institution. A home office of the depository institu3 tion receiving a request for such information pursu4 ant to this subsection shall provide the information

5 pertinent to the location of the branch in question

6 within fifteen days of the receipt of the written re7 quest.

8 ‘‘(2) In complying with paragraph (1), a deposi9 tory institution may provide the individual request10 ing such information, at the institution’s choice,

11 with—

12 ‘‘(A) a paper copy of the information re13 quested; or

14 ‘‘(B) if acceptable to the individual, the in15 formation through a form of electronic medium,

16 such as computer disc.’’.

17 Subtitle B—Community

18 Reinvestment Act Amendments

19 SEC. 421. EXPRESSION OF CONGRESSIONAL INTENT.

20 Subsection (b) of section 802 of the Community Rein21 vestment Act of 1977 (12 U.S.C. 2901) is amended to

22 read as follows:

23 ‘‘(b) It is the purpose of this title to require each ap24 propriate Federal financial supervisory agency to use its

25 authority, when examining financial institutions, to en-
257

•HR 2520 IH

1 courage such institutions to help meet the credit needs of

2 the local communities in which they are chartered consist3 ent with the safe and sound operation of such institutions.

4 When examining financial institutions, a supervisory agen5 cy shall not impose additional burden, recordkeeping, or

6 reporting upon such institutions.’’.

7 SEC. 422. INCREASED INCENTIVES FOR LENDING TO LOW8 AND MODERATE-INCOME COMMUNITIES.

9 (a) IN GENERAL.—Section 804(b) of the Community

10 Reinvestment Act of 1977 (12 U.S.C. 2903(b)) is amend11 ed to read as follows:

12 ‘‘(b) POSITIVE CONSIDERATION OF CERTAIN LOANS

13 AND INVESTMENTS.—In assessing and taking into ac14 count the records of a regulated financial institution under

15 subsection (a), the appropriate Federal financial super16 visory agency shall—

17 ‘‘(1) consider as a positive factor, consistent

18 with the safe and sound operation of the institution,

19 the institution’s investment in or loan to—

20 ‘‘(A) any minority depository institution or

21 women’s depository institution (as such terms

22 are defined in section 808(b)) or any low-in23 come credit union;

24 ‘‘(B) any joint venture or other entity or

25 project which promotes the public welfare in
258

•HR 2520 IH

1 any distressed community (as defined by such

2 agency) whether or not the distressed commu3 nity is located in the local community in which

4 the regulated financial institution is chartered

5 to do business; and

6 ‘‘(C) targeted low- and moderate-income

7 communities, including real property loans to

8 such communities; and

9 ‘‘(2) consider equally with other factors capital

10 investment, loan participation, and other ventures

11 undertaken by the institution in cooperation with—

12 ‘‘(A) minority- and women-owned financial

13 institutions and low-income credit unions to the

14 extent that these activities help meet the credit

15 needs of the local communities in which such

16 institutions are chartered; and

17 ‘‘(B) community development corporations

18 in extending credit and other financial services

19 principally to low- and moderate-income persons

20 and small businesses to the extent that such

21 community development corporations help meet

22 the credit needs of the local communities served

23 by the majority-owned institution.’’.

24 (b) AMENDMENT TO DEFINITIONS.—Section 803 of

25 the Community Reinvestment Act of 1977 (12 U.S.C.
259

•HR 2520 IH

1 2902) is amended by inserting after paragraph (5) (as

2 added by section 425(b) of this subtitle) the following new

3 paragraph:

4 ‘‘(6) STATE BANK SUPERVISOR.—The term

5 ‘State bank supervisor’ has the same meaning as in

6 section 3(r) of the Federal Deposit Insurance Act.’’.

7 (c) TECHNICAL CORRECTION.—The 1st of the 2

8 paragraphs designated as paragraph (2) of section 803 of

9 the Community Reinvestment Act of 1977 (12 U.S.C.

10 2902) is amended to read as follows:

11 ‘‘(D) the Director of the Office of Thrift

12 Supervision with respect to any savings associa13 tion (the deposits of which are insured by the

14 Federal Deposit Insurance Corporation) and

15 any savings and loan holding company (other

16 than a company which is a financial services

17 holding company);’’.

18 SEC. 423. PROHIBITION ON ADDITIONAL REPORTING

19 UNDER CRA.

20 Section 806 of the Community Reinvestment Act of

21 1977 (12 U.S.C. 2905) is amended to read as follows:

22 ‘‘SEC. 806. REGULATIONS.

23 ‘‘(a) IN GENERAL.—

24 ‘‘(1) PUBLICATION REQUIREMENT.—Regula25 tions to carry out the purposes of this title shall be
260

•HR 2520 IH

1 published by each appropriate Federal financial su2 pervisory agency.

3 ‘‘(2) PROHIBITION ON ADDITIONAL RECORD4 KEEPING.—Regulations prescribed and policy state5 ments, commentary, examiner guidance, or other su6 pervisory material issued under this title shall not

7 impose any additional recordkeeping on a financial

8 institution.

9 ‘‘(3) PROHIBITION ON LOAN DATA COLLEC10 TION.—No loan data may be required to be collected

11 and reported by a financial institution and no such

12 data may be made public by any Federal financial

13 supervisory agency under this title.’’.

14 SEC. 424. TECHNICAL AMENDMENT.

15 Section 807(b)(1)(B) of the Community Reinvest16 ment Act (12 U.S.C. 2906) is amended by striking ‘‘The

17 information’’ and inserting ‘‘In the case of a regulated fi18 nancial institution that maintains domestic branches in 2

19 or more States, the information’’.

20 SEC. 425. CRA CONGRESSIONAL OVERSIGHT.

21 (a) SENSE OF CONGRESS RELATING TO AGGRESSIVE

22 OVERSIGHT.—It is the sense of the Congress that the ap23 propriate committees of the House of Representatives and

24 the Senate should exercise aggressive oversight of the

25 adoption and implementation of any regulation by any ap-
261

•HR 2520 IH

1 propriate Federal financial supervisory agency under the

2 Community Reinvestment Act of 1977 after the date of

3 the enactment of this Act.

4 (b) AGENCY REPORTS REQUIRED.—

5 (1) IN GENERAL.—Each appropriate Federal fi6 nancial supervisory agency shall submit a report to

7 the Congress by December 31, 1996, and by Decem8 ber 31, 1997, on the implementation of all regula9 tions prescribed by such agency under the Commu10 nity Reinvestment Act of 1977 after the date of the

11 enactment of this Act.

12 (2) REQUIREMENTS RELATING TO PREPARA13 TION OF REPORTS.—In preparing each report re14 quired under paragraph (1), each appropriate Fed15 eral financial supervisory agency shall—

16 (A) solicit and include comments from reg17 ulated financial institutions with respect to the

18 regulations which are the subject of the report;

19 and

20 (B) include quantifiable measures of the

21 cost savings achieved under the regulations

22 which are the subject of the report and the ef23 fectiveness of such regulations in achieving the

24 purposes of the Community Reinvestment Act

25 of 1977.
262

•HR 2520 IH

1 (3) DEFINITIONS.—For purposes of this sec2 tion, the terms ‘‘appropriate Federal financial super3 visory agency’’ and ‘‘regulated financial institution’’

4 have the same meanings as in section 803 of the

5 Community Reinvestment Act of 1977.

6 SEC. 426. CONSULTATION AMONG EXAMINERS.

7 Section 10 of the Federal Deposit Insurance Act (12

8 U.S.C. 1820) is amended by adding at the end the follow9 ing new subsection:

10 ‘‘(j) CONSULTATION AMONG EXAMINERS.—

11 ‘‘(1) IN GENERAL.—Each appropriate Federal

12 banking agency shall take such action as may be

13 necessary to ensure that examiners employed by the

14 agency—

15 ‘‘(A) consult on examination activities with

16 respect to any depository institution; and

17 ‘‘(B) achieve an agreement and resolve any

18 inconsistencies on the recommendations to be

19 given to such institution as a consequence of

20 any examinations.

21 ‘‘(2) EXAMINER-IN-CHARGE.—Each agency

22 shall consider appointing an examiner-in-charge with

23 respect to a depository institution to ensure con24 sultation on examination activities among all of the
263

•HR 2520 IH

1 agency’s examiners involved in examinations of such

2 institution.’’.

3 SEC. 427. LIMITATION ON REGULATIONS.

4 Section 806 of the Community Reinvestment Act of

5 1977 (12 U.S.C. 2905) (as amended by section 423) is

6 amended by adding at the end the following new sub7 sections:

8 ‘‘(b) LIMITATION ON REGULATIONS.—No regulation

9 may be prescribed under this title by any Federal agency

10 which would—

11 ‘‘(1) require any regulated financial institution

12 to—

13 ‘‘(A) make any loan or enter into any

14 other agreement on the basis of any discrimina15 tory criteria prohibited under any law of the

16 United States; or

17 ‘‘(B) make any loan to, or enter into any

18 other agreement with, any uncreditworthy per19 son that would jeopardize the safety and sound20 ness of such institution; or

21 ‘‘(2) prevent or hinder in any way a financial

22 institution’s full responsibility to provide credit to all

23 segments of the community.

24 ‘‘(c) ENCOURAGE LOANS TO CREDITWORTHY BOR25 ROWERS.—Regulations prescribed under this title shall en-
264

•HR 2520 IH

1 courage regulated financial institutions to make loans and

2 extend credit to all creditworthy persons, consistent with

3 safety and soundness.’’.

4 Subtitle C—Consumer Banking

5 Reforms

6 SEC. 441. TRUTH IN SAVINGS.

7 (a) PURPOSE.—Section 262 of the Truth in Savings

8 Act (12 U.S.C. 4301) is amended to read as follows:

9 ‘‘SEC. 262. PURPOSE.

10 ‘‘It is the purpose of this subtitle to ensure that con11 sumers can make a meaningful comparison between the

12 competing claims of depository institutions with regard to

13 deposit accounts by requiring that institutions offering in14 terest-bearing accounts pay interest on the full amount of

15 principal each day in a consumer deposit account at the

16 rate agreed to be paid by the institution.’’.

17 (b) PROHIBITION ON MISLEADING OR INACCURATE

18 ADVERTISEMENTS AND DISCLOSURES.—Section 263 is

19 amended to read as follows:

20 ‘‘SEC. 263. PROHIBITION ON MISLEADING OR INACCURATE

21 ADVERTISEMENTS AND DISCLOSURES.

22 ‘‘No depository institution or deposit broker shall

23 make any advertisement, announcement, solicitation or

24 disclosure relating to a deposit account that is inaccurate

25 or misleading, including any inaccurate or misleading de-
265

•HR 2520 IH

1 scription of a free or no-cost account, or that misrepre2 sents its deposit contracts.’’.

3 (c) ACCOUNT INFORMATION UPON OPENING AN AC4 COUNT.—Section 264 of the Truth in Savings Act (12

5 U.S.C. 4304) is amended to read as follows:

6 ‘‘SEC. 264. ACCOUNT INFORMATION.

7 ‘‘(a) IN GENERAL.—Each depository institution shall

8 disclose fees, charges, penalties, and interest rates applica9 ble to each class of accounts offered by the institution in

10 accordance with this section.

11 ‘‘(b) INFORMATION ON FEES AND CHARGES.—Each

12 depository institution shall disclose the following informa13 tion with respect to any account to a consumer at the time

14 the account is opened, or at such earlier time as a

15 consumer may request (and no additional information may

16 be required to be disclosed under this subtitle by regula17 tion or otherwise with respect to such account):

18 ‘‘(1) A description of all fees, periodic service

19 charges, penalties, and interest rates which may be

20 charged or assessed against the account (or against

21 the account holder in connection with such account),

22 the amount of any such fees, charges, or penalties

23 (or the method by which such amount will be cal24 culated), and the conditions under which any such

25 amount will be assessed.
266

•HR 2520 IH

1 ‘‘(2) All minimum balance requirements that af2 fect fees, charges, and penalties, including a clear

3 description of how each such minimum balance is

4 calculated.

5 ‘‘(3) Any minimum amount required with re6 spect to the initial deposit in order to open the ac7 count.

8 ‘‘(c) INFORMATION ON INTEREST RATES.—The dis9 closures required under subsections (a) and (b) with re10 spect to any account shall include the following informa11 tion:

12 ‘‘(1) Any annual rate of simple interest.

13 ‘‘(2) The frequency with which interest will be

14 compounded and credited.

15 ‘‘(d) NO REGULATIONS AUTHORIZED.—No regula16 tions may be prescribed with respect to this section by the

17 Board or any agency referred to in this title, including

18 any regulation to define any terms used in this section.’’.

19 (d) DISCLOSURE OF CHANGE IN TERMS.—Section

20 265 of the Truth in Savings Act (12 U.S.C. 4304) is

21 amended to read as follows:

22 ‘‘SEC. 265. DISCLOSURE OF CHANGE IN TERMS.

23 ‘‘If any change is made in any item required to be

24 disclosed under section 264, all account holder who may

25 be affected by such change shall be notified by mail and
267

•HR 2520 IH

1 provided with a description of such change at least 30

2 days before the effective date of the change.’’.

3 (e) REPEAL OF SECTIONS.—Sections 266, 268, 271,

4 and 273 of the Truth is Savings Act (12 U.S.C. 4304,

5 4305, 4307, 4310, and 4312, respectively) are hereby re6 pealed.

7 (f) REDESIGNATION OF SECTIONS.—Section 267,

8 270, 272 of the Truth in Savings Act (12 U.S.C. 4306,

9 4309, and 4311) are redesignated as sections 266, 268,

10 and 269, respectively.

11 (g) REDESIGNATION AND AMENDMENT OF SECTION

12 269.—Section 269 of the Truth in Savings Act (12 U.S.C.

13 4308) (as determined before the redesignation made by

14 subsection (f) of this section) is amended to read as fol15 lows:

16 ‘‘SEC. 267. REGULATIONS.

17 ‘‘(a) IN GENERAL.—The Board, after consultation

18 with each agency referred to in section 268(a) and public

19 notice and opportunity for comment, shall prescribe regu20 lations to carry out the purpose and provisions of this sub21 title.

22 ‘‘(b) EFFECTIVE DATE OF REGULATIONS.—The pro23 visions of this subtitle shall not apply with respect to any

24 depository institution before the effective date of regula25 tions prescribed by the Board under this subsection.’’
268

•HR 2520 IH

1 (h) REDESIGNATION AND AMENDMENT OF SECTION

2 274.—Section 274 of the Truth in Savings Act (12 U.S.C.

3 4313) is amended to read as follows:

4 ‘‘SEC. 270. DEFINITIONS.

5 ‘‘For the purposes of this subtitle, the following defi6 nitions shall apply:

7 ‘‘(1) ACCOUNTS.—The term ‘account’ means

8 any account intended for use by and generally used

9 by a consumer primarily for personal, family, or

10 household purposes that is offered by a depository

11 institution.

12 ‘‘(2) DEPOSIT BROKER.—The term ‘deposit

13 broker’—

14 ‘‘(A) has the meaning given to such term

15 in section 29(f)(1) of the Federal Deposit In16 surance Act; and

17 ‘‘(B) includes any person who solicits any

18 amount from any other person for deposit in an

19 insured depository institution.

20 ‘‘(3) DEPOSITORY INSTITUTION.—The term ‘de21 pository institution’—

22 ‘‘(A) means an institution described in

23 clause (i), (ii), (iii), (iv), (v), or (vi) of section

24 19(b)(1)(A) of the Federal Reserve Act; and
269

•HR 2520 IH

1 ‘‘(B) does not include nonautomated credit

2 unions which were not required to comply with

3 the requirements of this title as of the date of

4 the enactment of the Financial Services Com5 petitiveness and Regulatory Relief Act of 1995

6 pursuant to the determination of the National

7 Credit Union Administration Board.

8 ‘‘(4) INTEREST.—The term ‘interest’ includes

9 dividends paid with respect to share accounts which

10 are accounts within the meaning of paragraph (1).

11 ‘‘(5) BOARD.—The term ‘Board’ means the

12 Board of Governors of the Federal Reserve Sys13 tem.’’.

14 (i) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall take effect on the effective date of

17 regulations prescribed by the Board of Governors of

18 the Federal Reserve System to implement such

19 amendments.

20 (2) AUTHORITY TO ISSUE REGULATIONS.—Not21 withstanding paragraph (1), the Board of Governors

22 of the Federal Reserve System shall prescribe regu23 lations in accordance with the amendment made by

24 subsection (g).
270

•HR 2520 IH

1 (3) CONTINUED APPLICABILITY OF PROVISIONS

2 UNTIL EFFECTIVE DATE OF NEW REGULATIONS.—

3 The Truth in Savings Act, as in effect on the day

4 before the date of the enactment of this Act, shall

5 continue to apply on and after such date until the

6 effective date of the amendments to such Act under

7 this section.

8 SEC. 442. INFORMATION SHARING.

9 Section 18 of the Federal Deposit Insurance Act (12

10 U.S.C. 1828) is amended by inserting after subsection (s)

11 (as added by section 107(a)) of this Act) the following new

12 subsection:

13 ‘‘(t) CUSTOMER ACCESS TO PRODUCTS.—

14 ‘‘(1) IN GENERAL.—Notwithstanding any other

15 provision of law, any depository institution, or any

16 affiliate or subsidiary of any depository institution,

17 may share or exchange information or otherwise

18 transfer information between or among themselves

19 without any restriction or limitation if it is clearly

20 and conspicuously disclosed that the information

21 may be communicated among such persons and the

22 consumer is given the opportunity, before the time

23 that the information is initially communicated, to di24 rect that such information not be communicated

25 among such persons.
271

•HR 2520 IH

1 ‘‘(2) DEFINITION.—For purposes of this sub2 section, the term ‘information’ means any and all

3 data, records, or other information and material ob4 tained or maintained by any depository institution or

5 any affiliate or subsidiary thereof in the ordinary

6 course of its business that relates in any way to a

7 person (as such term is defined in section 603(b) of

8 the Fair Credit Reporting Act) who applies for,

9 maintains, or has maintained an account or credit

10 relationship with or applied for, purchased or ob11 tained other products or services from any deposi12 tory institution or any affiliate or subsidiary of any

13 depository institution, regardless of the source of

14 manner in which the information is obtained or fur15 nished.

16 ‘‘(3) RULE OF CONSTRUCTION.—Any depository

17 institution, or any affiliate or subsidiary of any de18 pository institution, relying on this subsection shall

19 not be deemed to be a consumer reporting agency,

20 user, or third party, and the information itself shall

21 not constitute a consumer report, within the mean22 ing of the Fair Credit Reporting Act or other similar

23 law.’’.
272

•HR 2520 IH

1 SEC. 443. ELECTRONIC FUND TRANSFER ACT CLARIFICA2 TION.

3 (a) DEFINITION OF ACCEPTED CARD OR OTHER

4 MEANS OF ACCESS.—Section 903(1) of the Electronic

5 Fund Transfer Act (15 U.S.C. 1693a(1)) is amended by

6 inserting before the semicolon at the end the following:

7 ‘‘, but such term does not include a card, device, or com8 puter that a person may use to pay for transactions

9 through use of value stored on, or assigned to, the card,

10 device, or computer itself, except for those transactions

11 where such card, device, or computer is actually used to

12 access an account to effect such transaction’’.

13 (b) DEFINITION OF ACCOUNT.—Section 903(2) of

14 the Electronic Fund Transfer Act (15 U.S.C. 1693a(2))

15 is amended by inserting before the semicolon at the end

16 the following: ‘‘and does not include any value which is

17 stored on, or assigned to, a card, device, or computer itself

18 that enables a person to pay for transactions through use

19 of that stored value’’.

20 SEC. 444. LIMIT ON RESTITUTION FOR TRUTH IN LENDING

21 VIOLATIONS IF SAFETY AND SOUNDNESS OF

22 VIOLATOR WOULD BE AFFECTED.

23 Section 108(e)(3)(A) of the Truth in Lending Act (15

24 U.S.C. 1607(e)(3)(A)) is amended—
273

•HR 2520 IH

1 (1) by striking ‘‘in any such case, the agency

2 may require’’ and inserting ‘‘in any such case, the

3 agency may (i) require’’;

4 (2) by striking ‘‘, except that with respect to

5 any transaction consummated after the effective

6 date of section 608 of the Truth in Lending Sim7 plification and Reform Act, the agency shall’’ and

8 inserting ‘‘; or (ii)’’; and

9 (3) by striking ‘‘reasonable,’’ and inserting

10 ‘‘reasonable if, in the case of an agency referred to

11 in paragraph (1), (2), or (3) of subsection (a), the

12 agency determines that a partial adjustment or the

13 making of partial payments over an extended period

14 is necessary to avoid causing the creditor to become

15 undercapitalized (as determined in accordance with

16 regulations prescribed by such agency under section

17 38 of the Federal Deposit Insurance Act);’’.

18 Subtitle D—Equal Credit

19 Opportunity Act Amendments

20 SEC. 451. SHORT TITLE.

21 This subtitle may be cited as the ‘‘Equal Credit Op22 portunity Act Amendments of 1995’’.

23 SEC. 452. FINDINGS AND PURPOSE.

24 (a) FINDINGS.—The Congress finds that both the

25 Equal Credit Opportunity Act (15 U.S.C. 1691, et seq.)
274

•HR 2520 IH

1 and the Fair Credit Reporting Act (15 U.S.C. 1681, et

2 seq.) contain requirements that applicants for consumer

3 credit be given certain information in the event that ad4 verse action is taken on the application. These require5 ments differ in both scope and content and for that reason

6 are confusing to both the consumer who receives the infor7 mation and the party required to furnish the information.

8 (b) PURPOSE.—It is the purpose of this subtitle to

9 combine and simplify the adverse action notification re10 quirements of the Equal Credit Opportunity Act and the

11 Fair Credit Reporting Act regarding applications for

12 consumer credit and to make the information that is re13 quired to be furnished more understandable.

14 SEC. 453. EQUAL CREDIT OPPORTUNITY ACT AMEND15 MENTS.

16 (a) NOTICE OF ADVERSE ACTION.—Section

17 701(d)(2)(B) of the Equal Credit Opportunity Act (15

18 U.S.C. 1691(d)(2)(B)) is amended to read as follows:

19 ‘‘(B) giving written notification of adverse

20 action which discloses—

21 ‘‘(i) the applicant’s right to a state22 ment of reasons within 30 days after re23 ceipt by the creditor of a request made

24 within 60 days after such notification;
275

•HR 2520 IH

1 ‘‘(ii) if credit is denied or the charge

2 for such credit is increased either wholly or

3 partly because of information contained in

4 a consumer report from a consumer re5 porting agency—

6 ‘‘(I) that fact and the name, ad7 dress, and telephone number of the

8 consumer reporting agency making

9 the report;

10 ‘‘(II) the consumer’s right to ob11 tain, under section 612, a free copy of

12 a consumer report on the consumer,

13 from the consumer reporting agency

14 referred to in subclause (I) within the

15 30-day period provided under such

16 section; and

17 ‘‘(III) the consumer’s right to

18 dispute, under section 611, with a

19 consumer reporting agency the accu20 racy or completeness of any informa21 tion in a consumer report furnished

22 by the agency.

23 ‘‘(iii) if credit is denied or the charge

24 for credit is increased either wholly or

25 partly because of information obtained
276

•HR 2520 IH

1 from a person other than a consumer re2 porting agency bearing upon the consum3 er’s credit worthiness, credit standing,

4 credit capacity, character, general reputa5 tion, personal characteristics or mode of

6 living, that fact and the right to receive

7 disclosure of the nature of the information

8 so received, within a reasonable period of

9 time, upon the consumer’s written request

10 for information within 60 days after learn11 ing of such adverse action; and

12 ‘‘(v) the identity of the person or of13 fice from which such notification may be

14 obtained.

15 Such statement of reasons may be given orally

16 if the written notification advises the applicant

17 of his right to have the statement of reasons

18 confirmed in writing on written request.’’.

19 (b) TECHNICAL AND CONFORMING AMENDMENT.—

20 Section 701(d)(3) of the Equal Credit Opportunity Act

21 (15 U.S.C. 1691(d)(3)) is amended by striking the period

22 at the end and adding the following: ‘‘and, to the extent

23 applicable, the name, address, and telephone number of

24 the consumer reporting agency identified in accordance

25 with the requirements of subsection (d)(3)(ii) and a state-
277

•HR 2520 IH

1 ment of the right to obtain disclosure of the nature of the

2 information upon which adverse action was taken as re3 quired by such subsection.’’.

4 (c) REASONABLE PROCEDURES TO ASSURE COMPLI5 ANCE.—Section 706 of the Equal Credit Opportunity Act

6 (15 U.S.C. 1691e) is amended by adding at the end the

7 following new subsection:

8 ‘‘(l) REASONABLE PROCEDURES TO ASSURE COM9 PLIANCE.—No person shall be held liable for any violation

10 of subsection 701(d) if such person shows by a preponder11 ance of the evidence that at the time of the alleged viola12 tion the person maintained reasonable procedures to as13 sure compliance with the provisions of the subsection.’’.

14 SEC. 454. FAIR CREDIT REPORTING ACT AMENDMENTS.

15 (a) Section 615(a) of the Fair Credit Reporting Act

16 (15 U.S.C. 1681m(a)) is amended by striking ‘‘credit or’’

17 each place such term appears.

18 (b) Section 615 of the Fair Credit Reporting Act (15

19 U.S.C. 1681m) is amended by striking subsection (b) and

20 redesignating subsection (c) as subsection (b).

21 (c) Section 615(b) (as redesignated by this section)

22 of the Fair Credit Reporting Act (15 U.S.C. 1681m(b))

23 is amended by striking ‘‘subsections (a) and (b)’’ and in24 serting ‘‘subsection (a)’’.
278

•HR 2520 IH

1 SEC. 455. INCENTIVES FOR SELF-TESTING.

2 (a) EQUAL CREDIT OPPORTUNITY.—

3 (1) IN GENERAL.—The Equal Credit Oppor4 tunity Act (15 U.S.C. 1691 et seq.) is amended by

5 inserting after section 704 the following new section:

6 ‘‘SEC. 704A. INCENTIVES FOR SELF-TESTING AND SELF7 CORRECTION.

8 ‘‘(a) IN GENERAL.—If a creditor—

9 ‘‘(1) conducts, or authorizes an independent

10 third party to conduct, a self-test of the creditor’s

11 lending or any part of the creditor’s lending oper12 ations in order to determine the level or effectiveness

13 of compliance with this title by the creditor; and

14 ‘‘(2) has identified discriminatory practices and

15 has taken or is taking appropriate corrective actions

16 to address the discrimination,

17 any report or results of such a self-test may not be ob18 tained or used by any applicant, department, or agency

19 in any proceeding or civil action brought under this title.

20 ‘‘(b) RESULTS OF SELF-TESTING.—No provision of

21 this section shall be construed as preventing an applicant,

22 department, or agency from obtaining and using the re23 sults of any self-testing in any proceeding or civil action

24 brought under this title if—
279

•HR 2520 IH

1 ‘‘(1) the creditor or any other entity conducted

2 such activity at the request of a department or agen3 cy;

4 ‘‘(2) the creditor or any other entity, or any

5 person acting on behalf of the creditor or other en6 tity—

7 ‘‘(A) voluntarily releases or discloses all, or

8 any part of, such results; or

9 ‘‘(B) refers to or describes such results as

10 a defense to charges of unlawful discrimination

11 against such creditor, person, or entity; or

12 ‘‘(3) the results are sought by the applicant, de13 partment, or agency by means of a discovery request

14 for the purposes of determining an appropriate pen15 alty or remedy for a violation of this title.

16 ‘‘(c) REGULATIONS.—The appropriate Federal de17 partment or agency shall prescribe regulations, after no18 tice and opportunity for comment, which determine what

19 types of ‘self-tests’ are sufficiently extensive so as to con20 stitute a determination of the level or effectiveness of a

21 creditor’s compliance with this title.’’.

22 (2) REFERRALS TO THE ATTORNEY GEN23 ERAL.—Section 706(g) of the Equal Credit Oppor24 tunity Act (15 U.S.C. 1691e(g)) is amended—
280

•HR 2520 IH

1 (A) by striking ‘‘(g) The agencies’’ and in2 serting ‘‘(g) REFERRALS TO THE ATTORNEY

3 GENERAL.—

4 ‘‘(1) IN GENERAL.—The agencies’’; and

5 (B) by adding at the end the following new

6 paragraphs:

7 ‘‘(2) LIMITATION ON REFERRALS OF SELF8 TESTING RESULTS.—

9 ‘‘(A) IN GENERAL.—No agency shall be re10 quired to refer any report or results of a self11 test relating to any creditor to the Attorney

12 General if the creditor—

13 ‘‘(i) has already identified discrimina14 tory practices as the result of self-testing

15 instituted by the creditor to determine

16 compliance with this title; and

17 ‘‘(ii) has taken or is taking appro18 priate corrective actions to address the dis19 crimination.

20 ‘‘(3) ENFORCEMENT UNDER OTHER LAWS.—No

21 provision of this section shall be construed as limit22 ing the authority of the agency to enforce the provi23 sions of this title under any other provision of law.’’.

24 (3) REFERRALS TO HUD.—Section 706(k) of

25 the Equal Credit Opportunity Act (15 U.S.C.
281

•HR 2520 IH

1 1691e(k)) is amended by adding at the end the fol2 lowing: ‘‘No such agency shall be required to notify

3 the Secretary of Housing and Urban Development or

4 the applicant that the agency has reason to believe

5 that a violation of this title or the Fair Housing Act

6 occurred if the reason is based on a result of self7 testing instituted by the creditor to determine com8 pliance with this title, and the creditor has already

9 identified the possible violation and has taken or is

10 taking appropriate corrective actions to address the

11 possible violation. No provisions of this section shall

12 be construed as limiting the authority of the agency

13 to enforce the provisions of this title under any other

14 provision of law.’’.

15 (4) CLERICAL AMENDMENT.—The table of sec16 tions for title VII of the Consumer Credit Protection

17 Act is amended by inserting after the item relating

18 to section 704 the following new item:

‘‘704A. Incentives for self-testing and self-correction.’’.

19 (b) FAIR HOUSING.—The Fair Housing Act (42

20 U.S.C. 3601 et seq.) is amended by inserting after section

21 814 the following new section:

22 ‘‘SEC. 814A. SELF-TESTING ENHANCEMENT.

23 ‘‘(a) IN GENERAL.—If any person—

24 ‘‘(1) conducts, or authorizes an independent

25 third party to conduct, a self-test of that person’s
282

•HR 2520 IH

1 residential real estate related lending activities, or

2 any part of such activities, in order to determine the

3 level or effectiveness of compliance with this title by

4 the person; and

5 ‘‘(2) has identified discriminatory practices and

6 has taken or is taking appropriate corrective actions

7 to address the discrimination,

8 any report or results of such a self-test may not be ob9 tained or used by any aggrieved person, complainant, de10 partment, or agency in any proceeding or civil action

11 brought under this title.

12 ‘‘(b) RESULTS OF SELF-TESTING.—No provision of

13 this section shall be construed as preventing an aggrieved

14 person, complainant, department, or agency from obtain15 ing and using the results of any self-testing as described

16 in subsection (a) in any proceeding or civil action brought

17 under this title if—

18 ‘‘(1) the creditor or any other entity conducted

19 such activity at the request of a department or agen20 cy;

21 ‘‘(2) the creditor or any other entity, or any

22 person acting on behalf of the creditor or other en23 tity—

24 ‘‘(A) voluntarily releases or discloses all, or

25 any part of, such results; or
283

•HR 2520 IH

1 ‘‘(B) refers to or describes such results as

2 a defense to charges of unlawful discrimination

3 against such creditor, person, or entity; or

4 ‘‘(3) the results are sought by the aggrieved

5 person, complainant, department, or agency by

6 means of a discovery request for the purposes of de7 termining an appropriate penalty or remedy for a

8 violation of this title.

9 ‘‘(c) REGULATIONS.—The appropriate Federal de10 partment or agency shall prescribe regulations, after no11 tice and opportunity for comment, which determine what

12 types of ‘self-tests’ are sufficiently extensive so as to con13 stitute a determination of the level or effectiveness of a

14 creditor’s compliance with this title.’’.

15 SEC. 456. CONSULTATION BY ATTORNEY GENERAL RE16 QUIRED IN NONREFERRAL CASES.

17 (a) EQUAL CREDIT OPPORTUNITY.—Section 706(h)

18 of the Equal Credit Opportunity Act (15 U.S.C. 1691e(h))

19 is amended by adding at the end the following new sen20 tence: ‘‘Before bringing a civil action against any creditor

21 described in paragraph (1), (2), or (3) of section 704(a),

22 the Attorney General shall consult with the appropriate

23 agency under such paragraph.’’.

24 (b) FAIR HOUSING ACT.—Section 814(a) of the Fair

25 Housing Act (42 U.S.C. 3614(a)) is amended by adding
284

•HR 2520 IH

1 at the end the following new sentence: ‘‘Before bringing

2 a civil action under the preceding sentence against any

3 person or group of persons described in paragraph (1),

4 (2), or (3) of section 704(a) of the Equal Credit Oppor5 tunity Act with respect to a violation of 805(a) of this

6 title, the Attorney General shall consult with the appro7 priate agency under such paragraph.’’.

8 SEC. 457. EFFECTIVE DATE.

9 (a) IN GENERAL.—Except with respect to the re10 quirements of subsection (b), this Act shall take effect at

11 the end of the 270-day period beginning on the date of

12 the enactment of this Act.

13 (b) IMPLEMENTING REGULATIONS.—The Board of

14 Governors of the Federal Reserve System shall prescribe

15 regulations to implement this Act and such regulations

16 shall be published in final form before the end of the 180-

17 day period beginning on the date of the enactment of this

18 Act.

19 Subtitle E—Consumer Leasing Act

20 Amendments

21 SEC. 461. SHORT TITLE.

22 This subtitle may be cited as the ‘‘Consumer Leasing

23 Act Amendments of 1995’’.
285

•HR 2520 IH

1 SEC. 462. CONGRESSIONAL FINDINGS AND DECLARATION

2 OF PURPOSE.

3 (a) FINDINGS.—The Congress finds the following:

4 (1) Competition among the various financial in5 stitutions and other firms engaged in the business of

6 consumer leasing is greatest when there is informed

7 use of leasing. The informed use of leasing results

8 from an awareness of the cost of leasing by consum9 ers.

10 (2) There has been a continued trend toward

11 leasing automobiles and other durable goods for

12 consumer use as an alternative to installment credit

13 sales and that leasing product advances have oc14 curred such that lessors have been unable to provide

15 consistent industry-wide disclosures to fully account

16 for the competitive progress that has occurred.

17 (b) PURPOSES.—

18 (1) It is the purpose of this subtitle to assure

19 a simple, meaningful disclosure of leasing terms so

20 that the consumer will be able to compare more

21 readily the various leasing terms available to the

22 consumer and avoid the uninformed use of leasing,

23 and to protect the consumer against inaccurate and

24 unfair leasing practices.

25 (2) To provide for adequate cost disclosures

26 that reflect the marketplace without impairing com-
286

•HR 2520 IH

1 petition and the development of new leasing prod2 ucts, it is the purpose of this subtitle to provide the

3 Board with the regulatory authority to assure a sim4 plified, meaningful definition and disclosure of the

5 terms of certain leases of personal property for per6 sonal, family, or household purposes so as to enable

7 the lessee to compare more readily the various lease

8 terms available to the lessee, enable comparison of

9 lease terms with credit terms where appropriate and

10 to assure meaningful and accurate disclosures of

11 lease terms in advertisements.

12 SEC. 463. REGULATIONS.

13 (a) IN GENERAL.—Chapter 5 of title I of the

14 Consumer Credit Protection Act (15 U.S.C. 1601 et seq.)

15 is amended by adding at the end the following new section:

16 ‘‘SEC. 187. REGULATIONS.

17 ‘‘(a) REGULATIONS AUTHORIZED.—

18 ‘‘(1) IN GENERAL.—The Board shall write reg19 ulations or staff commentary, if appropriate, to up20 date and clarify the requirements and definitions for

21 lease disclosures, contracts, and any other specific

22 issues related to consumer leasing which would carry

23 out the purposes of this chapter, to prevent any cir24 cumvention of the chapter, and to facilitate compli25 ance with the requirements of the chapter.
287

•HR 2520 IH

1 ‘‘(2) CLASSIFICATIONS, ADJUSTMENTS.—The

2 regulations prescribed under paragraph (1) may con3 tain classifications and differentiations and may pro4 vide for adjustments and exceptions for any class of

5 transaction.

6 ‘‘(b) MODEL DISCLOSURES.—The Board shall pub7 lish model disclosure forms and clauses to facilitate com8 pliance with the disclosure requirements and to aid the

9 consumer in understanding the transaction. In designing

10 forms, the Board shall consider the use by lessors of data

11 processing or similar automated equipment. Use of the

12 models shall be optional. A lessor who properly uses the

13 material aspects of the models shall be deemed to be in

14 compliance with the disclosure requirements.

15 ‘‘(c) EFFECTIVE DATES.—

16 ‘‘(1) IN GENERAL.—Any regulation of the

17 Board, or any amendment or interpretation of any

18 regulation of the Board, that requires a disclosure

19 different from the disclosures previously required

20 shall have an effective date of the October 1 that fol21 lows the date of promulgation by at least 6 months.

22 ‘‘(2) LONGER PERIOD.—The Board may, in the

23 Board’s discretion, lengthen the period of time re24 ferred to in paragraph (1) to permit lessors to ad25 just their forms to accommodate new requirements.
288

•HR 2520 IH

1 ‘‘(3) SHORTER PERIOD.—The Board may also

2 shorten the period of time referred to in paragraph

3 (1) if the Board makes a specific finding that such

4 action is necessary to comply with the findings of a

5 court or to prevent unfair or deceptive practices.

6 ‘‘(4) COMPLIANCE BEFORE EFFECTIVE DATE.—

7 Lessors may comply with any newly promulgated

8 disclosure requirement before the effective date of

9 such requirement.’’.

10 (b) CLERICAL AMENDMENT.—The table of sections

11 for chapter 5 of title I of the Consumer Credit Protection

12 Act (15 U.S.C. 1601 et seq.) is amended by inserting after

13 the item relating to section 186 the following new item:

‘‘187. Regulations.’’.

14 SEC. 464. CONSUMER LEASE ADVERTISING.

15 Section 184 of the Consumer Credit Protection Act

16 (15 U.S.C. 1667c) is amended to read as follows:

17 ‘‘SEC. 184. CONSUMER LEASE ADVERTISING.

18 ‘‘(a) IN GENERAL.—If an advertisement for a

19 consumer lease states the amount of any payment or

20 states that any or no initial payment is required, the ad21 vertisement must also clearly and conspicuously state the

22 following terms, as applicable:

23 ‘‘(1) That the transaction advertised is a lease.
289

•HR 2520 IH

1 ‘‘(2) The total of initial payments required at

2 or before consummation of the lease or delivery of

3 the property, whichever is later.

4 ‘‘(3) That a security deposit is required.

5 ‘‘(4) The number, amounts, and timing of

6 scheduled payments.

7 ‘‘(5) For a lease in which the consumer’s liabil8 ity at the end of the lease term is based on the an9 ticipated residual value of the property, that an

10 extra charge may be imposed at the end of the lease

11 term.

12 ‘‘(b) ADVERTISING MEDIUM NOT LIABLE.—Any

13 owner or personnel of any medium in which an advertise14 ment appears or through which it is disseminated shall

15 not be liable under this section.’’.

16 SEC. 465. STATUTORY PENALTIES.

17 Section 185(a) of the Consumer Credit Protection

18 Act (15 U.S.C. 1667d(a)) is amended by adding at the

19 end the following new sentence: ‘‘Notwithstanding the pre20 ceding sentence, a creditor shall only have liability deter21 mined under section 130(a)(2) for failing to comply with

22 the requirements of paragraph (2), (8), (9), or (10) of sec23 tion 182 or for failing to comply with disclosure require24 ments under State law for any term which the Board has

25 determined to be substantially the same in meaning under
290

•HR 2520 IH

1 section 186 as any of the terms referred to in section

2 182.’’.

3 TITLE V—STREAMLINING

4 GOVERNMENT REGULATIONS

5 Subtitle A—Regulatory Approval

6 Issues

7 SEC. 501. STREAMLINED BANK ACQUISITIONS BY WELL

8 CAPITALIZED AND WELL MANAGED BANKING

9 ORGANIZATIONS.

10 Section 3 of the Bank Holding Company Act (12

11 U.S.C. 1842) is amended by adding at the end the follow12 ing new subsection:

13 ‘‘(h) NO APPROVAL REQUIRED FOR CERTAIN TRANS14 ACTIONS.—

15 ‘‘(1) IN GENERAL.—Notwithstanding paragraph

16 (3) or (5) of subsection (a) and subject to para17 graphs (5) and (6), an acquisition of shares by a

18 registered financial services holding company, or a

19 merger or consolidation between registered financial

20 services holding companies, shall be deemed ap21 proved at the conclusion of the period specified in

22 subparagraph (G) if all of the following conditions

23 have been met:

24 ‘‘(A) FINANCIAL AND MANAGERIAL CRI25 TERIA.—
291

•HR 2520 IH

1 ‘‘(i) WELL CAPITALIZED FINANCIAL

2 SERVICES HOLDING COMPANY.—Both at

3 the time of and immediately after the pro4 posed transaction, the acquiring financial

5 services holding company is well capital6 ized.

7 ‘‘(ii) WELL CAPITALIZED LEAD IN8 SURED DEPOSITORY INSTITUTION.—Both

9 at the time of and immediately after the

10 proposed transaction, the lead insured de11 pository institution of the acquiring finan12 cial services holding company is well cap13 italized.

14 ‘‘(iii) CAPITAL OF OTHER INSURED

15 DEPOSITORY INSTITUTIONS.—At the time

16 of the transaction, well capitalized insured

17 depository institutions control at least 80

18 percent of the aggregate total risk-weight19 ed assets of insured depository institutions

20 controlled by the acquiring financial serv21 ices holding company.

22 ‘‘(iv) NO UNDERCAPITALIZED IN23 SURED DEPOSITORY INSTITUTIONS.—At

24 the time of the transaction, no insured de25 pository institution controlled by the ac-
292

•HR 2520 IH

1 quiring financial services holding company

2 is undercapitalized.

3 ‘‘(v) WELL MANAGED.—

4 ‘‘(I) IN GENERAL.—At the time

5 of the transaction, the acquiring fi6 nancial services holding company, its

7 lead insured depository institution,

8 and insured depository institutions

9 that control at least 90 percent of the

10 aggregate total risk-weighted assets of

11 insured depository institutions con12 trolled by such holding company are

13 well managed.

14 ‘‘(II) NO POORLY MANAGED IN15 STITUTIONS.—Except with respect to

16 insured depository institutions de17 scribed in paragraph (2), no insured

18 depository institution controlled by

19 the acquiring financial services hold20 ing company has received 1 of the 2

21 lowest composite ratings at the later

22 of the institution’s most recent exam23 ination or subsequent review.

24 ‘‘(B) NO UNSATISFACTORY CRA RAT25 INGS.—Except with respect to insured deposi-
293

•HR 2520 IH

1 tory institutions described in paragraph (3), no

2 insured depository institution controlled by the

3 acquiring financial services holding company

4 has received a ‘needs to improve’ or ‘substantial

5 noncompliance’ composite rating as a result of

6 the institution’s most recent examination under

7 the Community Reinvestment Act of 1977.

8 ‘‘(C) COMPETITIVE CRITERIA.—Con9 summation of the proposal complies with guide10 lines established by the Board by regulation,

11 after consultation with the Attorney General,

12 that identify proposals that are not likely to

13 have a significantly adverse effect on competi14 tion in any relevant market.

15 ‘‘(D) SIZE OF ACQUISITION.—

16 ‘‘(i) ASSET SIZE.—The book value of

17 the total assets to be acquired does not ex18 ceed 10 percent of the consolidated total

19 risk weighted assets of the acquiring finan20 cial services holding company.

21 ‘‘(ii) CONSIDERATION.—The gross

22 consideration to be paid for the securities

23 or assets does not exceed 15 percent of the

24 consolidated Tier 1 capital of the acquiring

25 financial services holding company.
294

•HR 2520 IH

1 ‘‘(E) INTERSTATE ACQUISITIONS.—Board

2 approval of the transaction is not prohibited

3 under subsection (d).

4 ‘‘(F) COMPLIANCE CRITERION.—During

5 the 12-month period ending on the date of the

6 transaction, no administrative enforcement ac7 tion has been commenced, and no cease and de8 sist order has been issued pursuant to section

9 8 of the Federal Deposit Insurance Act, against

10 any financial services holding company involved

11 in the transaction or any depository institution

12 subsidiary of any such holding company and no

13 such enforcement action, order, or other admin14 istrative enforcement proceeding is pending as

15 of such date.

16 ‘‘(G) OTHER CONSIDERATIONS.—Board

17 approval of the transaction is not prohibited

18 under subsection (c)(3).

19 ‘‘(H) NOTIFICATION.—The acquiring fi20 nancial services holding company provides writ21 ten notice of the transaction, including a de22 scription of the terms of the transaction, to the

23 Board and the Attorney General, simulta24 neously, at least 15 business days (or such
295

•HR 2520 IH

1 shorter period as permitted by the Board) be2 fore the transaction is consummated.

3 ‘‘(I) NO BOARD DISAPPROVAL.—Before the

4 end of the 15-day period (or the shorter period)

5 referred to in subparagraph (H), the Board has

6 not required an application under subsection

7 (a).

8 ‘‘(2) SPECIAL RULE RELATING TO THE RE9 QUIREMENT FOR WELL MANAGED INSTITUTIONS.—

10 Insured depository institutions which have been ac11 quired by a financial services holding company dur12 ing the 12-month period preceding the date of the

13 transaction may be excluded for purposes of para14 graph (1)(A)(v)(II) if—

15 ‘‘(A) the financial services holding com16 pany has developed a plan for the institution to

17 restore the capital and management of the in18 stitution which is acceptable to the appropriate

19 Federal banking agency; and

20 ‘‘(B) all such insured depository institu21 tions represent, in the aggregate, less than 10

22 percent of the aggregate total risk-weighted as23 sets of all insured depository institutions con24 trolled by the holding company.
296

•HR 2520 IH

1 ‘‘(3) SPECIAL RULE RELATING TO THE RE2 QUIREMENT FOR COMMUNITY INVESTMENT.—In3 sured depository institutions acquired during the 12-

4 month period preceding the date of the transaction

5 may be excluded for purposes of paragraph (1)(B)

6 if the financial services holding company has devel7 oped a plan to restore the performance of the insti8 tution to at least a ‘satisfactory’ rating under the

9 Community Reinvestment Act of 1977 which is ac10 ceptable to the appropriate Federal banking agency.

11 ‘‘(4) ADJUSTMENT OF PERCENTAGES.—The

12 Board may by regulation adjust the percentages and

13 the manner in which the percentages of insured de14 pository institutions are calculated under subpara15 graph (A)(v)(I) or (D) of paragraph (1) or para16 graph (2)(B) if the Board determines that such ad17 justment is consistent with safety and soundness

18 and the purposes of this Act.

19 ‘‘(5) ADVICE OF ATTORNEY GENERAL.—The

20 Attorney General shall advise the Board during the

21 period referred to in paragraph (1)(H) in writing if

22 any competitive concerns exist with respect to the

23 transaction.

24 ‘‘(6) WAIVER OF POSTAPPROVAL WAITING PE25 RIOD.—If the Attorney General advises the Board
297

•HR 2520 IH

1 that no competitive concerns exist with respect to

2 the transaction, the provisions of section 11(b) relat3 ing to a postapproval waiting shall not apply with

4 respect to such transaction.’’.

5 SEC. 502. ELIMINATE FILING AND APPROVAL REQUIRE6 MENTS FOR INSURED DEPOSITORY INSTITU7 TIONS ALREADY CONTROLLED BY THE SAME

8 HOLDING COMPANY.

9 (a) BANK MERGER ACT.—Section 18(c) of the Fed10 eral Deposit Insurance Act (12 U.S.C. 1828(c)) is amend11 ed by adding at the end the following new paragraph:

12 ‘‘(12) The provisions of this subsection shall

13 not apply to any merger, consolidation, acquisition

14 of assets or assumption of liabilities involving only

15 insured depository institutions that are subsidiaries

16 of the same depository institution holding company

17 if—

18 ‘‘(A) the responsible agency would not be

19 prohibited from approving the transaction

20 under section 44, if applicable;

21 ‘‘(B) the acquiring, assuming, or resulting

22 institution complies with all applicable provi23 sions of section 44, if any, as if the merger,

24 consolidation, or acquisition were approved

25 under this subsection;
298

•HR 2520 IH

1 ‘‘(C) the acquiring, assuming, or resulting

2 institution provides written notification of the

3 transaction to the appropriate Federal banking

4 agency for the institution at least 10 days prior

5 to consummation of the transaction; and

6 ‘‘(D) after receiving such notice, the agen7 cy does not require the institution to submit an

8 application with respect to such transaction and

9 so notifies the institution.’’.

10 (b) NATIONAL BANK CONSOLIDATION AND MERGER

11 ACT.—

12 (1) CONSOLIDATIONS.—Section 2 of the Na13 tional Bank Consolidation and Merger Act (12

14 U.S.C. 215) is amended—

15 (A) in subsection (a), by adding at the end

16 the following new sentence:

17 ‘‘No approval by the Comptroller of the Currency is re18 quired under this subsection for a transaction which in19 volves the consolidation of banks that, at the time of the

20 consolidation, are all subsidiaries (as defined in section 3

21 of the Federal Deposit Insurance Act) of the same com22 pany.’’; and

23 (B) in subsection (b)—
299

•HR 2520 IH

1 (i) by striking ‘‘, and thereafter the

2 consolidation shall be approved by the

3 Comptroller’’; and

4 (ii) by striking ‘‘when such consolida5 tion is approved by the Comptroller’’.

6 (2) MERGERS.—Section 3 of the National Bank

7 Consolidation and Merger Act (12 U.S.C. 215a) is

8 amended—

9 (A) in subsection (a), by adding at the end

10 the following new sentence:

11 ‘‘No approval by the Comptroller of the Currency is re12 quired under this subsection for a transaction which in13 volves the merger of banks that, at the time of the merger,

14 are all subsidiaries (as defined in section 3 of the Federal

15 Deposit Insurance Act) of the same company.’’; and

16 (B) in subsection (b)—

17 (i) by striking ‘‘, and thereafter the

18 merger shall be approved by the Comptrol19 ler’’; and

20 (ii) by striking ‘‘when such merger

21 shall be approved by the Comptroller’’.
300

•HR 2520 IH

1 SEC. 503. ELIMINATE REDUNDANT APPROVAL REQUIRE2 MENT FOR OAKAR TRANSACTIONS.

3 (a) IN GENERAL.—Section 5(d)(3) of the Federal

4 Deposit Insurance Act (12 U.S.C. 1815(d)(3)) is amend5 ed—

6 (1) in subparagraph (A), by striking ‘‘with the

7 prior written approval of the responsible agency

8 under section 18(c)(2)’’;

9 (2) in subparagraph (E)—

10 (A) by striking clause (iv) and inserting

11 the following new clause:

12 ‘‘(iv) A transaction shall not be au13 thorized under this paragraph unless the

14 acquiring, assuming, or resulting deposi15 tory institution will meet all applicable cap16 ital requirements upon consummation of

17 the transaction.’’;

18 (B) by striking clauses (i) and (ii); and

19 (C) by redesignating clauses (iii) and (iv)

20 (as amended by subparagraph (A) of this para21 graph) as clauses (i) and (ii), respectively; and

22 (3) by striking subparagraph (G) and redesig23 nating the subsequent subparagraphs accordingly.

24 (b) TECHNICAL AND CONFORMING AMENDMENT.—

25 Section 5156A(b)(1) of the Revised Statutes of the United
301

•HR 2520 IH

1 States (12 U.S.C. 215c(b)(1)) is amended by striking

2 ‘‘section 5(d)(3) of the Federal Deposit Insurance Act or’’.

3 (c) CLERICAL AMENDMENT.—The heading for sec4 tion 5(d)(3)(E) of the Federal Deposit Insurance Act (12

5 U.S.C. 1815(d)(3)(E)) is amended by striking ‘‘FOR AP6 PROVAL, GENERALLY’’.

7 SEC. 504. ELIMINATION OF DUPLICATIVE REQUIREMENTS

8 IMPOSED UPON FINANCIAL SERVICES HOLD9 ING COMPANIES AND OTHER REGULATORY

10 RELIEF UNDER THE HOME OWNERS’ LOAN

11 ACT.

12 (a) EXEMPTION FOR BANK HOLDING COMPANIES.—

13 Section 10 of the Home Owners’ Loan Act (12 U.S.C.

14 1467a) is amended by adding at the end the following new

15 subsection:

16 ‘‘(t) EXEMPTION FOR FINANCIAL SERVICES HOLD17 ING COMPANIES.—This section shall not apply to a finan18 cial services holding company that is subject to the Finan19 cial Services Holding Company Act of 1995 or any com20 pany controlled by such financial services holding company

21 (other than a savings association).’’.

22 (b) DEFINITION OF SAVINGS AND LOAN HOLDING

23 COMPANY.—Section 10(a)(1)(D) of the Home Owners’

24 Loan Act (12 U.S.C. 1467a(a)(1)(D)) is amended to read

25 as follows:
302

•HR 2520 IH

1 ‘‘(D) SAVINGS AND LOAN HOLDING COM2 PANY.—

3 ‘‘(i) IN GENERAL.—Except as pro4 vided in clause (ii), the term ‘savings and

5 loan holding company’ means any company

6 which directly or indirectly controls a sav7 ings association or controls any other com8 pany which is a savings and loan holding

9 company.

10 ‘‘(ii) EXCEPTION FOR FINANCIAL

11 SERVICES HOLDING COMPANY.—The term

12 ‘savings and loan holding company’ does

13 not include any company which is reg14 istered under, and subject to, the provi15 sions of the Financial Services Holding

16 Company Act of 1995, or any company di17 rectly or indirectly controlled by such com18 pany.’’.

19 (c) AMENDMENTS TO THE BANK HOLDING COMPANY

20 ACT OF 1956.—Section 4(i) of the Bank Holding Com21 pany Act of 1956 (12 U.S.C. 1843(i)) is amended by add22 ing at the end the following new paragraphs:

23 ‘‘(4) SOLICITATION OF VIEWS.—

24 ‘‘(A) NOTICE TO DIRECTOR.—Upon receiv25 ing any application or notice by a financial
303

•HR 2520 IH

1 services holding company to acquire directly or

2 indirectly a savings association under sub3 section (c)(8), the Board shall solicit the Direc4 tor’s comments and recommendations with re5 spect to such acquisition.

6 ‘‘(B) COMMENT PERIOD.—The comments

7 and views of the Director under subparagraph

8 (A) with respect to any acquisition subject to

9 such subparagraph shall be transmitted to the

10 Board within 30 days of the receipt by the Di11 rector of the notice relating to such acquisition

12 (or such shorter period as the Board may speci13 fy if the Board advises the Director that an

14 emergency exists which requires expeditious ac15 tion).

16 ‘‘(5) EXAMINATION.—

17 ‘‘(A) SCOPE.—The Board shall consult

18 with the Director, as appropriate, in establish19 ing the scope of an examination by the Board

20 of a financial services holding company that

21 controls directly or indirectly a savings associa22 tion.

23 ‘‘(B) ACCESS TO INSPECTION REPORTS.—

24 Upon the request of the Director, the Board

25 shall furnish the Director with a copy of any in-
304

•HR 2520 IH

1 spection report, additional examination mate2 rials, or supervisory information relating to any

3 financial services holding company which di4 rectly or indirectly controls a savings associa5 tion.

6 ‘‘(6) COORDINATION OF ENFORCEMENT EF7 FORTS.—The Board and the Director shall cooper8 ate in any enforcement action against any financial

9 services holding company which controls a savings

10 association, if the relevant conduct involves such as11 sociation.

12 ‘‘(7) DIRECTOR DEFINED.—For purposes of

13 this section, the term ‘Director’ means the Director

14 of the Office of Thrift Supervision.’’.

15 (d) ALTERNATIVE TEST.—Section 10(m) of the

16 Home Owners’ Loan Act (12 U.S.C. 1467a(m)) is amend17 ed—

18 (1) in paragraph (1), by striking ‘‘(2) and (7)’’

19 and inserting ‘‘(2), (7), and (8)’’; and

20 (2) by adding at the end the following new

21 paragraph:

22 ‘‘(8) ALTERNATIVE TEST.—Any savings asso23 ciation which meets the requirements set forth in

24 section 7701(a)(19)(C) of the Internal Revenue
305

•HR 2520 IH

1 Code of 1986 shall be deemed to be a qualified thrift

2 lender.’’.

3 SEC. 505. ELIMINATE REQUIREMENT THAT APPROVAL BE

4 OBTAINED FOR DIVESTITURES.

5 Section 2(g) of the Bank Holding Company Act of

6 1956 (12 U.S.C. 1841(g)) (as amended by section

7 118(f)(6)(A) of this Act) is amended—

8 (1) by striking paragraph (3);

9 (2) by inserting ‘‘and’’ after the semicolon at

10 the end of paragraph (1); and

11 (3) by striking ‘‘; and’’ at the end of paragraph

12 (2) and inserting a period.

13 SEC. 506. ELIMINATE UNNECESSARY BRANCH APPLICA14 TIONS.

15 (a) NATIONAL BANK BRANCH APPLICATIONS.—Sec16 tion 5155(i) of the Revised Statutes (12 U.S.C. 36(i)) is

17 amended—

18 (1) by striking ‘‘(i) No branch’’ and inserting

19 ‘‘(i) RELOCATION.—

20 ‘‘(1) APPROVAL REQUIRED.—Except as pro21 vided in paragraph (2), no branch’’; and

22 (2) by adding at the end the following new

23 paragraphs:

24 ‘‘(2) NO APPROVAL REQUIRED FOR CERTAIN

25 BRANCHES.—Notwithstanding this subsection or
306

•HR 2520 IH

1 subsection (b) or (c), the consent and approval of

2 the Comptroller of the Currency shall not be re3 quired for a national bank to establish and operate,

4 or to retain and operate, a branch or seasonal agen5 cy if—

6 ‘‘(A) the bank is well capitalized (as de7 fined in section 38 of the Federal Deposit In8 surance Act and regulations prescribed by the

9 Comptroller of the Currency under such sec10 tion);

11 ‘‘(B) the bank received a composite

12 CAMEL rating of ‘1’ or ‘2’ under the Uniform

13 Financial Institutions Rating System (or an

14 equivalent rating under a comparable rating

15 system) as of its most recent examination;

16 ‘‘(C) the bank did not receive a ‘needs to

17 improve’ or ‘substantial noncompliance’ compos18 ite rating at its most recent examination under

19 the Community Reinvestment Act of 1977; and

20 ‘‘(D) the Comptroller of the Currency is

21 otherwise authorized to grant approval under

22 this section to such bank to establish and oper23 ate, or to retain and operate, a branch or sea24 sonal agency at the proposed location.
307

•HR 2520 IH

1 ‘‘(3) CERTAIN BRANCHES DEEMED TO HAVE

2 APPROVED APPLICATIONS.—A branch or seasonal

3 agency established by a national bank under para4 graph (2) shall be deemed to have been established

5 and operated pursuant to an application approved

6 under this section.’’.

7 (b) STATE MEMBER BANK BRANCH APPLICA8 TIONS.—The third undesignated paragraph of section 9

9 of the Federal Reserve Act (12 U.S.C. 321) is amended

10 by adding at the end the following: ‘‘Notwithstanding the

11 preceding 2 sentences, the approval of the Board shall not

12 be required for a State member bank to establish and op13 erate a branch or seasonal agency if—

14 ‘‘(A) the State member bank is well-cap15 italized (as defined in section 38 of the Federal

16 Deposit Insurance Act and regulations pre17 scribed by the Board under such section);

18 ‘‘(B) the State member bank received a

19 composite CAMEL rating of ‘1’ or ‘2’ under the

20 Uniform Financial Institutions Rating System

21 (or an equivalent rating under a comparable

22 rating system);

23 ‘‘(C) the State member bank did not re24 ceive a ‘needs to improve’ or ‘substantial non25 compliance’ composite rating at its most recent
308

•HR 2520 IH

1 examination under the Community Reinvest2 ment Act of 1977; and

3 ‘‘(D) the Board is otherwise authorized to

4 grant approval under this section to such State

5 member bank to establish and operate a branch

6 or seasonal agency at the proposed location.

7 A branch or seasonal agency established by a State mem8 ber bank under the previous sentence shall be deemed to

9 have been established and operated pursuant to an appli10 cation approved under this section.’’.

11 (c) STATE NONMEMBER BANK BRANCH APPLICA12 TIONS.—Section 18(d) of the Federal Deposit Insurance

13 Act (12 U.S.C. 1828(d)) is amended by adding at the end

14 the following new paragraphs:

15 ‘‘(5) APPLICATION EXEMPTION FOR CERTAIN

16 BANKS.—Notwithstanding paragraph (1), the con17 sent of the Corporation shall not be required for a

18 State nonmember insured bank to establish and op19 erate any domestic branch if—

20 ‘‘(A) the bank is well capitalized (as de21 fined in section 38 and regulations prescribed

22 by the Corporation under such section);

23 ‘‘(B) the bank received a composite

24 CAMEL rating of ‘1’ or ‘2’ under the Uniform

25 Financial Institutions Rating System (or an
309

•HR 2520 IH

1 equivalent rating under a comparable rating

2 system) as of its most recent examination;

3 ‘‘(C) the bank did not receive a ‘needs to

4 improve’ or ‘substantial noncompliance’ compos5 ite rating as result of the bank’s most recent

6 examination under the Community Reinvest7 ment Act of 1977; and

8 ‘‘(D) the Corporation is otherwise author9 ized to give consent under this section to such

10 bank to establish and operate a domestic

11 branch at the proposed location.

12 ‘‘(6) APPROVAL GRANTED.—A branch estab13 lished by a State member bank under paragraph (5)

14 shall be deemed to have been established and oper15 ated pursuant to an application approved under this

16 section.’’.

17 SEC. 507. ELIMINATE BRANCH APPLICATIONS AND RE18 QUIREMENTS FOR ATMs AND SIMILAR FA19 CILITIES.

20 (a) DEFINITION OF BRANCH UNDER NATIONAL

21 BANK ACT.—Section 5155(j) of the Revised Statutes (12

22 U.S.C. 36(j)) is amended—

23 (1) by striking ‘‘(j) The term’’ and inserting

24 ‘‘(j) BRANCH.—

25 ‘‘(1) IN GENERAL.—The term’’; and
310

•HR 2520 IH

1 (2) by adding at the end the following new

2 paragraph:

3 ‘‘(2) CERTAIN PROPRIETARY ATMS AND RE4 MOTE SERVICING UNITS.—The term ‘branch’ does

5 not include any automated teller machine or remote

6 service unit which is owned and operated by a depos7 itory institution—

8 ‘‘(A) primarily for the benefit of the insti9 tution and the affiliates of the institution; and

10 ‘‘(B) which could operate a branch at the

11 location of such machine or unit.’’.

12 (b) DEFINITION OF BRANCH UNDER FEDERAL DE13 POSIT INSURANCE ACT.—Section 3(o) of the Federal De14 posit Insurance Act (12 U.S.C. 1813(o)) is amended—

15 (1) by striking ‘‘(o) The term’’ and inserting

16 ‘‘(o) DEFINITIONS RELATING TO BRANCHES.—

17 ‘‘(1) DOMESTIC BRANCH.—

18 ‘‘(A) IN GENERAL.—The term’’; and

19 (2) by striking ‘‘lent; and the term’’ and insert20 ing ‘‘lent.

21 ‘‘(B) CERTAIN PROPRIETARY ATMS AND

22 REMOTE SERVICING UNITS.—The term ‘domes23 tic branch’ does not include any automated tell24 er machine or remote service unit which is
311

•HR 2520 IH

1 owned and operated by a depository institu2 tion—

3 ‘‘(i) primarily for the benefit of the in4 stitution and the affiliates of the institu5 tion; and

6 ‘‘(ii) which could operate a branch at

7 the location of such machine or unit.

8 ‘‘(2) FOREIGN BRANCH.—The term’’.

9 SEC. 508. ELIMINATE REQUIREMENT FOR APPROVAL OF IN10 VESTMENTS IN BANK PREMISES FOR WELL

11 CAPITALIZED AND WELL MANAGED BANKS.

12 Section 24A of the Federal Reserve Act (12 U.S.C.

13 371d) is amended by inserting before the period in that

14 section the following: ‘‘or, in the case of a bank which re15 ceived a composite CAMEL rating of ‘1’ or ‘2’ under the

16 Uniform Financial Institutions Rating System (or an

17 equivalent rating under a comparable rating system) as

18 of its most recent examination and, both before and imme19 diately following the investment or loan, is well capitalized

20 (as defined under section 38 of the Federal Deposit Insur21 ance Act), the amount which is equal to 150 percent of

22 the capital stock and surplus of such bank’’.
312

•HR 2520 IH

1 SEC. 509. ELIMINATE UNNECESSARY FILING FOR OFFICER

2 AND DIRECTOR APPOINTMENTS.

3 Section 32(d) of the Federal Deposit Insurance Act

4 (12 U.S.C. 1831i(d)) is amended to read as follows:

5 ‘‘(d) ADDITIONAL INFORMATION.—

6 ‘‘(1) IN GENERAL.—Any notice submitted to an

7 appropriate Federal banking agency with respect to

8 an individual by any insured depository institution

9 or depository institution holding company pursuant

10 to subsection (a) shall include—

11 ‘‘(A) the information described in section

12 7(j)(6)(A) about the individual; and

13 ‘‘(B) such other information as the agency

14 may prescribe by regulation.

15 ‘‘(2) WAIVER.—An appropriate Federal bank16 ing agency may waive the requirement of this section

17 by regulation or on a case-by-case basis consistent

18 with safety and soundness.’’.

19 SEC. 510. INCREASE IN CERTAIN CREDIT UNION LOAN

20 CEILINGS.

21 Section 107(5)(A) of the Federal Credit Union Act

22 (12 U.S.C. 1757(5)(A)) is amended—

23 (1) in clause (iv), by striking ‘‘$10,000’’ and in24 serting ‘‘$50,000’’; and

25 (2) in clause (v), by striking ‘‘$10,000’’ and in26 serting ‘‘$50,000’’.
313

•HR 2520 IH

1 Subtitle B—Streamlining of Gov2 ernment Regulations; Mis3 cellaneous Provisions

4 SEC. 521. ELIMINATE THE PER-BRANCH CAPITAL REQUIRE5 MENT FOR NATIONAL BANKS AND STATE

6 MEMBER BANKS.

7 Section 5155 of the Revised Statutes (12 U.S.C. 36)

8 is amended—

9 (1) by striking subsection (h); and

10 (2) by redesignating subsections (i) (as amend11 ed by section 506(a) of this Act), (j) (as amended

12 by section 507(a) of this Act), (k), and (l) as sub13 sections (h), (i), (j), and (k), respectively.

14 SEC. 522. BRANCH CLOSURES.

15 (a) IN GENERAL.—Section 42 of the Federal Deposit

16 Insurance Act (12 U.S.C. 1831r–1) is amended by adding

17 at the end the following new subsection:

18 ‘‘(e) SCOPE OF APPLICATION.—

19 ‘‘(1) IN GENERAL.—This section shall not apply

20 with respect to—

21 ‘‘(A) an automated teller machine;

22 ‘‘(B) a branch which—

23 ‘‘(i) has been acquired through merg24 er, consolidation, purchase, assumption, or

25 other method; and
314

•HR 2520 IH

1 ‘‘(ii) is located—

2 ‘‘(I) within 2.5 miles of another

3 branch of the acquiring institution; or

4 ‘‘(II) within a neighborhood cur5 rently being served by another branch

6 of the acquiring institution,

7 if such other branch of the acquiring institution

8 is expected to continue to provide banking serv9 ices to substantially all of the customers cur10 rently served by the branch acquired;

11 ‘‘(C) a branch which is closing and reopen12 ing at a location which is—

13 ‘‘(i) within 2.5 miles of the location of

14 the branch being closed; or

15 ‘‘(ii) within the same neighborhood as

16 the branch being closed,

17 if the branch at the new location is expected to

18 continue to provide banking services to substan19 tially all of the customers served by the branch

20 at the former location;

21 ‘‘(D) a branch that is closed in connection

22 with—

23 ‘‘(i) an emergency acquisition under—

24 ‘‘(I) section 11(n); or
315

•HR 2520 IH

1 ‘‘(II) subsection (f) or (k) of sec2 tion 13; or

3 ‘‘(ii) any assistance provided by the

4 Corporation under section 13(c); and

5 ‘‘(E) any other branch closure whose ex6 emption from the notice requirements of this

7 section would not produce a result inconsistent

8 with the purposes of this section.

9 ‘‘(2) REGULATIONS.—The appropriate Federal

10 banking agency shall, by regulation, determine the

11 circumstances under which any exemption under

12 paragraph(1)(E) may be granted.’’.

13 (b) EFFECTIVE DATE.—The amendment made by

14 subsection (a) shall apply as if such amendment had been

15 included in section 42 of the Federal Deposit Insurance

16 Act as of the date of the enactment of the Federal Deposit

17 Insurance Corporation Improvement Act of 1991.

18 SEC. 523. AMENDMENTS TO THE DEPOSITORY INSTITU19 TIONS MANAGEMENT INTERLOCKS ACT.

20 (a) DUAL SERVICE IN SAME AREA, TOWN, OR VIL21 LAGE.—Section 203 of the Depository Institution Man22 agement Interlocks Act (12 U.S.C. 3202) is amended—

23 (1) by inserting ‘‘(a) PROHIBITIONS.—’’ before

24 ‘‘A management official’’; and
316

•HR 2520 IH

1 (2) by adding after subsection (a) the following

2 new subsection:

3 ‘‘(b) SMALL MARKET SHARE EXEMPTION.—

4 ‘‘(1) IN GENERAL.—This section shall not be

5 construed as prohibiting a management official of a

6 depository institution or depository holding company

7 from serving as a management official of another de8 pository institution or depository holding company

9 not affiliated with such institution or holding com10 pany if the depository institutions or depository

11 holding companies with which the management offi12 cial serves hold, together with all the affiliates of

13 such institutions or holding companies, in the aggre14 gate no more that 20 percent of the deposits in each

15 relevant geographic banking market where offices of

16 the depository institutions or depository holding

17 companies or their affiliates are located.

18 ‘‘(2) RELEVANT GEOGRAPHIC BANKING MARKET

19 DEFINED.—For purposes of paragraph (1), the term

20 ‘relevant geographic banking market’ means—

21 ‘‘(A) the area defined by the boundaries

22 identified by the Board of Governors of the

23 Federal Reserve System;

24 ‘‘(B) if the Board has not defined such

25 boundaries, the area defined by the boundaries
317

•HR 2520 IH

1 of the Ranally Metropolitan Area in which the

2 office of the depository institution or the depos3 itory institution holding company is located;

4 and

5 ‘‘(C) if the office of such institution or

6 company is not located within a Ranally Metro7 politan Area, the area defined by the county (or

8 an equivalent area of general local government)

9 in which such office is located.’’.

10 (b) DUAL SERVICE AMONG LARGER ORGANIZA11 TIONS.—Section 204 of the Depository Institution Man12 agement Interlocks Act (12 U.S.C. 3203) is amended to

13 read as follows:

14 ‘‘SEC. 204. DUAL SERVICE AMONG LARGER ORGANIZA15 TIONS.

16 ‘‘(a) IN GENERAL.—If a depository institution, de17 pository institution holding company, or depository insti18 tution affiliate of any such institution or company has

19 total assets exceeding $2,500,000,000, a management offi20 cial of such institution, company, or affiliate may not serve

21 as a management official of any other depository institu22 tion, depository institution holding company, or depository

23 institution affiliate of any such institution or company

24 which—
318

•HR 2520 IH

1 ‘‘(1) is not an affiliate of the institution, com2 pany, or affiliate of which such person is a manage3 ment official; and

4 ‘‘(2) has total assets exceeding $1,500,000,000.

5 ‘‘(b) CPI ADJUSTMENTS.—The dollar amounts in

6 this section shall be adjusted annually after December 31,

7 1994, by the annual percentage increase in the Consumer

8 Price Index for Urban Wage Earners and Clerical Work9 ers published by the Bureau of Labor Statistics.’’.

10 (c) EXTENSION OF GRANDFATHER EXEMPTION.—

11 Section 206 of the Depository Institution Management

12 Interlocks Act (12 U.S.C. 3205) is amended—

13 (1) in subsection (a), by striking ‘‘for a period

14 of, subject to the requirements of subsection (c), 20

15 years after the date of enactment of this title’’;

16 (2) in subsection (b), by striking the 2d sen17 tence; and

18 (3) by striking subsection (c).

19 (d) RULES OR REGULATIONS.—Section 209 of the

20 Depository Institution Management Interlocks Act (12

21 U.S.C. 3207) is amended—

22 (1) by striking ‘‘(a) IN GENERAL.—Rules’’ and

23 inserting ‘‘Rules’’;

24 (2) by inserting ‘‘, including rules or regula25 tions which permit service by a management official
319

•HR 2520 IH

1 which would otherwise be prohibited by section 203

2 or section 204,’’ after ‘‘title’’; and

3 (3) by striking subsections (b) and (c).

4 SEC. 524. ACCELERATION OF REPAYMENT TO TREASURY.

5 The Appraisal Subcommittee of the Financial Institu6 tions Examination Council shall repay to the Secretary of

7 the Treasury the funds specified in section 1108 of Finan8 cial Institutions Reform, Recovery, and Enforcement Act

9 of 1989 by not later than September 30, 1998, and the

10 Secretary shall deposit such funds in the general fund of

11 the Treasury.

12 SEC. 525. ELIMINATE UNNECESSARY AND DUPLICATIVE

13 RECORDKEEPING AND REPORTING REQUIRE14 MENTS RELATING TO LOANS TO EXECUTIVE

15 OFFICERS AND PERMIT PARTICIPATION IN

16 EMPLOYEE BENEFIT PLANS.

17 (a) AMENDMENTS TO SECTION 22(h) OF THE FED18 ERAL RESERVE ACT.—

19 (1) EMPLOYEE BENEFIT PLANS.—Section

20 22(h)(2) of the Federal Reserve Act (12 U.S.C.

21 375b(2)) is amended—

22 (A) by redesignating subparagraphs (A),

23 (B), and (C) as clauses (i), (ii), and (iii), re24 spectively, and moving the left margins of such

25 clauses 2 ems to the right;
320

•HR 2520 IH

1 (B) by striking ‘‘(2) PREFERENTIAL

2 TERMS PROHIBITED.—A member bank’’ and in3 serting ‘‘(2) PREFERENTIAL TERMS PROHIB4 ITED.—

5 ‘‘(A) IN GENERAL.—A member bank’’; and

6 (C) by adding at the end the following new

7 subparagraph:

8 ‘‘(B) EXCEPTION.—No provision of this

9 paragraph shall be construed as prohibiting ex10 tensions of credit that constitute a benefit or

11 compensation program that is widely available

12 to and used by employees of the member bank,

13 including employees who are not executive offi14 cers of the bank.’’.

15 (2) EXCEPTION FOR EXTENSIONS OF CREDIT

16 TO EXECUTIVE OFFICERS AND DIRECTORS OF

17 NONBANK AFFILIATES.—Section 22(h)(8)(B) of the

18 Federal Reserve Act (12 U.S.C. 375b(8)(B)) is

19 amended to read as follows:

20 ‘‘(B) EXCEPTION.—The Board may, by

21 regulation, make exceptions to subparagraph

22 (A) for an executive officer or director of a sub23 sidiary of a company that controls the member

24 bank if—
321

•HR 2520 IH

1 ‘‘(i) the executive officer or director

2 does not have authority to participate, and

3 does not participate, in major policymaking

4 functions of the member bank; and

5 ‘‘(ii) the assets of such subsidiary do

6 not exceed 10 percent of the consolidated

7 assets of a company that controls the

8 member bank and such subsidiary (and is

9 not controlled by any other company).’’.

10 (3) RECORDKEEPING REQUIREMENTS.—Section

11 22(h)(10) of the Federal Reserve Act (12 U.S.C.

12 375b(10)) is amended by adding at the end the fol13 lowing: ‘‘The Board shall specify by regulation the

14 recordkeeping required of member banks to ensure

15 compliance with this section.’’.

16 (b) REPORTING REQUIREMENTS.—

17 (1) UNNECESSARY REPORTS.—Section 22(g) of

18 the Federal Reserve Act (12 U.S.C. 375a) is amend19 ed—

20 (A) by striking paragraphs (6) and (9);

21 and

22 (B) by redesignating paragraphs (7), (8),

23 and (10) as paragraphs (8), (9), and (10), re24 spectively.
322

•HR 2520 IH

1 (2) UNNECESSARY REPORTS.—Section 7 of the

2 Federal Deposit Insurance Act (12 U.S.C. 1817) is

3 amended by striking subsection (k).

4 (3) UNNECESSARY REPORTS REGARDING LOANS

5 FROM CORRESPONDENT BANKS.—Section 106(b)(2)

6 of the Bank Holding Company Act Amendments of

7 1970 (12 U.S.C. 1972(2)) is amended—

8 (A) by striking subparagraph (G); and

9 (B) by redesignating subparagraphs (H)

10 and (I) as subparagraphs (G) and (H), respec11 tively.

12 (c) AMENDMENTS RELATING TO LOANS TO EXECU13 TIVE OFFICERS.—Section 22(g) of the Federal Reserve

14 Act (12 U.S.C. 375a) (as amended by subsection (a) of

15 this section) is amended—

16 (1) in paragraph (1)(D), by striking ‘‘of any

17 one of the three categories respectively referred to in

18 paragraphs (2), (3), and (4)’’ and inserting ‘‘of any

19 category referred to in paragraph (2), (3), (4), (5),

20 or (6)’’;

21 (2) by redesignating paragraphs (4) and (5) as

22 paragraphs (6) and (7), respectively;

23 (3) by inserting after paragraph (3) the follow24 ing new paragraph:
323

•HR 2520 IH

1 ‘‘(4) HOME EQUITY LINES OF CREDIT.—A

2 member bank may make a revolving open-end exten3 sion of credit to any executive officer of the bank if

4 the credit—

5 ‘‘(A) does not exceed $100,000; and

6 ‘‘(B) is secured by a dwelling that is owned

7 by such officer and used by the officer as a res8 idence.

9 ‘‘(5) LOANS SECURED BY MARKETABLE AS10 SETS.—A member bank may extend credit to any

11 executive officer of the bank if the credit is secured

12 by readily marketable assets of a value not exceeding

13 such amount as the Board may establish by regula14 tion.’’; and

15 (4) in paragraph (7) (as so redesignated by

16 paragraph (2) of this subsection) by striking ‘‘(4)’’

17 each place such term appears and inserting ‘‘(6)’’.

18 SEC. 526. EXPANDED REGULATORY DISCRETION FOR

19 SMALL BANK EXAMINATIONS.

20 (a) SMALL BANK SIZE DISCRETION.—Section 10(d)

21 of the Federal Deposit Insurance Act (12 U.S.C. 1820(d))

22 is amended—

23 (1) by redesignating paragraph (9) as para24 graph (10);
324

•HR 2520 IH

1 (2) by redesignating the 2d of the 2 paragraphs

2 designated as paragraph (8) as paragraph (9); and

3 (3) in paragraph (9) (as so redesignated), by

4 striking ‘‘$175,000,000’’ and inserting

5 ‘‘$250,000,000’’.

6 (b) INFLATION ADJUSTMENT.—Section 10(d) of the

7 Federal Deposit Insurance Act (12 U.S.C. 1820(d)) is

8 amended by inserting after paragraph (10) (as so redesig9 nated in subsection (a)(1) of this section) the following

10 new paragraph:

11 ‘‘(11) ANNUAL CPI ADJUSTMENT.—The dollar

12 amount in this section shall be adjusted annually

13 after December 31, 1994, by the annual percentage

14 increase in the Consumer Price Index for Urban

15 Wage Earners and Clerical Workers published by

16 the Bureau of Labor Statistics.’’.

17 (c) COORDINATED FEDERAL AND STATE EXAMINA18 TIONS.—The Federal banking agencies (as defined in sec19 tion 3 of the Federal Deposit Insurance Act) shall submit

20 semiannual reports to the Congress on the progress made

21 by such agencies in implementing the requirements of sec22 tion 10(d)(6) of the Federal Deposit Insurance Act until

23 such agencies submit a final report that—

24 (1) the examination system provided for in such

25 section is in place; and
325

•HR 2520 IH

1 (2) such system provides for full coordination of

2 examinations of State depository institutions with

3 State bank supervisors.

4 SEC. 527. COST REIMBURSEMENT.

5 Section 1115 of the Right to Financial Privacy Act

6 (12 U.S.C. 3415) is amended by inserting ‘‘(including cor7 porate customers)’’ after ‘‘pertaining to a customer’’.

8 SEC. 528. IDENTIFICATION OF FOREIGN NONBANK FINAN9 CIAL INSTITUTION CUSTOMERS.

10 (a) IN GENERAL.—Section 5327(a)(1) of title 31,

11 United States Code, is amended to read as follows:

12 ‘‘(1) is a financial institution (other than a for13 eign bank (as defined in section 101(b) of the Inter14 national Banking Act of 1978)) which is a foreign

15 person; and’’.

16 (b) TECHNICAL AND CONFORMING AMENDMENT.—

17 The heading for section 5327 of title 31, United States

18 Code, is amended by inserting ‘‘FOREIGN NONBANK’’

19 after ‘‘OF’’.

20 (c) CLERICAL AMENDMENT.—The table of sections

21 for chapter 53 of title 31, United States Code, is amended

22 by striking the item relating to section 5327 and inserting

23 the following new item:

‘‘5327. Identification of foreign nonbank financial institutions.’’.
326

•HR 2520 IH

1 SEC. 529. PAPERWORK REDUCTION REVIEW.

2 Not later than 180 days after the date of enactment

3 of this Act, each appropriate Federal banking agency and

4 the National Credit Union Administration, in consultation

5 with insured depository institutions, insured credit unions,

6 and other interested parties, shall—

7 (1) review the extent to which current regula8 tions require insured depository institutions and in9 sured credit unions to produce unnecessary internal

10 written policies; and

11 (2) eliminate such requirements, where appro12 priate.

13 For purposes of this section, the terms ‘‘insured deposi14 tory institution’’ and ‘‘appropriate Federal banking agen15 cy’’ have the same meanings as in section 3 of the Federal

16 Deposit Insurance Act and the term ‘‘insured credit

17 union’’ has the same meaning as in section 101(7) of the

18 Federal Credit Union Act.

19 SEC. 530. DAILY CONFIRMATIONS FOR HOLD-IN-CUSTODY

20 REPURCHASE TRANSACTIONS.

21 Before the end of the 1-year period beginning on the

22 date of the enactment of this Act, the Secretary of the

23 Treasury shall revise the regulation under section 15C of

24 the Securities Exchange Act of 1934 relating to the obli25 gations of financial institutions and of brokers and dealer

26 registered under such Act holding custody of securities
327

•HR 2520 IH

1 subject to a repurchase agreement to confirm, daily and

2 in writing, the securities that are subject to such repur3 chase agreement. Such revision shall permit the

4 counterparty to such agreement to waive in writing the

5 right to obtain such daily written confirmation if the

6 counterparty has received a clear and conspicuous disclo7 sure before entering into any side agreement, in a form

8 prescribed by the Secretary, that adequately informs the

9 counterparty of the benefits of receiving such daily written

10 confirmations.

11 SEC. 531. REQUIRED REGULATORY REVIEW OF REGULA12 TIONS.

13 (a) IN GENERAL.—Not less frequently than once

14 every 10 years, the Financial Institutions Examination

15 Council (hereafter in this section referred to as the ‘‘Coun16 cil’’) and each appropriate Federal banking agency (as de17 fined in section 3(q) of the Federal Deposit Insurance

18 Act) represented on the Council shall conduct a review of

19 all regulations prescribed by the Council or by any such

20 agency, respectively, in order to identify outdated or other21 wise unnecessary regulatory requirements imposed upon

22 insured depository institutions.

23 (b) PROCESS.—In conducting the review under sub24 section (a), the Council or the appropriate Federal bank25 ing agency shall—
328

•HR 2520 IH

1 (1) categorize the regulations by type (such as

2 consumer regulations, safety and soundness regula3 tions, or such other designations as determined by

4 the Council); and

5 (2) at regular intervals, provide notice and so6 licit public comment on a particular category or cat7 egories of regulations, requesting commentators to

8 identify areas of the regulations that are outdated,

9 unnecessary, or unduly burdensome.

10 (c) COMPLETE REVIEW.—The Council or the appro11 priate Federal banking agency shall ensure that the notice

12 and comment period described in subsection (b)(2) is con13 ducted with respect to all regulations described in sub14 section (a) not less frequently than once every 10 years.

15 (d) REGULATORY RESPONSE.—The Council or the

16 appropriate Federal banking agency shall—

17 (1) publish in the Federal Register a summary

18 of the comments received under this section, identi19 fying significant issues raised and providing com20 ment on such issues; and

21 (2) eliminate unnecessary regulations to the ex22 tent that such action is appropriate.

23 (e) REPORT TO CONGRESS.—Not later than 30 days

24 after carrying out subsection (d)(1), the Council shall pro25 vide to the Congress a report, which shall include—
329

•HR 2520 IH

1 (1) a summary of any significant issues raised

2 by public comments received by the Council and the

3 appropriate Federal banking agencies under this sec4 tion and the relative merits of such issues; and

5 (2) an analysis of whether the appropriate Fed6 eral banking agency involved is able to address the

7 regulatory burdens associated with such issues by

8 regulation, or whether such burdens must be ad9 dressed by legislative action.

10 SEC. 532. COUNTRY RISK REQUIREMENTS.

11 Subsections (a)(1) and (b) of section 905 of the

12 International Lending Supervision Act of 1983 (12 U.S.C.

13 3904) are amended by striking ‘‘shall’’ and inserting

14 ‘‘may’’.

15 SEC. 533. AUDIT COSTS.

16 (a) IN GENERAL.—

17 (1) AUDITOR ATTESTATIONS.—Section 36 of

18 the Federal Deposit Insurance At (12 U.S.C.

19 1831m) is amended—

20 (A) in subsection (a)(2)(A)(ii), by striking

21 ‘‘subsections (c) and (d)’’ and inserting ‘‘sub22 section (c)’’;

23 (B) by striking subsections (c) and (e);

24 and
330

•HR 2520 IH

1 (C) by redesignating subsections (d), (f),

2 (g), (h), (i), and (j) as subsections (c), (d), (e),

3 (f), (g), and (h), respectively.

4 (2) PUBLIC AVAILABILITY.—Section 36(a)(3) of

5 the Federal Deposit Insurance Act (12 U.S.C.

6 1831m(a)(3)) is amended by inserting at the end the

7 following new sentence: ‘‘Notwithstanding the pre8 ceding sentence, the Corporation and the appro9 priate Federal banking agencies may designate cer10 tain information as privileged and confidential and

11 not available to the public.’’.

12 (b) EXEMPTION FOR WELL-CAPITALIZED AND

13 WELL-MANAGED INSURED DEPOSITORY INSTITU14 TIONS.—Section 36 of the Federal Deposit Insurance Act

15 (12 U.S.C. 1831m) (as amended by subsection (a) of this

16 section) is amended by adding at the end the following

17 new subsection:

18 ‘‘(i) EXEMPTION FOR WELL-CAPITALIZED AND

19 WELL-MANAGED INSURED DEPOSITORY INSTITU20 TIONS.—No provision of this section other than subsection

21 (c) shall apply with respect to any insured depository insti22 tution which is well-capitalized and well-managed.’’.

23 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

24 (1) Paragraph (1)(B) of section 36(e) of the

25 Federal Deposit Insurance Act (as so redesignated
331

•HR 2520 IH

1 by subsection (a)(1)(C) of this section) is amended

2 by striking ‘‘(b)(2), (c), and (d)’’ and inserting

3 ‘‘(b)(2) and (c)’’.

4 (2) Paragraph (1) of section 36(g) of the Fed5 eral Deposit Insurance Act (as so redesignated by

6 subsection (a)(1)(C) of this section) is amended by

7 striking ‘‘(d)’’ and inserting ‘‘(c)’’.

8 SEC. 534. STANDARDS FOR DIRECTOR AND OFFICER LI9 ABILITY.

10 Section 3(u) of the Federal Deposit Insurance Act

11 (12 U.S.C. 1813(u)) is amended—

12 (1) in paragraph (1), by inserting ‘‘(other than

13 an outside director)’’ after ‘‘director’’;

14 (2) in paragraph (3), by inserting ‘‘(other than

15 an outside director)’’ after ‘‘any other person’’; and

16 (3) in paragraph (4), by inserting ‘‘or outside

17 director’’ after ‘‘or accountant)’’.

18 SEC. 535. FOREIGN BANK APPLICATIONS.

19 (a) PROVISIONS RELATING TO ESTABLISHMENT OF

20 BANK OFFICES.—Section 7(d) of the International Bank21 ing Act of 1978 (12 U.S.C. 3105(d)) is amended—

22 (1) in paragraph (2), by striking ‘‘The’’ and in23 serting ‘‘Except as provided in paragraph (6), the’’;
332

•HR 2520 IH

1 (2) in paragraph (5), by striking ‘‘Consistent

2 with the standards for approval in paragraph (2),

3 the’’ and inserting ‘‘The’’; and

4 (3) by adding at the end the following new

5 paragraphs:

6 ‘‘(6) EXCEPTION.—

7 ‘‘(A) IN GENERAL.—If the Board is unable

8 to find under paragraph (2) that a foreign bank

9 is subject to comprehensive supervision or regu10 lation on a consolidated basis by the appro11 priate authorities in its home country, the

12 Board may nevertheless approve an application

13 under paragraph (1) by such foreign bank if—

14 ‘‘(i) the appropriate authorities in the

15 home country of such foreign bank are

16 working to establish arrangements for the

17 consolidated supervision of such bank; and

18 ‘‘(ii) all other factors are consistent

19 with approval.

20 ‘‘(B) ADDITIONAL CONDITIONS.—The

21 Board, after requesting and considering the

22 views of the appropriate State bank supervisor

23 or the Comptroller of the Currency, as the case

24 may be, may impose such conditions or restric25 tions relating to activities or business oper-
333

•HR 2520 IH

1 ations of the proposed branch, agency, or com2 mercial lending company subsidiary, including

3 restrictions on sources of funding, as are con4 sidered appropriate in the public interest.

5 ‘‘(C) MODIFICATION OF CONDITIONS.—

6 Any condition or restriction imposed by the

7 Board under this subsection in connection with

8 the approval of an application may be varied or

9 withdrawn where such modification is consistent

10 with the public interest.

11 ‘‘(7) TIME PERIOD FOR BOARD ACTION.—

12 ‘‘(A) FINAL ACTION.—The Board shall

13 take final action on any application under para14 graph (1) within 180 days of receipt of the ap15 plication, except that the Board may extend for

16 an additional 180 days the period within which

17 to take final action on such application, after

18 providing notice of, and the reasons for, the ex19 tension to the applicant foreign bank and any

20 appropriate State bank supervisor or the Comp21 troller of the Currency, as the case may be.

22 ‘‘(B) FAILURE TO SUBMIT INFORMA23 TION.—The Board may deny any application if

24 it has not received information requested from

25 the applicant foreign bank or appropriate au-
334

•HR 2520 IH

1 thorities in the home country in sufficient time

2 to permit the Board to evaluate such informa3 tion adequately within the time periods for final

4 action set forth in subparagraph (A).

5 ‘‘(C) WAIVER.—A foreign bank may waive

6 the applicability of subparagraph (A) with re7 spect to any such application.’’.

8 (b) PROVISION RELATING TO TERMINATION OF

9 BANK OFFICES.—Section 7(e)(1)(A) of the International

10 Banking Act of 1978 (12 U.S.C. 3105(e)(1)(A)) is amend11 ed—

12 (1) by striking ‘‘(A)’’ and inserting ‘‘(A)(i)’’;

13 (2) by striking ‘‘; or’’ and inserting ‘‘; and’’;

14 and

15 (3) by inserting at the end the following new

16 clause:

17 ‘‘(ii) the appropriate authorities in the

18 home country are not making progress in estab19 lishing arrangements for the comprehensive su20 pervision or regulation of such foreign bank on

21 a consolidated basis; or’’.

22 (c) UNIFORM TERMINATIONS OF FOREIGN BANK OF23 FICES, AGENCIES, BRANCHES, AND SUBSIDIARIES BY THE

24 FEDERAL RESERVE SYSTEM.—
335

•HR 2520 IH

1 (1) IN GENERAL.—Section 7(e)(1) of the Inter2 national Banking Act of 1978 (12 U.S.C.

3 3105(e)(1)) is amended—

4 (A) by inserting ‘‘or the Comptroller of the

5 Currency’’ after ‘‘State bank supervisor’’;

6 (B) by inserting ‘‘or a Federal branch or

7 agency’’ after ‘‘commercial lending company

8 subsidiary’’ the 1st place such term appears;

9 and

10 (C) in the last sentence, by inserting ‘‘or

11 a Federal branch or agency’’ after ‘‘commercial

12 lending company subsidiary’’.

13 (2) TECHNICAL AND CONFORMING AMEND14 MENT.—Section 7(e) of the International Banking

15 Act of 1978 (12 U.S.C. 3105(e)) is amended—

16 (A) by striking paragraph (5); and

17 (B) by redesignating paragraphs (6) and

18 (7) as paragraphs (5) and (6), respectively.

19 SEC. 536. DUPLICATE EXAMINATION OF FOREIGN BANKS.

20 Section 7(c)(1) of the International Banking Act of

21 1978 (12 U.S.C. 3105(c)(1)) is amended—

22 (1) by adding after clause (ii) of subparagraph

23 (B) the following new clause:

24 ‘‘(iii) AVOIDANCE OF DUPLICATION.—

25 In exercising its authority under this para-
336

•HR 2520 IH

1 graph, the Board shall take all reasonable

2 measures to reduce burden and avoid un3 necessary duplication of examinations.’’;

4 (2) by striking subparagraph (C) and inserting

5 the following:

6 ‘‘(C) ON-SITE EXAMINATION.—Each Fed7 eral branch or agency, and each State branch

8 or agency, of a foreign bank shall be subject to

9 on-site examination by a Federal banking agen10 cy or State bank supervisor as frequently as

11 would a national bank or State bank, respec12 tively, by its appropriate Federal banking agen13 cy.’’; and

14 (3) by amending subparagraph (D) to read as

15 follows:

16 ‘‘(D) COST OF EXAMINATIONS.—The cost

17 of any examination undertaken pursuant to

18 subparagraph (A) shall be assessed against and

19 collected from the foreign bank or the foreign

20 company that controls the foreign bank, as the

21 case may be, but only to the same extent that

22 fees are collected by the Board for examination

23 of any State member insured bank.’’.
337

•HR 2520 IH

1 SEC. 537. SECOND MORTGAGES.

2 (a) IN GENERAL.—Section 103(aa)(1) of the Truth

3 in Lending Act (15 U.S.C. 1602(aa)(1)) is amended—

4 (1) by inserting ‘‘a subordinate mortgage on’’

5 after ‘‘secured by’’; and

6 (2) by striking ‘‘a residential mortgage trans7 action’’.

8 (b) EFFECT ON PENDING CASES.—Any administra9 tive enforcement proceeding or other action which—

10 (1) is pending on the date of the enactment of

11 this Act; and

12 (2) is based on regulations in effect as of such

13 date under the Truth in Lending Act with respect

14 to high-cost residential mortgage transactions which

15 are not subordinate mortgages,

16 shall be dismissed as of such date.

17 SEC. 538. STREAMLINING FDIC APPROVAL OF NEW STATE

18 BANK POWERS.

19 (a) IN GENERAL.—Section 24(a) of the Federal De20 posit Insurance Act (12 U.S.C. 1831a(a)) is amended to

21 read as follows:

22 ‘‘(a) ACTIVITIES GENERALLY.—

23 ‘‘(1) IN GENERAL.—An insured State bank may

24 not engage as principal in any type of activity that

25 is not permissible for a national bank unless—
338

•HR 2520 IH

1 ‘‘(A) the bank has given the Corporation

2 written notice of the bank’s intention to engage

3 in such activity at least 60 days before com4 mencing to engage in the activity and within

5 such 60-day period (or within the extended pe6 riod provided under paragraph (2)) the Cor7 poration has not disapproved the activity; and

8 ‘‘(B) the State bank is, and continues to

9 be, in compliance with applicable capital stand10 ards prescribed by the appropriate Federal

11 banking agency.

12 ‘‘(2) EXTENSION OF PERIOD.—The Corporation

13 may extend the 60-day period referred to in para14 graph (1) for issuing a notice of disapproval with re15 spect to any activity for an additional 30 days.

16 ‘‘(3) CONTENTS OF NOTICE.—Any notice sub17 mitted by a State bank under paragraph (1)(A) shall

18 contain such information as the Corporation may re19 quire.

20 ‘‘(4) BASIS FOR DISAPPROVAL.—The Corpora21 tion may disapprove an activity for a State bank

22 under this subsection unless the Corporation deter23 mines that the activity would pose no significant risk

24 to the appropriate insurance fund.’’.
339

•HR 2520 IH

1 (b) SUBSIDIARIES OF INSURED STATE BANKS.—Sec2 tion 24(d)(1) of the Federal Deposit Insurance Act (12

3 U.S.C. 1831a(d)(1)) is amended to read as follows:

4 ‘‘(1) ACTIVITIES GENERALLY.—

5 ‘‘(A) IN GENERAL.—A subsidiary of an in6 sured State bank may not engage as principal

7 in any type of activity that is not permissible

8 for a subsidiary of a national bank unless—

9 ‘‘(i) the subsidiary has given the Cor10 poration written notice of the subsidiary’s

11 intention to engage in such activity at least

12 60 days before commencing to engage in

13 the activity and within such 60-day period

14 (or within the extended period provided

15 under paragraph (2)) the Corporation has

16 not disapproved the activity; and

17 ‘‘(ii) the bank is, and continues to be,

18 in compliance with applicable capital

19 standards prescribed by the appropriate

20 Federal banking agency.

21 ‘‘(B) EXTENSION OF PERIOD.—The Cor22 poration may extend the 60-day period referred

23 to in subparagraph (A) for issuing a notice of

24 disapproval with respect to any activity for an

25 additional 30 days.
340

•HR 2520 IH

1 ‘‘(C) CONTENTS OF NOTICE.—Any notice

2 submitted by a subsidiary of an insured State

3 bank under subparagraph (A)(i) shall contain

4 such information as the Corporation may re5 quire.

6 ‘‘(D) BASIS FOR DISAPPROVAL.—The Cor7 poration may disapprove an activity for a sub8 sidiary of an insured State bank under this

9 paragraph unless the Corporation determines

10 that the activity would pose no significant risk

11 to the appropriate insurance fund.’’.

12 SEC. 539. REPEAL OF CALL REPORT ATTESTATION RE13 QUIREMENT.

14 Section 5211(a) of the Revised Statutes (12 U.S.C.

15 161(a)) is amended by striking the 4th sentence.

16 SEC. 540. AUTHORIZING BANK SERVICE COMPANIES TO OR17 GANIZE AS LIMITED LIABILITY PARTNER18 SHIPS.

19 (a) AMENDMENT TO SHORT TITLE.—Section 1 of the

20 Bank Service Corporation Act (12 U.S.C. 1861(a)) is

21 amended by striking subsection (a) and inserting the fol22 lowing new subsection:

23 ‘‘(a) SHORT TITLE.—This Act may be cited as the

24 ‘Bank Service Company Act’.’’;
341

•HR 2520 IH

1 (b) AMENDMENTS TO DEFINITIONS.—Section 1(b) of

2 the Bank Service Corporation Act (12 U.S.C. 1861(b)) is

3 amended—

4 (1) by striking paragraph (2) and inserting the

5 following new paragraph:

6 ‘‘(2) the term ‘bank service company’ means—

7 ‘‘(A) any corporation—

8 ‘‘(i) which is organized to perform

9 services authorized by this Act; and

10 ‘‘(ii) all of the capital stock of which

11 is owned by 1 or more insured banks; and

12 ‘‘(B) any limited liability company—

13 ‘‘(i) which is organized to perform

14 services authorized by this Act; and

15 ‘‘(ii) all of the members of which are

16 1 or more insured banks.’’;

17 (2) in paragraph (6)—

18 (A) by striking ‘‘corporation’’ and inserting

19 ‘‘company’’; and

20 (B) by striking ‘‘and’’ after the semicolon;

21 (3) by redesignating paragraph (7) as para22 graph (8) and inserting after paragraph (6) the fol23 lowing new paragraph:

24 ‘‘(7) the term ‘limited liability company’ means

25 any company organized under the law of a State (as
342

•HR 2520 IH

1 defined in section 3 of the Federal Deposit Insur2 ance Act) which provides that a member or manager

3 of such company is not personally liable for a debt,

4 obligation, or liability of the company solely by rea5 son of being, or acting as, a member or manager of

6 such company; and’’; and

7 (4) in paragraph (8) (as so redesignated)—

8 (A) by striking ‘‘corporation’’ each place

9 such term appears and inserting ‘‘company’’;

10 and

11 (B) by striking ‘‘capital stock’’ and insert12 ing ‘‘equity’’.

13 (c) AMENDMENTS TO SECTION 2.—Section 2 of the

14 Bank Service Corporation Act (12 U.S.C. 1862) is amend15 ed—

16 (1) by striking ‘‘corporation’’ and inserting

17 ‘‘company’’;

18 (2) by striking ‘‘corporations’’ and inserting

19 ‘‘companies’’; and

20 (3) in the heading for such section, by striking

21 ‘‘CORPORATION’’ and inserting ‘‘COMPANY’’.

22 (d) AMENDMENTS TO SECTION 3.—Section 3 of the

23 Bank Service Corporation Act (12 U.S.C. 1863) is amend24 ed—
343

•HR 2520 IH

1 (1) by striking ‘‘corporation’’ each place such

2 term appears and inserting ‘‘company’’; and

3 (2) in the heading for such section, by striking

4 ‘‘CORPORATION’’ and inserting ‘‘COMPANY’’.

5 (e) AMENDMENTS TO SECTION 4.—Section 4 of the

6 Bank Service Corporation Act (12 U.S.C. 1864) is amend7 ed—

8 (1) by striking ‘‘corporation’’ each place such

9 term appears and inserting ‘‘company’’;

10 (2) in subsection (b), by inserting ‘‘or mem11 bers’’ after ‘‘shareholders’’ each place such term ap12 pears;

13 (3) in subsections (c) and (d), by inserting ‘‘or

14 member’’ after ‘‘shareholder’’ each place such term

15 appears;

16 (4) in subsection (e)—

17 (A) by inserting ‘‘or members’’ after ‘‘na18 tional bank and State bank shareholders’’;

19 (B) by striking ‘‘its national bank share20 holder or shareholders’’ and inserting ‘‘any

21 shareholder or member of the company which is

22 a national bank’’;

23 (C) by striking ‘‘its State bank shareholder

24 or shareholders’’ and inserting ‘‘any share-
344

•HR 2520 IH

1 holder or member of the company which is a

2 State bank’’;

3 (D) by striking ‘‘such State bank or

4 banks’’ and inserting ‘‘any such State bank’’;

5 and

6 (E) by inserting ‘‘or members’’ after

7 ‘‘State bank and national bank shareholders’’;

8 (5) in subsection (f), by inserting ‘‘or providing

9 insurance as principal, agent, or broker (except to

10 the extent permitted under subparagraph (A) or (E)

11 of section 4(c)(8) of the Financial Services Holding

12 Company Act of 1995)’’ after ‘‘or deposit taking’’;

13 and

14 (6) in the heading for such section, by striking

15 ‘‘CORPORATION’’ and inserting ‘‘COMPANY’’.

16 (f) AMENDMENTS TO SECTION 5.—Section 5 of the

17 Bank Service Corporation Act (12 U.S.C. 1865) is amend18 ed—

19 (1) by striking ‘‘corporation’’ each place such

20 term appears and inserting ‘‘company’’; and

21 (2) in the heading for such section, by striking

22 ‘‘CORPORATIONS’’ and inserting ‘‘COMPANIES’’.

23 (g) AMENDMENTS TO SECTION 6.—Section 6 of the

24 Bank Service Corporation Act (12 U.S.C. 1866) is amend25 ed—
345

•HR 2520 IH

1 (1) by striking ‘‘corporation’’ each place such

2 term appears and inserting ‘‘company’’;

3 (2) by inserting ‘‘or is not a member of’’ after

4 ‘‘does not own stock in’’;

5 (3) by striking ‘‘the nonstockholding institu6 tion’’ and inserting ‘‘such depository institution’’;

7 (4) by inserting ‘‘or is a member of’’ after ‘‘that

8 owns stock in’’;

9 (5) in paragraphs (1) and (2), by inserting ‘‘or

10 nonmember’’ after ‘‘nonstockholding’’; and

11 (6) in the heading for such section by inserting

12 ‘‘OR NONMEMBERS’’ after ‘‘NONSTOCKHOLDERS’’.

13 (h) AMENDMENTS TO SECTION 7.—Section 7 of the

14 Bank Service Corporation Act (12 U.S.C. 1867) is amend15 ed—

16 (1) by striking ‘‘corporation’’ each place such

17 term appears and inserting ‘‘company’’;

18 (2) in subsection (a)—

19 (A) by inserting ‘‘or principal member’’

20 after ‘‘principal shareholder’’; and

21 (B) by inserting ‘‘or member’’ after ‘‘other

22 shareholder’’; and

23 (3) in the heading for such section, by striking

24 ‘‘CORPORATIONS’’ and inserting ‘‘COMPANIES’’.
346

•HR 2520 IH

1 SEC. 541. BANK INVESTMENTS IN EDGE ACT AND AGREE2 MENT CORPORATIONS.

3 The 10th undesignated paragraph of section 25A of

4 the Federal Reserve Act (12 U.S.C. 618) is amended by

5 striking the last sentence and inserting the following:

6 ‘‘Any national bank may invest in the stock of any cor7 poration organized under this section. The aggregate

8 amount of stock held by any national bank in all corpora9 tions engaged in business of the kind described in this sec10 tion or section 25 shall not exceed an amount equal to

11 10 percent of the capital and surplus of such bank unless

12 the Board determines that the investment of an additional

13 amount by the bank would not be unsafe or unsound and,

14 in any case, shall not exceed an amount equal to 25 per15 cent of the capital and surplus of such bank.’’.

16 SEC. 542. REPORT ON THE RECONCILIATION OF DIF17 FERENCES BETWEEN REGULATORY AC18 COUNTING PRINCIPLES AND GENERALLY AC19 CEPTED ACCOUNTING PRINCIPLES.

20 Before the end of the 180-day period beginning on

21 the date of the enactment of this Act, each appropriate

22 Federal banking agency (as defined in section 3 of the

23 Federal Deposit Insurance Act) shall submit to the Com24 mittee on Banking and Financial Services of the House

25 of Representatives and the Committee on Banking, Hous26 ing, and Urban Affairs of the Senate a report on the ac-
347

•HR 2520 IH

1 tions taken and to be taken by the agency to eliminate

2 or conform inconsistent or duplicative accounting and re3 porting requirements applicable to reports or statements

4 filed with any such agency by insured depository institu5 tions, as required by section 121 of the Federal Deposit

6 Insurance Corporation Improvement Act of 1991.

7 SEC. 543. WAIVERS AUTHORIZED FOR RESIDENCY RE8 QUIREMENT FOR NATIONAL BANK DIREC9 TORS.

10 The 1st sentence of section 5146 of the Revised Stat11 utes of the United States (12 U.S.C. 72) is amended by

12 inserting ‘‘(1) the Comptroller of the Currency may, in

13 the Comptroller’s discretion, waive the residency require14 ment in the case of any director of a national bank to

15 whom the requirement would otherwise apply, and (2)’’

16 after ‘‘except that’’.

17 TITLE VI—LENDER LIABILITY

18 SEC. 601. LENDER LIABILITY.

19 (a) PARTICIPATION IN MANAGEMENT.—

20 (1) IN GENERAL.—It is the sense of Congress

21 that a person who holds indicia of ownership pri22 marily to protect the person’s security interest in a

23 vessel or facility should not be considered to have

24 participated in management, as that term is used in

25 section 101(20) of the Comprehensive Environ-
348

•HR 2520 IH

1 mental Response, Compensation, and Liability Act

2 of 1980 (42 U.S.C. 9601(20)), unless the person—

3 (A) exercises decisionmaking control over

4 the borrower’s environmental compliance such

5 that the person has undertaken responsibility

6 for the hazardous substance handling or dis7 posal practices of the vessel or facility; or

8 (B) exercises control at a level comparable

9 to that of a manager of the borrower’s vessel or

10 facility such that the person has assumed or

11 manifested responsibility for the overall man12 agement of the vessel or facility encompassing

13 day-to-day decisionmaking over either environ14 mental compliance or over the operational, as

15 opposed to financial and administrative, aspects

16 of the vessel or facility.

17 (2) OPERATIONAL ASPECTS DEFINED.—In

18 paragraph (1)(B), the term ‘‘operational aspects’’

19 includes functions such as those of a facility or plant

20 manager, operations manager, chief operating offi21 cer, or chief executive officer.

22 (b) EXCLUSIONS.—It is further the sense of Congress

23 that the term ‘‘participation in management’’ as used in

24 such section 101(20) should not include any of the follow25 ing:
349

•HR 2520 IH

1 (1) The mere capacity to influence, or ability to

2 influence, or the unexercised right to control vessel

3 or facility operations.

4 (2) Any act of a security interest holder to re5 quire another person to comply with applicable laws

6 or to respond lawfully to disposal of any hazardous

7 substance.

8 (3) Conducting an act or failing to act prior to

9 the time that a security interest is created in a ves10 sel or facility.

11 (4) Holding a security interest in a vessel or fa12 cility or abandoning or releasing such a security in13 terest.

14 (5) Including in the terms of an extension of

15 credit, or in a contract or security agreement relat16 ing to such an extension, covenants, warranties, or

17 other terms and conditions that relate to environ18 mental compliance.

19 (6) Monitoring or enforcing the terms and con20 ditions of the extension of credit or security interest.

21 (7) Monitoring or undertaking 1 or more in22 spections of the vessel or facility.

23 (8) Under section 107(d) of the Comprehensive

24 Environmental Response, Compensation, and Liabil25 ity Act of 1980, or under the direction of an on-
350

•HR 2520 IH

1 scene coordinator, conducting a response action or

2 other lawful means of addressing the release or

3 threatened release of a hazardous substance in con4 nection with the vessel or facility prior to, during, or

5 upon the expiration of the term of the extension of

6 credit.

7 (9) Providing financial or other advice or coun8 seling in an effort to mitigate, prevent, or cure de9 fault or diminution in the value of the vessel or facil10 ity.

11 (10) Restructuring, renegotiating, or otherwise

12 agreeing to alter the terms and conditions of the ex13 tension of credit or security interest or exercising

14 forbearance.

15 (11) Exercising other remedies that may be

16 available under applicable law for the breach of any

17 term or condition of the extension of credit or secu18 rity agreement.

19 (12) Holding legal or equitable title acquired by

20 a security interest holder through foreclosure or its

21 equivalent primarily to protect a security interest

22 provided that the holder undertakes to sell, re-lease,

23 or otherwise divest the property in a reasonably ex24 peditious manner on commercially reasonable terms,
351

•HR 2520 IH

1 taking into account market conditions and legal and

2 regulatory requirements.

3 (c) SECURITY INTEREST.—It is further the sense of

4 Congress that the term ‘‘security interest’’ as used in such

5 section 101(20) should include rights under a mortgage,

6 deed of trust, assignment, judgment, lien, pledge, security

7 agreement, factoring agreement, lease, or any other right

8 accruing to person to secure the repayment of money, the

9 performance of a duty, or some other obligation.

10 (d) MISCELLANEOUS.—It is further the sense of the

11 Congress that the potential Superfund liability of fidu12 ciaries and the potential Resource Conservation and Re13 covery Act liability of lenders and fiduciaries should be

14 addressed by the Congress.

15 TITLE VII—ANNUAL STUDY AND

16 REPORT ON IMPACT ON

17 LENDING TO SMALL BUSI18 NESS

19 SEC. 701. ANNUAL STUDY AND REPORT.

20 Not later than 12 months after the date of the en21 actment of this Act, and annually thereafter, the Board

22 of Governors of the Federal Reserve System, the Director

23 of the Office of Thrift Supervision, the Comptroller of the

24 Currency, and the Board of Directors of the Federal De25 posit Insurance Corporation shall jointly conduct a study
352

•HR 2520 IH

1 and submit to the Congress a report on the extent to

2 which this Act and the amendments made by this Act

3 have, through reductions in regulatory burdens, resulted

4 in increased lending to small businesses.

Æ

HR 2520 IH——2

HR 2520 IH——3

HR 2520 IH——4

HR 2520 IH——5

HR 2520 IH——6

HR 2520 IH——7

HR 2520 IH——8

HR 2520 IH——9

HR 2520 IH——10

HR 2520 IH——11

HR 2520 IH——12

HR 2520 IH——13

HR 2520 IH——14

HR 2520 IH——15

HR 2520 IH——16

HR 2520 IH——17

HR 2520 IH——18

HR 2520 IH——19

HR 2520 IH——20

HR 2520 IH——21
353

•HR 2520 IH

HR 2520 IH——22

HR 2520 IH——23

HR 2520 IH——24