99–006

107TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 107–467

FEDERAL DEPOSIT INSURANCE REFORM ACT OF 2002

MAY 16, 2002.—Committed to the Committee of the Whole House on the State of

the Union and ordered to be printed

Mr. OXLEY, from the Committee on Financial Services,

submitted the following

R E P O R T

together with

ADDITIONAL AND DISSENTING VIEWS

[To accompany H.R. 3717]

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred the

bill (H.R. 3717) to reform the Federal deposit insurance system,

and for other purposes, having considered the same, report favorably thereon with an amendment and recommend that the bill as

amended do pass.

CONTENTS

Page

Amendment .............................................................................................................. 2

Purpose and Summary ............................................................................................ 20

Background and Need for Legislation .................................................................... 21

Hearings ................................................................................................................... 23

Committee Consideration ........................................................................................ 24

Committee Votes ...................................................................................................... 24

Committee Oversight Findings ............................................................................... 27

Performance Goals and Objectives ......................................................................... 27

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 27

Committee Cost Estimate ....................................................................................... 28

Congressional Budget Office Estimate ................................................................... 28

Federal Mandates Statement ................................................................................. 35

Advisory Committee Statement .............................................................................. 35

Constitutional Authority Statement ...................................................................... 35

Applicability to Legislative Branch ........................................................................ 35

Exchange of Committee Correspondence ............................................................... 36

Section-by-Section Analysis of the Legislation ...................................................... 36

Changes in Existing Law Made by the Bill, as Reported ..................................... 42

Additional and Dissenting Views ............................................................ 124, 127, 128

2

AMENDMENT

The amendment is as follows:

Strike all after the enacting clause and insert the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Federal Deposit Insurance Reform Act of 2002’’.

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Merging the BIF and SAIF.

Sec. 3. Increase in deposit insurance coverage.

Sec. 4. Setting assessments and repeal of special rules relating to minimum assessments and free deposit insurance.

Sec. 5. Assessments on rapid-growth deposits to maintain Fund reserves without penalizing low-growth institutions.

Sec. 6. Replacement of fixed designated reserve ratio with reserve range.

Sec. 7. Requirements applicable to the risk-based assessment system.

Sec. 8. Refunds, dividends, and credits from Deposit Insurance Fund.

Sec. 9. Deposit Insurance Fund restoration plans.

Sec. 10. Regulations required.

Sec. 11. Studies of FDIC structure and expenses and certain activities and further possible changes to deposit

insurance system.

Sec. 12. Technical and conforming amendments to the Federal Deposit Insurance Act relating to the merger

of the BIF and SAIF.

Sec. 13. Other technical and conforming amendments relating to the merger of the BIF and SAIF.

SEC. 2. MERGING THE BIF AND SAIF.

(a) IN GENERAL.—

(1) MERGER.—The Bank Insurance Fund and the Savings Association Insurance Fund shall be merged into the Deposit Insurance Fund.

(2) DISPOSITION OF ASSETS AND LIABILITIES.—All assets and liabilities of the

Bank Insurance Fund and the Savings Association Insurance Fund shall be

transferred to the Deposit Insurance Fund.

(3) NO SEPARATE EXISTENCE.—The separate existence of the Bank Insurance

Fund and the Savings Association Insurance Fund shall cease on the effective

date of the merger thereof under this section.

(b) REPEAL OF OUTDATED MERGER PROVISION.—Section 2704 of the Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is repealed.

(c) EFFECTIVE DATE.—This section shall take effect on the first day of the first

calendar quarter that begins after the end of the 90-day period beginning on the

date of the enactment of this Act.

SEC. 3. INCREASE IN DEPOSIT INSURANCE COVERAGE.

(a) IN GENERAL.—Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C.

1821(a)(1)) is amended—

(1) by striking subparagraph (B) and inserting the following new subparagraph:

‘‘(B) NET AMOUNT OF INSURED DEPOSIT.—The net amount due to any depositor at an insured depository institution shall not exceed the standard

maximum deposit insurance amount as determined in accordance with subparagraphs (C), (D), (E) and (F) and paragraph (3).’’; and

(2) by adding at the end the following new subparagraphs:

‘‘(E) STANDARD MAXIMUM DEPOSIT INSURANCE AMOUNT DEFINED.—For purposes of this Act, the term ‘standard maximum deposit insurance amount’

means—

‘‘(i) until the effective date of final regulations prescribed pursuant to

section 10(a)(2) of the Federal Deposit Insurance Reform Act of 2002,

$100,000; and

‘‘(ii) on and after such effective date, $130,000, adjusted as provided

under subparagraph (F).

‘‘(F) INFLATION ADJUSTMENT.—

‘‘(i) IN GENERAL.—By April 1 of 2005, and the 1st day of each subsequent 5-year period, the Board of Directors and the National Credit

Union Administration Board shall jointly prescribe the amount by

which the standard maximum deposit insurance amount and the standard maximum share insurance amount (as defined in section 207(k) of

the Federal Credit Union Act) applicable to any depositor at an insured

depository institution shall be increased by calculating the product of—

‘‘(I) $130,000; and

‘‘(II) the ratio of the value of the Personal Consumption Expenditures Chain-Type Index (or any successor index thereto), published

by the Department of Commerce, as in effect on the date this subVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6621 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
3

paragraph takes effect, to the value of such index as of December

31 of the year preceding the year in which the adjustment is calculated under this clause. ‘‘(ii) ROUNDING.—If the amount determined under clause (ii) for any period is not a multiple of $10,000, the amount so determined shall be

rounded to the nearest $10,000. ‘‘(iii) PUBLICATION AND REPORT TO THE CONGRESS.—Not later than

April 5 of any calendar year in which an adjustment is required to be

calculated under clause (i) to the standard maximum deposit insurance

amount and the standard maximum share insurance amount under

such clause, the Board of Directors and the National Credit Union Administration Board shall— ‘‘(I) publish in the Federal Register the standard maximum deposit insurance amount, the standard maximum share insurance

amount, and the amount of coverage under paragraph (3)(A) and

section 207(k)(3) of the Federal Credit Union Act, as so calculated;

and‘‘(II) jointly submit a report to the Congress containing the

amounts described in subclause (I). ‘‘(iv) 6-MONTH IMPLEMENTATION PERIOD.—Unless an Act of Congress

enacted before July 1 of the calendar year in which an adjustment is

required to be calculated under clause (i) provides otherwise, the increase in the standard maximum deposit insurance amount and the

standard maximum share insurance amount shall take effect on January 1 of the year immediately succeeding such calendar year.’’.

(b) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT PLAN DEPOSITS.—Section

11(a)(1)(D) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)(D)) is amended to read as follows:

‘‘(D) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT PLAN DEPOSITS.—

‘‘(i) PASS-THROUGH INSURANCE.—The Corporation shall provide passthrough deposit insurance for the deposits of any employee benefit

plan.

‘‘(ii) PROHIBITION ON ACCEPTANCE OF BENEFIT PLAN DEPOSITS.—An insured depository institution that is not well capitalized or adequately

capitalized may not accept employee benefit plan deposits.

‘‘(iii) DEFINITIONS.—For purposes of this subparagraph, the following

definitions shall apply:

‘‘(I) CAPITAL STANDARDS.—The terms ‘well capitalized’ and ‘adequately capitalized’ have the same meanings as in section 38.

‘‘(II) EMPLOYEE BENEFIT PLAN.—The term ‘employee benefit plan’

has the same meaning as in paragraph (8)(B)(ii), and includes any

eligible deferred compensation plan described in section 457 of the

Internal Revenue Code of 1986.

‘‘(III) PASS-THROUGH DEPOSIT INSURANCE.—The term ‘passthrough deposit insurance’ means, with respect to an employee

benefit plan, deposit insurance coverage provided on a pro rata

basis to the participants in the plan, in accordance with the interest of each participant.’’.

(c) DOUBLING OF DEPOSIT INSURANCE FOR CERTAIN RETIREMENT ACCOUNTS.—Section 11(a)(3)(A) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(3)(A)) is

amended by striking ‘‘$100,000’’ and inserting ‘‘2 times the standard maximum deposit insurance amount (as determined under paragraph (1))’’.

(d) INCREASED INSURANCE COVERAGE FOR MUNICIPAL DEPOSITS.—Section 11(a)(2)

of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(2)) is amended—

(1) in subparagraph (A)—

(A) by moving the margins of clauses (i) through (v) 4 ems to the right;

(B) by striking, in the matter following clause (v), ‘‘such depositor shall’’

and all that follows through the period; and

(C) by striking the semicolon at the end of clause (v) and inserting a period;

(2) by striking ‘‘(2)(A) Notwithstanding’’ and all that follows through ‘‘a depositor who is—’’ and inserting the following:

‘‘(2) MUNICIPAL DEPOSITORS.—

‘‘(A) IN GENERAL.—Notwithstanding any limitation in this Act or in any

other provision of law relating to the amount of deposit insurance available

to any 1 depositor—

‘‘(i) a municipal depositor shall, for the purpose of determining the

amount of insured deposits under this subsection, be deemed to be a

depositor separate and distinct from any other officer, employee, or

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agent of the United States or any public unit referred to in subparagraph (D); and ‘‘(ii) except as provided in subparagraph (B), the deposits of a municipal depositor shall be insured in an amount equal to the standard

maximum deposit insurance amount (as determined under paragraph

(1)). ‘‘(B) IN-STATE MUNICIPAL DEPOSITORS.—In the case of the deposits of an

in-State municipal depositor described in clause (ii), (iii), (iv), or (v) of subparagraph (D) at an insured depository institution, such deposits shall be

insured in an amount not to exceed the lesser of— ‘‘(i) $5,000,000; or

‘‘(ii) the sum of the standard maximum deposit insurance amount

and 80 percent of the amount of any deposits in excess of the standard

maximum deposit insurance amount. ‘‘(C) IN-STATE MUNICIPAL DEPOSITOR DEFINED.—For purposes of this paragraph, the term ‘in-State municipal depositor’ means a municipal depositor

that is located in the same State as the office or branch of the insured depository institution at which the deposits of that depositor are held. ‘‘(D) MUNICIPAL DEPOSITOR.—In this paragraph, the term ‘municipal depositor’ means a depositor that is—’’;

(3) by striking ‘‘(B) The’’ and inserting the following:

‘‘(E) AUTHORITY TO LIMIT DEPOSITS.—The’’; and

(4) by striking ‘‘depositor referred to in subparagraph (A) of this paragraph’’

each place such term appears and inserting ‘‘municipal depositor’’.

(e) TECHNICAL AND CONFORMING AMENDMENT RELATING TO INSURANCE OF TRUST

FUNDS.—Paragraphs (1) and (3) of section 7(i) of the Federal Deposit Insurance Act

(12 U.S.C. 1817(i)) are each amended by striking ‘‘$100,000’’ and inserting ‘‘the

standard maximum deposit insurance amount (as determined under section

11(a)(1))’’.

(f) OTHER TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Section 11(m)(6) of the Federal Deposit Insurance Act (12 U.S.C.

1821(m)(6)) is amended by striking ‘‘$100,000’’ and inserting ‘‘an amount equal

to the standard maximum deposit insurance amount’’.

(2) Subsection (a) of section 18 of the Federal Deposit Insurance Act (12

U.S.C. 1828(a)) is amended to read as follows:

‘‘(a) INSURANCE LOGO.—

‘‘(1) INSURED DEPOSITORY INSTITUTIONS.—Each insured depository institution

shall display at each place of business maintained by that institution a sign or

signs relating to the insurance of the deposits of the institution, in accordance

with regulations to be prescribed by the Corporation.

‘‘(2) REGULATIONS.—The Corporation shall prescribe regulations to carry out

this subsection, including regulations governing the substance of signs required

by paragraph (1) and the manner of display or use of such signs.

‘‘(3) PENALTIES.—For each day that an insured depository institution continues to violate this subsection or any regulation issued under this subsection,

it shall be subject to a penalty of not more than $100, which the Corporation

may recover for its use.’’.

(3) Section 43(d) of the Federal Deposit Insurance Act (12 U.S.C. 1831t(d)) is

amended by striking ‘‘$100,000’’ and inserting ‘‘an amount equal to the standard

maximum deposit insurance amount’’.

(4) Section 6 of the International Banking Act of 1978 (12 U.S.C. 3104) is

amended—

(A) by striking ‘‘$100,000’’ each place such term appears and inserting

‘‘an amount equal to the standard maximum deposit insurance amount’’;

and

(B) by adding at the end the following new subsection:

‘‘(e) STANDARD MAXIMUM DEPOSIT INSURANCE AMOUNT DEFINED.—For purposes of

this section, the term ‘standard maximum deposit insurance amount’ means the

amount of the maximum amount of deposit insurance as determined under section

11(a)(1) of the Federal Deposit Insurance Act.’’.

(g) CONFORMING CHANGE TO CREDIT UNION SHARE INSURANCE FUND.—

(1) IN GENERAL.—Section 207(k) of the Federal Credit Union Act (12 U.S.C.

1787(k)) is amended—

(A) by striking ‘‘(k)(1)’’ and all that follows through the end of paragraph

(1) and inserting the following:

‘‘(k) INSURED AMOUNTS PAYABLE.—

‘‘(1) NET INSURED AMOUNT.—

‘‘(A) IN GENERAL.—Subject to the provisions of paragraph (2), the net

amount of share insurance payable to any member at an insured credit

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union shall not exceed the total amount of the shares or deposits in the

name of the member (after deducting offsets), less any part thereof which

is in excess of the standard maximum share insurance amount, as determined in accordance with this paragraph and paragraphs (5) and (6), and

consistently with actions taken by the Federal Deposit Insurance Corporation under section 11(a) of the Federal Deposit Insurance Act.

‘‘(B) AGGREGATION.—Determination of the net amount of share insurance

under subparagraph (A), shall be in accordance with such regulations as

the Board may prescribe, and, in determining the amount payable to any

member, there shall be added together all accounts in the credit union

maintained by that member for that member’s own benefit, either in the

member’s own name or in the names of others.

‘‘(C) AUTHORITY TO DEFINE THE EXTENT OF COVERAGE.—The Board may

define, with such classifications and exceptions as it may prescribe, the extent of the share insurance coverage provided for member accounts, including member accounts in the name of a minor, in trust, or in joint tenancy.’’;

(B) in paragraph (2)—

(i) in subparagraph (A)—

(I) in clauses (i) through (v), by moving the margins 4 ems to the

right;

(II) in the matter following clause (v), by striking ‘‘his account’’

and all that follows through the period; and

(III) by striking the semicolon at the end of clause (v) and inserting a period;

(ii) by striking ‘‘(2)(A) Notwithstanding’’ and all that follows through

‘‘a depositor or member who is—’’ and inserting the following:

‘‘(2) MUNICIPAL DEPOSITORS OR MEMBERS.—

‘‘(A) IN GENERAL.—Notwithstanding any limitation in this Act or in any

other provision of law relating to the amount of insurance available to any

1 depositor or member, deposits or shares of a municipal depositor or member shall be insured in an amount equal to the standard maximum share

insurance amount (as determined under paragraph (5)), except as provided

in subparagraph (B).

‘‘(B) IN-STATE MUNICIPAL DEPOSITORS.—In the case of the deposits of an

in-State municipal depositor described in clause (ii), (iii), (iv), or (v) of subparagraph (E) at an insured credit union, such deposits shall be insured in

an amount equal to the lesser of—

‘‘(i) $5,000,000; or

‘‘(ii) the sum of the standard maximum deposit insurance amount

and 80 percent of the amount of any deposits in excess of the standard

maximum deposit insurance amount.

‘‘(C) RULE OF CONSTRUCTION.—No provision of this paragraph shall be

construed as authorizing an insured credit union to accept the deposits of

a municipal depositor in an amount greater than such credit union is authorized to accept under any other provision of Federal or State law.

‘‘(D) IN-STATE MUNICIPAL DEPOSITOR DEFINED.—For purposes of this paragraph, the term ‘in-State municipal depositor’ means a municipal depositor

that is located in the same State as the office or branch of the insured credit union at which the deposits of that depositor are held.

‘‘(E) MUNICIPAL DEPOSITOR.—In this paragraph, the term ‘municipal depositor’ means a depositor that is—’’;

(iii) by striking ‘‘(B) The’’ and inserting the following:

‘‘(F) AUTHORITY TO LIMIT DEPOSITS.—The’’; and

(iv) by striking ‘‘depositor or member referred to in subparagraph

(A)’’ and inserting ‘‘municipal depositor or member’’; and

(C) by adding at the end the following new paragraphs:

‘‘(4) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT PLAN DEPOSITS.—

‘‘(A) PASS-THROUGH INSURANCE.—The Administration shall provide passthrough share insurance for the deposits or shares of any employee benefit

plan.

‘‘(B) PROHIBITION ON ACCEPTANCE OF DEPOSITS.—An insured credit union

that is not well capitalized or adequately capitalized may not accept employee benefit plan deposits.

‘‘(C) DEFINITIONS.—For purposes of this paragraph, the following definitions shall apply:

‘‘(i) CAPITAL STANDARDS.—The terms ‘well capitalized’ and ‘adequately capitalized’ have the same meanings as in section 216(c).

‘‘(ii) EMPLOYEE BENEFIT PLAN.—The term ‘employee benefit plan’—

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‘‘(I) has the meaning given to such term in section 3(3) of the

Employee Retirement Income Security Act of 1974; ‘‘(II) includes any plan described in section 401(d) of the Internal

Revenue Code of 1986; and ‘‘(III) includes any eligible deferred compensation plan described

in section 457 of the Internal Revenue Code of 1986. ‘‘(iii) PASS-THROUGH SHARE INSURANCE.—The term ‘pass-through

share insurance’ means, with respect to an employee benefit plan, insurance coverage provided on a pro rata basis to the participants in the

plan, in accordance with the interest of each participant. ‘‘(D) RULE OF CONSTRUCTION.—No provision of this paragraph shall be

construed as authorizing an insured credit union to accept the deposits of

an employee benefit plan in an amount greater than such credit union is

authorized to accept under any other provision of Federal or State law. ‘‘(5) STANDARD MAXIMUM SHARE INSURANCE AMOUNT DEFINED.—For purposes

of this Act, the term ‘standard maximum share insurance amount’ means— ‘‘(A) until the effective date of final regulations prescribed pursuant to

section 10(a)(2) of the Federal Deposit Insurance Reform Act of 2002,

$100,000; and ‘‘(B) on and after such effective date, $130,000, adjusted as provided

under section 11(a)(1)(F) of the Federal Deposit Insurance Act.’’. (2) DOUBLING OF SHARE INSURANCE FOR CERTAIN RETIREMENT ACCOUNTS.— Section 207(k)(3) of the Federal Credit Union Act (12 U.S.C. 1787(k)(3)) is

amended by striking ‘‘$100,000’’ and inserting ‘‘2 times the standard maximum

share insurance amount (as determined under paragraph (1))’’. (h) EFFECTIVE DATE.—This section and the amendments made by this section

shall take effect on the date the final regulations required under section 10(a)(2)

take effect.

SEC. 4. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES RELATING TO MINIMUM ASSESSMENTS AND FREE DEPOSIT INSURANCE.

(a) SETTING ASSESSMENTS.—Section 7(b)(2) of the Federal Deposit Insurance Act

(12 U.S.C. 1817(b)(2)) is amended— (1) by striking subparagraphs (A) and (B) and inserting the following new

subparagraphs: ‘‘(A) IN GENERAL.—The Board of Directors shall set assessments for insured depository institutions in such amounts as the Board of Directors

may determine to be necessary or appropriate, subject to subparagraph (D). ‘‘(B) FACTORS TO BE CONSIDERED.—In setting assessments under subparagraph (A), the Board of Directors shall consider the following factors: ‘‘(i) The estimated operating expenses of the Deposit Insurance Fund.

‘‘(ii) The estimated case resolution expenses and income of the Deposit Insurance Fund. ‘‘(iii) The projected effects of the payment of assessments on the capital and earnings of insured depository institutions. ‘‘(iv) the risk factors and other factors taken into account pursuant

to paragraph (1) under the risk-based assessment system, including the

requirement under such paragraph to maintain a risk-based system. ‘‘(v) Any other factors the Board of Directors may determine to be appropriate.’’; and

(2) by inserting after subparagraph (C) the following new subparagraph: ‘‘(D) BASE RATE FOR ASSESSMENTS.— ‘‘(i) IN GENERAL.—In setting assessment rates pursuant to subparagraph (A), the Board of Directors shall establish a base rate of not more

than 1 basis point (exclusive of any credit or dividend) for those insured

depository institutions in the lowest-risk category under the risk-based

assessment system established pursuant to paragraph (1). ‘‘(ii) SUSPENSION.—Clause (i) shall not apply during any period in

which the reserve ratio of the Deposit Insurance Fund is less than the

amount which is equal to 1.15 percent of the aggregate estimated insured deposits.’’. (b) ASSESSMENT RECORDKEEPING PERIOD SHORTENED.—Paragraph (5) of section

7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) is amended to read

as follows:

‘‘(5) DEPOSITORY INSTITUTION REQUIRED TO MAINTAIN ASSESSMENT-RELATED

RECORDS.—Each insured depository institution shall maintain all records that

the Corporation may require for verifying the correctness of any assessment on

the insured depository institution under this subsection until the later of—

‘‘(A) the end of the 3-year period beginning on the due date of the assessment; or

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‘‘(B) in the case of a dispute between the insured depository institution

and the Corporation with respect to such assessment, the date of a final

determination of any such dispute.’’. (c) SHORTENED STATUTE OF LIMITATIONS FOR CAUSES OF ACTION RELATING TO AS- SESSMENTS.— (1) IN GENERAL.—Subsection (g) of section 7 of the Federal Deposit Insurance

Act (12 U.S.C. 1817(g)) is amended— (A) by striking ‘‘(g) The Corporation, in a suit brought at law or in equity’’ and inserting the following: ‘‘(g) ACTIONS ON CLAIMS ARISING FROM ASSESSMENTS.— ‘‘(1) CAUSE OF ACTION ESTABLISHED.—The Corporation, in an action brought’’;

and

(B) by striking all that follows the first sentence and inserting the following new paragraphs: ‘‘(2) CLAIMS OF INSURED DEPOSITORY INSTITUTIONS.—An action by an insured

depository institution to recover from the Corporation on a claim relating to the

alleged overpayment of any assessment may not be brought against the Corporation after the end of the 3-year period beginning on the date the payment

of the assessment is due. ‘‘(3) CLAIMS OF THE CORPORATION.—Subject to paragraph (4), an action by the

Corporation to recover from an insured depository institution on a claim relating to the alleged nonpayment or underpayment of an assessment may not be

brought by the Corporation after the end of the 3-year period beginning on the

date the payment of the assessment is due.

‘‘(4) FALSE OR FRAUDULENT STATEMENT.—If an insured depository institution

has made or filed a false or fraudulent statement with the intent to evade any

amount of any assessment, the 3-year period referred to in paragraph (3) shall

commence on the date the Corporation discovers the falsity or fraudulent nature

of the statement.

‘‘(5) TOLLING OF STATUTE OF LIMITATIONS.—In accordance with regulations

which the Corporation shall prescribe establishing procedures for administrative review of claims described in paragraphs (2), (3), and (4), the period of any

administrative review by the Corporation of any such claim shall not be taken

into account for purposes of the 3-year period referred to in any such paragraph.

‘‘(6) FINALITY OF RECORDS.—Deposit information that is relevant to the determination of the amount of an assessment and is based on records required to

be maintained under subsection (b)(5) shall become conclusive and not subject

to change after the expiration of the period described in such subsection.

‘‘(7) COORDINATION WITH OTHER LAW.—The provisions of this subsection shall

apply with respect to actions described in this subsection, notwithstanding any

provision of any other Federal or State law.’’.

(2) SCOPE OF APPLICATION.—Paragraph (1) and the amendments made by

paragraph (1) shall apply only to assessments on insured depository institutions

which become due after the date of the enactment of this Act.

(d) INCREASE IN FEES FOR LATE ASSESSMENT PAYMENTS.—Subsection (h) of section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828(h)) is amended to read

as follows:

‘‘(h) PENALTY FOR FAILURE TO TIMELY PAY ASSESSMENTS.—

‘‘(1) IN GENERAL.—Any insured depository institution which fails or refuses to

pay any assessment shall be subject to a penalty in an amount not more than

1 percent of the amount of the assessment due for each day that such violation

continues.

‘‘(2) EXCEPTION IN CASE OF DISPUTE.—Paragraph (1) shall not apply if—

‘‘(A) the failure to pay an assessment is due to a dispute between the insured depository institution and the Corporation over the amount of such

assessment; and

‘‘(B) the insured depository institution deposits security satisfactory to the

Corporation for payment upon final determination of the issue.

‘‘(3) AUTHORITY TO MODIFY OR REMIT PENALTY.—The Corporation, in the sole

discretion of the Corporation, may compromise, modify or remit any penalty

which the Corporation may assess or has already assessed under paragraph (1)

upon a finding that good cause prevented the timely payment of an assessment.’’.

(e) ASSESSMENTS FOR LIFELINE ACCOUNTS.—

(1) IN GENERAL.—Section 232 of the Federal Deposit Insurance Corporation

Improvement Act of 1991 (12 U.S.C. 1834) is amended by striking subsection

(c).

(2) CLARIFICATION OF RATE APPLICABLE TO DEPOSITS ATTRIBUTABLE TO LIFELINE ACCOUNTS.—Section 7(b)(2)(H) of the Federal Deposit Insurance Act (12

8

U.S.C. 1817(b)(2)(H)) is amended by striking ‘‘at a rate determined in accordance with such Act’’ and inserting ‘‘at 1⁄2 the assessment rate otherwise applicable for such insured depository institution’’.

(3) REGULATIONS.—Section 232(a)(1) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 1834(a)(1)) is amended by striking

‘‘Board of Governors of the Federal Reserve System, and the’’.

(f) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Paragraph (3) of section 7(a) of the Federal Deposit Insurance Act (12

U.S.C. 1817(a)(3)) is amended by striking the 3d sentence and inserting the following: ‘‘Such reports of condition shall be the basis for the certified statements

to be filed pursuant to subsection (c).’’.

(2) Subparagraphs (B)(ii) and (C) of section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) are each amended by striking ‘‘semiannual’’

where such term appears in each such subparagraph.

(3) Section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2))

is amended—

(A) by striking subparagraphs (E), (F), and (G);

(B) in subparagraph (C), by striking ‘‘semiannual’’; and

(C) by redesignating subparagraph (H) (as amended by subsection (e)(2)

of this section) as subparagraph (E).

(4) Section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) (as

amended by subsection (c) of this section) is amended by striking paragraph (4)

and redesignating paragraphs (5) (as amended by subsection (b) of this section),

(6), and (7) as paragraphs (4), (5), and (6) respectively.

(5) Section 7(c) of the Federal Deposit Insurance Act (12 U.S.C. 1817(c)) is

amended—

(A) in paragraph (1)(A), by striking ‘‘semiannual’’;

(B) in paragraph (2)(A), by striking ‘‘semiannual’’; and

(C) in paragraph (3), by striking ‘‘semiannual period’’ and inserting ‘‘initial assessment period’’.

(6) Section 7(g)(6) of the Federal Deposit Insurance Act (12 U.S.C. 1817(g)(6))

(as amended by subsection (c) of this section) is amended by striking ‘‘(b)(5)’’

and inserting ‘‘(b)(4)’’.

(7) Section 8(p) of the Federal Deposit Insurance Act (12 U.S.C. 1818(p)) is

amended by striking ‘‘semiannual’’.

(8) Section 8(q) of the Federal Deposit Insurance Act (12 U.S.C. 1818(q)) is

amended by striking ‘‘semiannual period’’ and inserting ‘‘assessment period’’.

(9) Section 13(c)(4)(G)(ii)(II) of the Federal Deposit Insurance Act (12 U.S.C.

1823(c)(4)(G)(ii)(II)) is amended by striking ‘‘semiannual period’’ and inserting

‘‘assessment period’’.

(10) Section 232(a) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 1834(a)) is amended—

(A) in the matter preceding subparagraph (A) of paragraph (2), by striking ‘‘the Board and’’;

(B) in subparagraph (J) of paragraph (2), by striking ‘‘the Board’’ and inserting ‘‘the Corporation’’;

(C) by striking subparagraph (A) of paragraph (3) and inserting the following new subparagraph:

‘‘(A) CORPORATION.—The term ‘Corporation’ means the Federal Deposit

Insurance Corporation.’’; and

(D) in subparagraph (C) of paragraph (3), by striking ‘‘Board’’ and inserting ‘‘Corporation’’.

(g) EFFECTIVE DATE.—Except as provided in subsection (c), this section and the

amendments made by this section shall take effect on the date that the final regulations required under section 10(a)(5) take effect.

SEC. 5. ASSESSMENTS ON RAPID-GROWTH DEPOSITS TO MAINTAIN FUND RESERVES WITHOUT PENALIZING LOW-GROWTH INSTITUTIONS.

(a) IN GENERAL.—Section 5(d) of the Federal Deposit Insurance Act (12 U.S.C.

1815(d)) is amended by adding at the end the following new paragraph:

‘‘(4) NET INCREASE IN NEW DEPOSITS.—

‘‘(A) IN GENERAL.—In the case of any insured depository institution that

experiences a net increase in new insured deposits, during the most recent

assessment period, in excess of such percentage as the Corporation may determine to be appropriate, the Board of Directors may, subject to subparagraph (B), impose a fee on the depository institution in the manner provided under paragraph (1) with respect to the amount of such net increase

in new insured deposits, taking into account the levels of assessments paid

by such insured depository institution in prior assessment periods.

9

‘‘(B) REGULATIONS.—The Corporation shall prescribe regulations, after notice and opportunity for comment, establishing procedures for imposing fees

under subparagraph (A).’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall take effect at

the end of the 60-day period beginning on the date of the enactment of this Act.

SEC. 6. REPLACEMENT OF FIXED DESIGNATED RESERVE RATIO WITH RESERVE RANGE.

(a) IN GENERAL.—Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C.

1817(b)(3)) is amended to read as follows: ‘‘(3) DESIGNATED RESERVE RATIO.— ‘‘(A) ESTABLISHMENT.— ‘‘(i) IN GENERAL.—The Board of Directors shall designate, by regulation after notice and opportunity for comment, the reserve ratio applicable with respect to the Deposit Insurance Fund. ‘‘(ii) NOT LESS THAN ANNUAL REDETERMINATION.—A determination

under clause (i) shall be made by the Board of Directors at least before

the beginning of each calendar year, for such calendar year, and at

such other times as the Board of Directors may determine to be appropriate. ‘‘(B) RANGE.—The reserve ratio designated by the Board of Directors for

any year—‘‘(i) may not exceed 1.4 percent of estimated insured deposits; and

‘‘(ii) may not be less than 1.15 percent of estimated insured deposits. ‘‘(C) FACTORS.—In designating a reserve ratio for any year, the Board of

Directors shall— ‘‘(i) take into account the risk of losses to the Deposit Insurance Fund

in such year and future years, including historic experience and potential and estimated losses from insured depository institutions; ‘‘(ii) take into account economic conditions generally affecting insured

depository institutions so as to allow the designated reserve ratio to increase during more favorable economic conditions and to decrease during less favorable economic conditions, notwithstanding the increased

risks of loss that may exist during such less favorable conditions, as determined to be appropriate by the Board of Directors; ‘‘(iii) seek to prevent sharp swings in the assessment rates for insured depository institutions; and ‘‘(iv) take into account such other factors as the Board of Directors

may determine to be appropriate, consistent with the requirements of

this subparagraph. ‘‘(D) PUBLICATION OF PROPOSED CHANGE IN RATIO.—In soliciting comment

on any proposed change in the designated reserve ratio in accordance with

subparagraph (A), the Board of Directors shall include in the published proposal a thorough analysis of the data and projections on which the proposal

is based.’’.

(b) TECHNICAL AND CONFORMING AMENDMENT.—Section 3(y) of the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) is amended—

(1) by striking ‘‘(y) The term’’ and inserting ‘‘(y) DEFINITIONS RELATING TO DEPOSIT INSURANCE FUND.—

‘‘(1) DEPOSIT INSURANCE FUND.—The term’’; and

(2) by inserting after paragraph (1) (as so designated by paragraph (1) of this

subsection) the following new paragraph:

‘‘(2) DESIGNATED RESERVE RATIO.—The term ‘designated reserve ratio’ means

the reserve ratio designated by the Board of Directors in accordance with section 7(b)(3).’’.

(c) EFFECTIVE DATE.—This section and the amendments made by this section

shall take effect on the date that the final regulations required under section

10(a)(1) take effect.

SEC. 7. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT SYSTEM.

Section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) is

amended by adding at the end the following new subparagraphs:

‘‘(E) INFORMATION CONCERNING RISK OF LOSS AND ECONOMIC CONDITIONS.—

‘‘(i) SOURCES OF INFORMATION.—For purposes of determining risk of

losses at insured depository institutions and economic conditions generally affecting depository institutions, the Corporation shall collect information, as appropriate, from all sources the Board of Directors considers appropriate, such as reports of condition, inspection reports, and

other information from all Federal banking agencies, any information

available from State bank supervisors, State insurance and securities

10

regulators, the Securities and Exchange Commission (including information described in section 35), the Secretary of the Treasury, the

Commodity Futures Trading Commission, the Farm Credit Administration, the Federal Trade Commission, any Federal reserve bank or Federal home loan bank, and other regulators of financial institutions, and

any information available from credit rating entities, and other private

economic or business analysts.

‘‘(ii) CONSULTATION WITH FEDERAL BANKING AGENCIES.—

‘‘(I) IN GENERAL.—Except as provided in subclause (II), in assessing the risk of loss to the Deposit Insurance Fund with respect to

any insured depository institution, the Corporation shall consult

with the appropriate Federal banking agency of such institution.

‘‘(II) TREATMENT ON AGGREGATE BASIS.—In the case of insured

depository institutions that are well capitalized (as defined in section 38) and, in the most recent examination, were found to be well

managed, the consultation under subclause (I) concerning the assessment of the risk of loss posed by such institutions may be made

on an aggregate basis.

‘‘(iii) RULE OF CONSTRUCTION.—No provision of this paragraph shall

be construed as providing any new authority for the Corporation to require submission of information by insured depository institutions to

the Corporation.

‘‘(F) MODIFICATIONS TO THE RISK-BASED ASSESSMENT SYSTEM ALLOWED

ONLY AFTER NOTICE AND COMMENT.—In revising or modifying the risk-based

assessment system at any time after the date of the enactment of the Federal Deposit Insurance Reform Act of 2002, the Board of Directors may implement such revisions or modification in final form only after notice and

opportunity for comment.’’.

SEC. 8. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT INSURANCE FUND.

(a) IN GENERAL.—Subsection (e) of section 7 of the Federal Deposit Insurance Act

(12 U.S.C. 1817(e)) is amended to read as follows:

‘‘(e) REFUNDS, DIVIDENDS, AND CREDITS.—

‘‘(1) REFUNDS OF OVERPAYMENTS.—In the case of any payment of an assessment by an insured depository institution in excess of the amount due to the

Corporation, the Corporation may—

‘‘(A) refund the amount of the excess payment to the insured depository

institution; or

‘‘(B) credit such excess amount toward the payment of subsequent assessments until such credit is exhausted.

‘‘(2) DIVIDENDS FROM EXCESS AMOUNTS IN DEPOSIT INSURANCE FUND.—

‘‘(A) RESERVE RATIO EQUAL TO OR IN EXCESS OF 1.4 PERCENT OF ESTIMATED

INSURED DEPOSITS.—Whenever the reserve ratio of the Deposit Insurance

Fund equals or exceeds 1.4 percent of estimated insured deposits, the Corporation shall declare the amount in the Fund in excess of the amount required to maintain the reserve ratio at the designated reserve ratio in effect

at such time, as dividends to be paid to insured depository institutions.

‘‘(B) RESERVE RATIO EQUAL TO OR IN EXCESS OF 1.35 PERCENT OF ESTIMATED INSURED DEPOSITS AND LESS THAN 1.4 PERCENT.—Whenever the reserve ratio of the Deposit Insurance Fund equals or exceeds 1.35 percent

of estimated insured deposits and is less than 1.4 percent of such deposits,

the Corporation shall declare the amount in the Fund that is equal to 50

percent of the amount in excess of the amount required to maintain the reserve ratio at 1.35 percent of the estimated insured deposits as dividends

to be paid to insured depository institutions.

‘‘(C) BASIS FOR DISTRIBUTION OF DIVIDENDS.—

‘‘(i) IN GENERAL.—The Corporation shall determine each insured depository institution’s relative share of the Deposit Insurance Fund, for

the purposes of determining that institution’s relative percentage share

of any dividends declared under this paragraph, based upon the contributions made by such institution (and any predecessor institution) to

such Fund or the Bank Insurance Fund or the Savings Association Insurance Fund, as the case may be.

‘‘(ii) FACTORS.—The Corporation shall determine, pursuant to clause

(i), the relative percentage share of any insured depository institution

in any dividend declared under this paragraph based on—

‘‘(I) the institution’s relative share of the Deposit Insurance Fund

as determined using the assessment base of the institution (including any predecessor institution) on December 31, 1996, compared

11

to the assessment base of all insured depository institutions on

such date, taking into account such other factors as the Corporation may determine to be appropriate; and ‘‘(II) the effect on such share of any assessments paid after December 31, 1996, by such insured depository institution (including

any predecessor institution) to the Deposit Insurance Fund or the

Bank Insurance Fund or the Savings Association Insurance Fund,

as the case may be, excluding that portion of any assessment paid

for any assessment period that exceeds, if any, the amount of the

assessment such institution would have paid for such assessment

period if the institution had been classified in the lowest-risk category under the risk-based assessment established under subsection (b)(1). ‘‘(D) NOTICE AND OPPORTUNITY FOR COMMENT.—The declaration and payment of dividends under this paragraph shall be made in such manner and

on such conditions as the Corporation shall prescribe by regulation, after

notice and opportunity for comment. ‘‘(3) CREDIT POOL.— ‘‘(A) ONE-TIME CREDIT BASED ON TOTAL ASSESSMENT BASE AT YEAR-END

1996.—

‘‘(i) IN GENERAL.—Before the end of the 270-day period beginning on

the date of the enactment of the Federal Deposit Insurance Reform Act

of 2002, the Board of Directors shall, by regulation, provide for a credit

to each eligible insured depository institution, based on the assessment

base of the institution (including any predecessor institution) on December 31, 1996, as compared to the combined aggregate assessment

base of all eligible insured depository institutions, taking into account

such factors as the Board of Directors may determine to be appropriate.

‘‘(ii) CREDIT LIMIT.—The aggregate amount of credits available under

clause (i) to all eligible insured depository institutions shall equal the

amount that the Corporation could collect if the Corporation imposed

an assessment of 12 basis points on the combined assessment base of

the Bank Insurance Fund and the Savings Association Insurance Fund

as of December 31, 2001.

‘‘(iii) ELIGIBLE INSURED DEPOSITORY INSTITUTION DEFINED.—For purposes of this paragraph, the term ‘eligible insured depository institution’ means any insured depository institution that—

‘‘(I) was in existence on December 31, 1996, and paid a deposit

insurance assessment prior to that date; or

‘‘(II) is a successor to any insured depository institution described

in subclause (II).

‘‘(iv) APPLICATION OF CREDITS.—

‘‘(I) IN GENERAL.—The amount of a credit to any eligible insured

depository institution under this paragraph may be applied by the

Corporation to those portions of the assessments imposed on such

institution under subsection (b) that become due for assessment periods beginning after the effective date of regulations prescribed

under clause (i).

‘‘(II) REGULATIONS.—The regulations prescribed under clause (i)

shall establish the qualifications and procedures governing the application of assessment credits pursuant to subclause (I).

‘‘(v) CRITERIA FOR DETERMINATION.—In determining whether to provide assessment credits under this paragraph and the amounts of any

such credits, the Board of Directors shall take into account the factors

for designating the reserve ratio under subsection (b)(3) and the factors

for setting assessments under subsection (b)(2)(B).

‘‘(vi) LIMITATION ON AMOUNT OF CREDIT FOR CERTAIN DEPOSITORY INSTITUTIONS.—In the case of an insured depository institution that exhibits financial, operational, or compliance weaknesses ranging from

moderately severe to unsatisfactory, or is not adequately capitalized (as

defined in section 38) at the beginning of an assessment period, the

amount of any credit allowed under this paragraph against the assessment on that depository institution for such period may not exceed the

amount equal to the average assessment on all insured depository institutions for such assessment period.

‘‘(vii) ADMINISTRATIVE REVIEW.—

‘‘(I) IN GENERAL.—The regulations prescribed under clause (i)

shall include provisions allowing an eligible insured depository institution a reasonable opportunity for a hearing before the CorVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6621 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
12

poration to challenge the amount of the credit determined under

this paragraph for such institution.

‘‘(II) FINALITY OF ADMINISTRATIVE REVIEW.—Any review under

subclause (i) of any determination of the Corporation under this

paragraph shall be final and not subject to judicial review.

‘‘(viii) PREDECESSOR DEFINED.—For purposes of this paragraph, the

term ‘predecessor’, when used with respect to any insured depository

institution, includes any other insured depository institution acquired

by or merged with such insured depository institution.

‘‘(B) ON-GOING CREDIT POOL.—

‘‘(i) IN GENERAL.—In addition to the credit provided pursuant to subparagraph (A) and subject to the limitation contained in clause (vi) of

such subparagraph, the Corporation shall, by regulation, establish an

on-going system of credits to be applied against future assessments

under subsection (b)(1) on the same basis as the dividends provided

under paragraph (2)(C).

‘‘(ii) LIMITATION ON CREDITS UNDER CERTAIN CIRCUMSTANCES.—No

credits may be allowed by the Corporation under this subparagraph

during any period in which—

‘‘(I) the reserve ratio of the Deposit Insurance Fund is less than

the designated reserve ratio of such Fund; or

‘‘(II) the designated reserve ratio of the Fund is less than 1.25

percent of the amount of estimated insured deposits.’’.

(b) DEFINITION OF RESERVE RATIO.—Section 3(y) of the Federal Deposit Insurance

Act (12 U.S.C. 1813(y)) (as amended by section 6(b) of this Act) is amended by adding at the end the following new paragraph:

‘‘(3) RESERVE RATIO.—The term ‘reserve ratio’, when used with regard to the

Deposit Insurance Fund other than in connection with a reference to the designated reserve ratio, means the ratio of the net worth of the Deposit Insurance

Fund to the value of the aggregate estimated insured deposits.’’.

SEC. 9. DEPOSIT INSURANCE FUND RESTORATION PLANS.

Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1917(b)(3)) (as

amended by section 6(a) of this Act) is amended by adding at the end the following

new subparagraph:

‘‘(E) DIF RESTORATION PLANS.—

‘‘(i) IN GENERAL.—Whenever—

‘‘(I) the Corporation projects that the reserve ratio of the Deposit

Insurance Fund will fall below the designated reserve ratio within

6 months of such determination; or

‘‘(II) the reserve ratio of the Deposit Insurance Fund actually

falls below the designated reserve ratio without any determination

under subclause (I) having been made,

the Corporation shall establish and implement a Deposit Insurance

Fund restoration plan within 30 days that meets the requirements of

clause (ii) or (iii), as the case may be, and such other conditions as the

Corporation determines to be appropriate.

‘‘(ii) REQUIREMENTS OF PLAN IF RESERVE RATIO DOES NOT FALL BELOW

1.0 PERCENT.—If the reserve ratio of the Deposit Insurance Fund is not

projected to or has not fallen below an amount equal to 1.0 percent of

the aggregate estimated insured deposits, a Deposit Insurance Fund

restoration plan meets the requirements of this clause if the plan provides that the reserve ratio of the Fund will meet or exceed the designated reserve ratio that was in effect before the occurrence of the

event described in subclause (I) or (II) of clause (i) before the end of

the 3-year period beginning upon implementation of the plan.

‘‘(iii) REQUIREMENTS OF PLAN IF RESERVE RATIO FALLS BELOW 1.0 PERCENT.—If the reserve ratio of the Deposit Insurance Fund has fallen

below an amount equal to 1.0 percent of the aggregate estimated insured deposits, a Deposit Insurance Fund restoration plan meets the

requirements of this clause if the plan provides that the reserve ratio

of the Fund—

‘‘(I) will meet or exceed an amount equal to 1.0 percent of the aggregate estimated insured deposits before the end of the 2-year period beginning upon implementation of the plan; and

‘‘(II) will meet or exceed the designated reserve ratio that was in

effect before the occurrence of the event described in subclause (I)

or (II) of clause (i) before the end of the 3-year period beginning

on the date the reserve ratio first meets or exceeds an amount

13

equal to 1.0 percent of the aggregate estimated insured deposits

after the implementation of the plan.

‘‘(iv) TRANSPARENCY.—Not more than 90 days after the Corporation

establishes and implements a restoration plan under clause (i), the Corporation shall publish in the Federal Register a detailed analysis of the

factors considered and the basis for the actions taken with regard to

the plan.’’.

SEC. 10. REGULATIONS REQUIRED.

(a) IN GENERAL.—Not later than 270 days after the date of the enactment of this

Act, the Board of Directors of the Federal Deposit Insurance Corporation shall prescribe final regulations, after notice and opportunity for comment—

(1) designating the reserve ratio for the Deposit Insurance Fund in accordance

with section 7(b)(3) of the Federal Deposit Insurance Act (as amended by section

6 of this Act);

(2) implementing increases in deposit insurance coverage in accordance with

the amendments made by section 3 of this Act;

(3) implementing the dividend requirement under section 7(e)(2) of the Federal Deposit Insurance Act (as amended by section 8 of this Act).

(4) implementing the 1-time assessment credit to certain insured depository

institutions in accordance with section 7(e)(3) of the Federal Deposit Insurance

Act, as amended by section 8 of this Act, including the qualifications and procedures under which the Corporation would apply assessment credits; and

(5) providing for assessments under section 7(b) of the Federal Deposit Insurance Act, as amended by this Act.

(b) RULE OF CONSTRUCTION.—No provision of this Act or any amendment made

by this Act shall be construed as affecting the authority of the Corporation to set

or collect deposit insurance assessments before the effective date of the final regulation prescribed under subsection (a).

SEC. 11. STUDIES OF FDIC STRUCTURE AND EXPENSES AND CERTAIN ACTIVITIES AND FURTHER POSSIBLE CHANGES TO DEPOSIT INSURANCE SYSTEM.

(a) STUDY BY COMPTROLLER GENERAL.—

(1) STUDY REQUIRED.—The Comptroller General shall conduct a study of the

following issues:

(A) The efficiency and effectiveness of the administration of the prompt

corrective action program under section 38 of the Federal Deposit Insurance

Act by the Federal banking agencies (as defined in section 3 of such Act),

including the degree of effectiveness of such agencies in identifying troubled

depository institutions and taking effective action with respect to such institutions, and the degree of accuracy of the risk assessments made by the

Corporation.

(B) The appropriateness of the organizational structure of the Federal Deposit Insurance Corporation for the mission of the Corporation taking into

account—

(i) the current size and complexity of the business of insured depository institutions (as such term is defined in section 3 of the Federal Deposit Insurance Act);

(ii) the extent to which the organizational structure contributes to or

reduces operational inefficiencies that increase operational costs; and

(iii) the effectiveness of internal controls.

(2) REPORT TO THE CONGRESS.—The Comptroller General shall submit a report to the Congress before the end of the 1-year period beginning on the date

of the enactment of this Act containing the findings and conclusions of the

Comptroller General with respect to the study required under paragraph (1) together with such recommendations for legislative or administrative action as

the Comptroller General may determine to be appropriate.

(b) INTERNAL STUDY BY THE FDIC.—

(1) STUDY REQUIRED.—Concurrently with the study required to be conducted

by the Comptroller General under subsection (a), the Federal Deposit Insurance

Corporation shall conduct an internal study of the same conditions and factors

included in the study under subsection (a).

(2) REPORT TO THE CONGRESS.—The Federal Deposit Insurance Corporation

shall submit a report to the Congress before the end of the 1-year period beginning on the date of the enactment of this Act containing the findings and conclusions of the Corporation with respect to the study required under paragraph

(1) together with such recommendations for legislative or administrative action

as the Board of Directors of the Corporation may determine to be appropriate.

(c) STUDY OF FURTHER POSSIBLE CHANGES TO DEPOSIT INSURANCE SYSTEM.—

14

(1) STUDY REQUIRED.—The Board of Directors of the Federal Deposit Insurance Corporation and the National Credit Union Administration Board shall

each conduct a study of the following:

(A) The feasibility of establishing a voluntary deposit insurance system

for deposits in excess of the maximum amount of deposit insurance for any

depositor and the potential benefits and the potential adverse consequences

that may result from the establishment of any such system.

(B) The feasibility of privatizing all deposit insurance at insured depository institutions and insured credit unions.

(2) REPORT.—Before the end of the 1-year period beginning on the date of the

enactment of this Act, the Board of Directors of the Federal Deposit Insurance

Corporation and the National Credit Union Administration Board shall each

submit a report to the Congress on the study required under paragraph (1) containing the findings and conclusions of the reporting agency together with such

recommendations for legislative or administrative changes as the agency may

determine to be appropriate.

(d) STUDY REGARDING APPROPRIATE DEPOSIT BASE IN DESIGNATING RESERVE

RATIO.—

(1) STUDY REQUIRED.—The Federal Deposit Insurance Corporation shall conduct a study of the feasibility of using actual domestic deposits rather than estimated insured deposits in calculating the reserve ratio of the Deposit Insurance

Fund and designating a reserve ratio for such Fund.

(2) REPORT.—The Federal Deposit Insurance Corporation shall submit a report to the Congress before the end of the 1-year period beginning on the date

of the enactment of this Act containing the findings and conclusions of the Corporation with respect to the study required under paragraph (1) together with

such recommendations for legislative or administrative action as the Board of

Directors of the Corporation may determine to be appropriate.

(e) STUDY OF RESERVE METHODOLOGY AND ACCOUNTING FOR LOSS.— (1) STUDY REQUIRED.—The Federal Deposit Insurance Corporation, in consultation with the Comptroller General, shall conduct a study of the reserve

methodology and loss accounting used by the Corporation during the period beginning on January 1, 1992, and ending December 31, 2002, with respect to insured depository institutions in a troubled condition (as defined in the regulations prescribed pursuant to section 32(f) of the Federal Deposit Insurance Act).

(2) FACTORS TO BE INCLUDED.—In conducting the study pursuant to paragraph (1), the Federal Deposit Insurance Corporation shall— (A) consider the overall effectiveness and accuracy of the methodology

used by the Corporation for establishing and maintaining reserves and estimating and accounting for losses at insured depository institutions, during

the period described in such paragraph;

(B) consider the appropriateness and reliability of information and criteria used by the Corporation in determining— (i) whether an insured depository institution was in a troubled condition; and

(ii) the amount of any loss anticipated at such institution;

(C) analyze the actual historical loss experience over the period described

in paragraph (1) and the causes of the exceptionally high rate of losses experienced by the Corporation in the final 3 years of that period; and

(D) rate the Corporation’s efforts of the Corporation to reduce losses in

such 3-year period to minimally acceptable levels and to historical levels.

(3) REPORT REQUIRED.—The Board of Directors of the Federal Deposit Insurance Corporation shall submit a report to the Congress before June 30, 2003,

containing the findings and conclusions of the Corporation, in consultation with

the Comptroller General, with respect to the study required under paragraph

(1), together with such recommendations for legislative or administrative action

as the Board of Directors may determine to be appropriate.

SEC. 12. TECHNICAL AND CONFORMING AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT RELATING TO THE MERGER OF THE BIF AND SAIF.

(a) IN GENERAL.—The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is

amended—

(1) in section 3 (12 U.S.C. 1813)—

(A) by striking subparagraph (B) of subsection (a)(1) and inserting the following new subparagraph:

‘‘(B) includes any former savings association.’’; and

(B) by striking paragraph (1) of subsection (y) (as so designated by section

6(b) of this Act) and inserting the following new paragraph:

‘‘(1) DEPOSIT INSURANCE FUND.—The term ‘Deposit Insurance Fund’ means

the Deposit Insurance Fund established under section 11 (a)(4).’’;

15

(2) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking ‘‘the Bank Insurance

Fund or the Savings Association Insurance Fund,’’ and inserting ‘‘the Deposit

Insurance Fund,’’;

(3) in section 5(c)(4), by striking ‘‘deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(4) in section 5(d) (12 U.S.C. 1815(d)), by striking paragraphs (2) and (3);

(5) in section 5(d)(1) (12 U.S.C. 1815(d)(1))—

(A) in subparagraph (A), by striking ‘‘reserve ratios in the Bank Insurance Fund and the Savings Association Insurance Fund as required by section 7’’ and inserting ‘‘the reserve ratio of the Deposit Insurance Fund’’;

(B) by striking subparagraph (B) and inserting the following:

‘‘(2) FEE CREDITED TO THE DEPOSIT INSURANCE FUND.—The fee paid by the depository institution under paragraph (1) shall be credited to the Deposit Insurance Fund.’’;

(C) by striking ‘‘(1) UNINSURED INSTITUTIONS.—’’; and

(D) by redesignating subparagraphs (A) and (C) as paragraphs (1) and

(3), respectively, and moving the left margins 2 ems to the left;

(6) in section 5(e) (12 U.S.C. 1815(e))—

(A) in paragraph (5)(A), by striking ‘‘Bank Insurance Fund or the Savings

Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(B) by striking paragraph (6); and

(C) by redesignating paragraphs (7), (8), and (9) as paragraphs (6), (7),

and (8), respectively;

(7) in section 6(5) (12 U.S.C. 1816(5)), by striking ‘‘Bank Insurance Fund or

the Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance

Fund’’;

(8) in section 7(b) (12 U.S.C. 1817(b))—

(A) in paragraph (1)(C), by striking ‘‘deposit insurance fund’’ each place

that term appears and inserting ‘‘Deposit Insurance Fund’’;

(B) in paragraph (1)(D), by striking ‘‘each deposit insurance fund’’ and inserting ‘‘the Deposit Insurance Fund’’; and

(C) in paragraph (5) (as so redesignated by section 4(f)(4) of this Act)—

(i) by striking ‘‘any such assessment’’ and inserting ‘‘any such assessment is necessary’’;

(ii) by striking subparagraph (B);

(iii) in subparagraph (A)—

(I) by striking ‘‘(A) is necessary—’’;

(II) by striking ‘‘Bank Insurance Fund members’’ and inserting

‘‘insured depository institutions’’; and

(III) by redesignating clauses (i), (ii), and (iii) as subparagraphs

(A), (B), and (C), respectively, and moving the margins 2 ems to the

left; and

(iv) in subparagraph (C) (as so redesignated)—

(I) by inserting ‘‘that’’ before ‘‘the Corporation’’; and

(II) by striking ‘‘; and’’ and inserting a period;

(9) in section 7(j)(7)(F) (12 U.S.C. 1817(j)(7)(F)), by striking ‘‘Bank Insurance

Fund or the Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(10) in section 8(t)(2)(C) (12 U.S.C. 1818(t)(2)(C)), by striking ‘‘deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(11) in section 11 (12 U.S.C. 1821)—

(A) by striking ‘‘deposit insurance fund’’ each place that term appears and

inserting ‘‘Deposit Insurance Fund’’;

(B) by striking paragraph (4) of subsection (a) and inserting the following

new paragraph:

‘‘(4) DEPOSIT INSURANCE FUND.—

‘‘(A) ESTABLISHMENT.—There is established the Deposit Insurance Fund,

which the Corporation shall—

‘‘(i) maintain and administer;

‘‘(ii) use to carry out its insurance purposes, in the manner provided

by this subsection; and

‘‘(iii) invest in accordance with section 13(a).

‘‘(B) USES.—The Deposit Insurance Fund shall be available to the Corporation for use with respect to insured depository institutions the deposits

of which are insured by the Deposit Insurance Fund.

‘‘(C) LIMITATION ON USE.—Notwithstanding any provision of law other

than section 13(c)(4)(G), the Deposit Insurance Fund shall not be used in

any manner to benefit any shareholder or affiliate (other than an insured

16

depository institution that receives assistance in accordance with the provisions of this Act) of— ‘‘(i) any insured depository institution for which the Corporation has

been appointed conservator or receiver, in connection with any type of

resolution by the Corporation; ‘‘(ii) any other insured depository institution in default or in danger

of default, in connection with any type of resolution by the Corporation;

or‘‘(iii) any insured depository institution, in connection with the provision of assistance under this section or section 13 with respect to such

institution, except that this clause shall not prohibit any assistance to

any insured depository institution that is not in default, or that is not

in danger of default, that is acquiring (as defined in section 13(f)(8)(B))

another insured depository institution. ‘‘(D) DEPOSITS.—All amounts assessed against insured depository institutions by the Corporation shall be deposited into the Deposit Insurance

Fund.’’;

(C) by striking paragraphs (5), (6), and (7) of subsection (a); and

(D) by redesignating paragraph (8) of subsection (a) as paragraph (5);

(12) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by striking ‘‘, except that—’’ and

all that follows through the end of the paragraph and inserting a period;

(13) in section 11(i)(3) (12 U.S.C. 1821(i)(3))—

(A) by striking subparagraph (B);

(B) by redesignating subparagraph (C) as subparagraph (B); and

(C) in subparagraph (B) (as so redesignated), by striking ‘‘subparagraphs

(A) and (B)’’ and inserting ‘‘subparagraph (A)’’;

(14) in section 11(p)(2)(B) (12 U.S.C. 1821(p)(2)(B)), by striking ‘‘institution,

any’’ and inserting ‘‘institution, the’’;

(15) in section 11A(a) (12 U.S.C. 1821a(a))—

(A) in paragraph (2), by striking ‘‘LIABILITIES.—’’ and all that follows

through ‘‘Except’’ and inserting ‘‘LIABILITIES.—Except’’;

(B) by striking paragraph (2)(B); and

(C) in paragraph (3), by striking ‘‘the Bank Insurance Fund, the Savings

Association Insurance Fund,’’ and inserting ‘‘the Deposit Insurance Fund’’;

(16) in section 11A(b) (12 U.S.C. 1821a(b)), by striking paragraph (4);

(17) in section 11A(f) (12 U.S.C. 1821a(f)), by striking ‘‘Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(18) in section 12(f)(4)(E)(iv) (12 U.S.C. 1822(f)(4)(E)(iv)), by striking ‘‘Federal

deposit insurance funds’’ and inserting ‘‘the Deposit Insurance Fund (or any

predecessor deposit insurance fund)’’;

(19) in section 13 (12 U.S.C. 1823)—

(A) by striking ‘‘deposit insurance fund’’ each place that term appears and

inserting ‘‘Deposit Insurance Fund’’;

(B) in subsection (a)(1), by striking ‘‘Bank Insurance Fund, the Savings

Association Insurance Fund,’’ and inserting ‘‘Deposit Insurance Fund’’;

(C) in subsection (c)(4)(E)—

(i) in the subparagraph heading, by striking ‘‘FUNDS’’ and inserting

‘‘FUND’’; and

(ii) in clause (i), by striking ‘‘any insurance fund’’ and inserting ‘‘the

Deposit Insurance Fund’’;

(D) in subsection (c)(4)(G)(ii)—

(i) by striking ‘‘appropriate insurance fund’’ and inserting ‘‘Deposit

Insurance Fund’’;

(ii) by striking ‘‘the members of the insurance fund (of which such institution is a member)’’ and inserting ‘‘insured depository institutions’’;

(iii) by striking ‘‘each member’s’’ and inserting ‘‘each insured depository institution’s’’; and

(iv) by striking ‘‘the member’s’’ each place that term appears and inserting ‘‘the institution’s’’;

(E) in subsection (c), by striking paragraph (11);

(F) in subsection (h), by striking ‘‘Bank Insurance Fund’’ and inserting

‘‘Deposit Insurance Fund’’;

(G) in subsection (k)(4)(B)(i), by striking ‘‘Savings Association Insurance

Fund member’’ and inserting ‘‘savings association’’; and

(H) in subsection (k)(5)(A), by striking ‘‘Savings Association Insurance

Fund members’’ and inserting ‘‘savings associations’’;

(20) in section 14(a) (12 U.S.C. 1824(a)), in the 5th sentence—

(A) by striking ‘‘Bank Insurance Fund or the Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’; and

17

(B) by striking ‘‘each such fund’’ and inserting ‘‘the Deposit Insurance

Fund’’;

(21) in section 14(b) (12 U.S.C. 1824(b)), by striking ‘‘Bank Insurance Fund

or Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance

Fund’’;

(22) in section 14(c) (12 U.S.C. 1824(c)), by striking paragraph (3);

(23) in section 14(d) (12 U.S.C. 1824(d))— (A) by striking ‘‘Bank Insurance Fund member’’ each place that term appears and inserting ‘‘insured depository institution’’;

(B) by striking ‘‘Bank Insurance Fund members’’ each place that term appears and inserting ‘‘insured depository institutions’’;

(C) by striking ‘‘Bank Insurance Fund’’ each place that term appears

(other than in connection with a reference to a term amended by subparagraph (A) or (B) of this paragraph) and inserting ‘‘Deposit Insurance Fund’’;

(D) by striking the subsection heading and inserting the following: ‘‘(d) BORROWING FOR THE DEPOSIT INSURANCE FUND FROM INSURED DEPOSITORY

INSTITUTIONS.—’’;

(E) in paragraph (3), in the paragraph heading, by striking ‘‘BIF’’ and inserting ‘‘THE DEPOSIT INSURANCE FUND’’; and

(F) in paragraph (5), in the paragraph heading, by striking ‘‘BIF MEM- BERS’’ and inserting ‘‘INSURED DEPOSITORY INSTITUTIONS’’;

(24) in section 14 (12 U.S.C. 1824), by adding at the end the following new

subsection:

‘‘(e) BORROWING FOR THE DEPOSIT INSURANCE FUND FROM FEDERAL HOME LOAN

BANKS.—

‘‘(1) IN GENERAL.—The Corporation may borrow from the Federal home loan

banks, with the concurrence of the Federal Housing Finance Board, such funds

as the Corporation considers necessary for the use of the Deposit Insurance

Fund.

‘‘(2) TERMS AND CONDITIONS.—Any loan from any Federal home loan bank

under paragraph (1) to the Deposit Insurance Fund shall—

‘‘(A) bear a rate of interest of not less than the current marginal cost of

funds to that bank, taking into account the maturities involved;

‘‘(B) be adequately secured, as determined by the Federal Housing Finance Board;

‘‘(C) be a direct liability of the Deposit Insurance Fund; and

‘‘(D) be subject to the limitations of section 15(c).’’;

(25) in section 15(c)(5) (12 U.S.C. 1825(c)(5))—

(A) by striking ‘‘the Bank Insurance Fund or Savings Association Insurance Fund, respectively’’ each place that term appears and inserting ‘‘the

Deposit Insurance Fund’’; and

(B) in subparagraph (B), by striking ‘‘the Bank Insurance Fund or the

Savings Association Insurance Fund, respectively’’ and inserting ‘‘the Deposit Insurance Fund’’;

(26) in section 17(a) (12 U.S.C. 1827(a))—

(A) in the subsection heading, by striking ‘‘BIF, SAIF,’’ and inserting ‘‘THE

DEPOSIT INSURANCE FUND’’; and

(B) in paragraph (1)—

(i) by striking ‘‘the Bank Insurance Fund, the Savings Association Insurance Fund,’’ each place that term appears and inserting ‘‘the Deposit Insurance Fund’’; and

(ii) in subparagraph (D), by striking ‘‘each insurance fund’’ and inserting ‘‘the Deposit Insurance Fund’’;

(27) in section 17(d) (12 U.S.C. 1827(d)), by striking ‘‘, the Bank Insurance

Fund, the Savings Association Insurance Fund,’’ each place that term appears

and inserting ‘‘the Deposit Insurance Fund’’;

(28) in section 18(m)(3) (12 U.S.C. 1828(m)(3))—

(A) by striking ‘‘Savings Association Insurance Fund’’ in the 1st sentence

of subparagraph (A) and inserting ‘‘Deposit Insurance Fund’’;

(B) by striking ‘‘Savings Association Insurance Fund member’’ in the last

sentence of subparagraph (A) and inserting ‘‘savings association’’; and

(C) by striking ‘‘Savings Association Insurance Fund or the Bank Insurance Fund’’ in subparagraph (C) and inserting ‘‘Deposit Insurance Fund’’;

(29) in section 18(o) (12 U.S.C. 1828(o)), by striking ‘‘deposit insurance funds’’

and ‘‘deposit insurance fund’’ each place those terms appear and inserting ‘‘Deposit Insurance Fund’’;

(30) in section 18(p) (12 U.S.C. 1828(p)), by striking ‘‘deposit insurance funds’’

and inserting ‘‘Deposit Insurance Fund’’;

(31) in section 24 (12 U.S.C. 1831a)—

18

(A) in subsections (a)(1) and (d)(1)(A), by striking ‘‘appropriate deposit insurance fund’’ each place that term appears and inserting ‘‘Deposit Insurance Fund’’;

(B) in subsection (e)(2)(A), by striking ‘‘risk to’’ and all that follows

through the period and inserting ‘‘risk to the Deposit Insurance Fund.’’; and

(C) in subsections (e)(2)(B)(ii) and (f)(6)(B), by striking ‘‘the insurance

fund of which such bank is a member’’ each place that term appears and

inserting ‘‘the Deposit Insurance Fund’’;

(32) in section 28 (12 U.S.C. 1831e), by striking ‘‘affected deposit insurance

fund’’ each place that term appears and inserting ‘‘Deposit Insurance Fund’’;

(33) by striking section 31 (12 U.S.C. 1831h);

(34) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)), by striking ‘‘affected deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(35) in section 37(a)(1)(C) (12 U.S.C. 1831n(a)(1)(C)), by striking ‘‘insurance

funds’’ and inserting ‘‘Deposit Insurance Fund’’;

(36) in section 38 (12 U.S.C. 1831o), by striking ‘‘the deposit insurance fund’’ each place that term appears and inserting ‘‘the Deposit Insurance Fund’’;

(37) in section 38(a) (12 U.S.C. 1831o(a)), in the subsection heading, by striking ‘‘FUNDS’’ and inserting ‘‘FUND’’;

(38) in section 38(k) (12 U.S.C. 1831o(k))— (A) in paragraph (1), by striking ‘‘a deposit insurance fund’’ and inserting ‘‘the Deposit Insurance Fund’’;

(B) in paragraph (2), by striking ‘‘A deposit insurance fund’’ and inserting ‘‘The Deposit Insurance Fund’’; and

(C) in paragraphs (2)(A) and (3)(B), by striking ‘‘the deposit insurance

fund’s outlays’’ each place that term appears and inserting ‘‘the outlays of

the Deposit Insurance Fund’’; and

(39) in section 38(o) (12 U.S.C. 1831o(o))— (A) by striking ‘‘ASSOCIATIONS.—’’ and all that follows through ‘‘Subsections (e)(2)’’ and inserting ‘‘ASSOCIATIONS.—Subsections (e)(2)’’;

(B) by redesignating subparagraphs (A), (B), and (C) as paragraphs (1),

(2), and (3), respectively, and moving the margins 2 ems to the left; and

(C) in paragraph (1) (as so redesignated), by redesignating clauses (i) and

(ii) as subparagraphs (A) and (B), respectively, and moving the margins 2

ems to the left.

(b) EFFECTIVE DATE.—This section and the amendments made by this section

shall take effect on the first day of the first calendar quarter that begins after the

end of the 90-day period beginning on the date of the enactment of this Act.

SEC. 13. OTHER TECHNICAL AND CONFORMING AMENDMENTS RELATING TO THE MERGER OF

THE BIF AND SAIF.

(a) SECTION 5136 OF THE REVISED STATUTES.—The paragraph designated the ‘‘Eleventh’’ of section 5136 of the Revised Statutes of the United States (12 U.S.C.

24) is amended in the 5th sentence, by striking ‘‘affected deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’. (b) INVESTMENTS PROMOTING PUBLIC WELFARE; LIMITATIONS ON AGGREGATE IN- VESTMENTS.—The 23d undesignated paragraph of section 9 of the Federal Reserve

Act (12 U.S.C. 338a) is amended in the 4th sentence, by striking ‘‘affected deposit

insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’. (c) ADVANCES TO CRITICALLY UNDERCAPITALIZED DEPOSITORY INSTITUTIONS.—Section 10B(b)(3)(A)(ii) of the Federal Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is

amended by striking ‘‘any deposit insurance fund in’’ and inserting ‘‘the Deposit Insurance Fund of’’. (d) AMENDMENTS TO THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL

ACT OF 1985.—Section 255(g)(1)(A) of the Balanced Budget and Emergency Deficit

Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is amended— (1) by striking ‘‘Bank Insurance Fund’’ and inserting ‘‘Deposit Insurance

Fund’’; and

(2) by striking ‘‘Federal Deposit Insurance Corporation, Savings Association

Insurance Fund (51–4066–0–3–373);’’. (e) AMENDMENTS TO THE FEDERAL HOME LOAN BANK ACT.—The Federal Home

Loan Bank Act (12 U.S.C. 1421 et seq.) is amended—

(1) in section 11(k) (12 U.S.C. 1431(k))—

(A) in the subsection heading, by striking ‘‘SAIF’’ and inserting ‘‘THE DEPOSIT INSURANCE FUND’’; and

(B) by striking ‘‘Savings Association Insurance Fund’’ each place such

term appears and inserting ‘‘Deposit Insurance Fund’’;

(2) in section 21 (12 U.S.C. 1441)—

(A) in subsection (f)(2), by striking ‘‘, except that’’ and all that follows

through the end of the paragraph and inserting a period; and

19

(B) in subsection (k), by striking paragraph (4);

(3) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by striking ‘‘affected deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(4) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))—

(A) in the subparagraph heading, by striking ‘‘SAIF-INSURED BANKS’’ and

inserting ‘‘CHARTER CONVERSIONS’’; and

(B) by striking ‘‘Savings Association Insurance Fund member’’ and inserting ‘‘savings association’’;

(5) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 1441a(b)(10)(A)(iv)(II)), by striking ‘‘Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance

Fund’’;

(6) in section 21A(n)(6)(E)(iv) (12 U.S.C. 1441(n)(6)(E)(iv)), by striking ‘‘Federal deposit insurance funds’’ and inserting ‘‘the Deposit Insurance Fund’’;

(7) in section 21B(e) (12 U.S.C. 1441b(e))—

(A) in paragraph (5), by inserting ‘‘as of the date of funding’’ after ‘‘Savings Association Insurance Fund members’’ each place that term appears;

and

(B) by striking paragraphs (7) and (8); and

(8) in section 21B(k) (12 U.S.C. 1441b(k))—

(A) by inserting before the colon ‘‘, the following definitions shall apply’’;

(B) by striking paragraph (8); and

(C) by redesignating paragraphs (9) and (10) as paragraphs (8) and (9),

respectively.

(f) AMENDMENTS TO THE HOME OWNERS’ LOAN ACT.—The Home Owners’ Loan Act

(12 U.S.C. 1461 et seq.) is amended—

(1) in section 5 (12 U.S.C. 1464)—

(A) in subsection (c)(5)(A), by striking ‘‘that is a member of the Bank Insurance Fund’’;

(B) in subsection (c)(6), by striking ‘‘As used in this subsection—’’ and inserting ‘‘For purposes of this subsection, the following definitions shall

apply:’’;

(C) in subsection (o)(1), by striking ‘‘that is a Bank Insurance Fund member’’;

(D) in subsection (o)(2)(A), by striking ‘‘a Bank Insurance Fund member

until such time as it changes its status to a Savings Association Insurance

Fund member’’ and inserting ‘‘insured by the Deposit Insurance Fund’’;

(E) in subsection (t)(5)(D)(iii)(II), by striking ‘‘affected deposit insurance

fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(F) in subsection (t)(7)(C)(i)(I), by striking ‘‘affected deposit insurance

fund’’ and inserting ‘‘Deposit Insurance Fund’’; and

(G) in subsection (v)(2)(A)(i), by striking ‘‘the Savings Association Insurance Fund’’ and inserting ‘‘or the Deposit Insurance Fund’’; and

(2) in section 10 (12 U.S.C. 1467a)—

(A) in subsection (c)(6)(D), by striking ‘‘this title’’ and inserting ‘‘this Act’’;

(B) in subsection (e)(1)(B), by striking ‘‘Savings Association Insurance

Fund or Bank Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(C) in subsection (e)(2), by striking ‘‘Savings Association Insurance Fund

or the Bank Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

(D) in subsection (e)(4)(B), by striking ‘‘subsection (1)’’ and inserting ‘‘subsection (l)’’;

(E) in subsection (g)(3)(A), by striking ‘‘(5) of this section’’ and inserting

‘‘(5) of this subsection’’;

(F) in subsection (i), by redesignating paragraph (5) as paragraph (4);

(G) in subsection (m)(3), by striking subparagraph (E) and by redesignating subparagraphs (F), (G), and (H) as subparagraphs (E), (F), and (G),

respectively;

(H) in subsection (m)(7)(A), by striking ‘‘during period’’ and inserting

‘‘during the period’’; and

(I) in subsection (o)(3)(D), by striking ‘‘sections 5(s) and (t) of this Act’’

and inserting ‘‘subsections (s) and (t) of section 5’’.

(g) AMENDMENTS TO THE NATIONAL HOUSING ACT.—The National Housing Act (12

U.S.C. 1701 et seq.) is amended—

(1) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by striking ‘‘Bank Insurance Fund for banks or through the Savings Association Insurance Fund for

savings associations’’ and inserting ‘‘Deposit Insurance Fund’’; and

(2) in section 536(b)(1)(B)(ii) (12 U.S.C. 1735f–14(b)(1)(B)(ii)), by striking

‘‘Bank Insurance Fund for banks and through the Savings Association Insurance Fund for savings associations’’ and inserting ‘‘Deposit Insurance Fund’’.

20

(h) AMENDMENTS TO THE FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT OF 1989.—The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note) is amended—

(1) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by inserting ‘‘and after

the merger of such funds, the Deposit Insurance Fund,’’ after ‘‘the Savings Association Insurance Fund,’’; and

(2) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by striking ‘‘Bank Insurance Fund, the Savings Association Insurance Fund,’’ and inserting ‘‘Deposit Insurance Fund’’.

(i) AMENDMENT TO THE BANK HOLDING COMPANY ACT OF 1956.—The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended—

(1) in section 2(j)(2) (12 U.S.C. 1841(j)(2)), by striking ‘‘Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’; and

(2) in section 3(d)(1)(D)(iii) (12 U.S.C. 1842(d)(1)(D)(iii)), by striking ‘‘appropriate deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’.

(j) AMENDMENTS TO THE GRAMM-LEACH-BLILEY ACT.—Section 114 of the GrammLeach-Bliley Act (12 U.S.C. 1828a) is amended by striking ‘‘any Federal deposit insurance fund’’ in subsection (a)(1)(B), paragraphs (2)(B) and (4)(B) of subsection (b),

and subsection (c)(1)(B), each place that term appears and inserting ‘‘the Deposit Insurance Fund’’.

(k) EFFECTIVE DATE.—This section and the amendments made by this section

shall take effect on the first day of the first calendar quarter that begins after the

end of the 90-day period beginning on the date of the enactment of this Act.

PURPOSE AND SUMMARY

H.R. 3717, the Federal Deposit Insurance Reform Act of 2002,

will preserve the value of insured deposits at insured depository institutions, advance the national priority of enhancing retirement

security for all Americans, and ensure that the value, benefit and

costs of deposit insurance are allocated equitably and fairly.

The bill merges the Bank Insurance Fund (BIF) and the Savings

Association Insurance Fund (SAIF); increases the standard maximum deposit insurance limit from $100,000 to $130,000, and indexes it every 5 years for inflation; doubles the new coverage level

for certain retirement accounts; and increases the coverage amount

for in-state municipal deposits. Federally chartered credit unions

are provided with parity in general standard maximum deposit insurance coverage, coverage for retirement accounts and municipal

deposits.

H.R. 3717 removes legal constraints on the authority of the Federal Deposit Insurance Corporation (FDIC) to charge risk-based

premium assessments, so that all insured depository institutions

pay for the value and benefit of deposit insurance fairly and equitably.

The legislation authorizes the FDIC to set the ratio of reserves

to estimated insured deposits within a range of 1.15–1.40 percent,

replacing the 1.25 percent ‘‘hard target’’ mandated by current law.

The bill also returns assessments in the form of refunds, credits,

and dividends to insured depository institutions for overpayments

they have made and/or whenever the fund’s level is considered

strong and the financial and economic outlook is considered favorable. Dividends are provided to qualified insured depository institutions whenever the upper limits of the designated reserve ratio

(DRR) are exceeded.

Finally, the legislation directs the FDIC to study its administrative and managerial processes and alternative means for administering the deposit insurance system. These studies will ensure

that the deposit insurance fund and the overall deposit insurance

21

system are managed and operated as efficiently and as effectively

as possible.

BACKGROUND AND NEED FOR LEGISLATION

Federal deposit insurance was created by Congress in 1934 and

significantly modified in 1989 and 1991 in response to the savings

and loan and bank crises. All banks and savings associations are

required to carry Federal deposit insurance.

The National Credit Union Share Insurance Fund (NCUSIF) was

created in 1970. This fund insures ‘‘share’’ accounts at credit

unions and is administered by the National Credit Union Administration (NCUA). All Federally chartered credit unions must belong

to NCUSIF; membership is optional for State chartered credit

unions.

Deposit insurance makes deposits safe by assuring depositors

that up to $100,000 will be available to them even if their insured

depository institution fails. It protects depositors from a sudden

and unforeseen loss of wealth. It also protects the economy due to

a loss of liquidity in the financial services system.

Currently, the FDIC provides deposit insurance through two

funds, the BIF and the SAIF. These funds are maintained in the

U.S. Treasury and both earn interest income from investment in

non-marketable Treasury securities.

The Federal deposit insurance system has served the Nation well

for the last 68 years—public confidence and stability in the Nation’s banking system were preserved through one of the largest

banking crises since the Federally insured deposit system originated. During the crisis of the 1980’s and the 1990’s, the FDIC and

Resolution Trust Corporation (RTC) resolved 2,362 failures of insured depository institutions involving more than $700 billion in

assets, with no bank runs, no panics, no disruptions to the financial markets, and no debilitating impact on overall economic activity.

After conducting a comprehensive study of the overall deposit insurance system, the FDIC published a report in April 2001 (Keeping the Promise: Recommendations for Deposit Insurance Reform,

April 2001), that identified 4 structural deficiencies that warranted

legislative consideration:

(1) Deposit insurance is provided by two insurance funds at

potentially different prices;

(2) Under current law, deposit insurance cannot be priced effectively to reflect risk;

(3) Deposit insurance premiums are highest at the wrong

point in the business cycle; and

(4) The value of insurance coverage does not keep pace with

inflation.

Hearings before the Subcommittee on Financial Institutions and

Consumer Credit in the first session of the 107th Congress yielded

a broad consensus among the Bush Administration, the Federal

and State banking and thrift regulators, and industry and consumer groups that the deposit insurance system could be improved

and strengthened to make it more responsive to the cyclical nature

of lending and deposit taking activities and the post-Gramm-LeachBliley financial and economic environment.

22

Merging the BIF and the SAIF eliminates potential disparities in

bank and thrift risk-based premium assessments and the administrative burden of maintaining and operating two separate funds.

Current law limits the ability of the FDIC to assess premiums

on depository institutions above amounts needed to achieve and

maintain the existing ratio of reserves to estimated insured deposits at 1.25 percent. An FDIC analysis found that currently 92 percent of the industry does not pay for deposit insurance, and more

than 900 institutions that were chartered within the last 5 years

have never paid any premiums. Current law also limits the FDIC’s

ability to charge riskier institutions, new entrants and institutions

growing at excessive rates appropriate premiums based on the

risks they present to the fund. The current premium restrictions

require safer institutions to subsidize riskier institutions unnecessarily, and new entrants and institutions that undergo significant

growth are allowed to avoid paying premiums.

Further, the current system’s ‘‘pro-cyclical’’ bias results in sharply higher premiums being assessed at ‘‘down’’ points in the economic cycle, when banks can least afford to pay them and the economy could most benefit from additional liquidity in the banking

system.

These inequities are addressed in H.R. 3717 by giving the FDIC

greater discretion to identify the relative risks all institutions

present to the deposit insurance fund and set appropriate riskbased premiums. With this authority, the FDIC can better manage

the insurance fund relative to industry and economic cyclicality.

The current deposit insurance system’s emphasis on maintaining

the 1.25 percent designated reserve ratio (DRR) and the requirement that a 23 basis point premium be assessed whenever the

DRR drops and remains below this level for a year is pro-cyclical

and creates the potential for volatile premium swings. This problem would also more than likely result in the industry paying high

premiums when both banks and the economy could least afford it,

and it could sustain and deepen an economic downturn.

The legislation gives the FDIC the discretion to set the DRR

within a range of 1.15–1.40 percent, addressing the system’s volatility and avoiding sharp premium swings. This flexibility gives the

FDIC better tools with which to manage the deposit insurance fund

during various economic environments.

The Committee found that the overall value of basic insurance

coverage had eroded over the last 20 years. If coverage had kept

pace with inflation since 1980, when levels were last adjusted, it

would now be at more than $200,000; and if it were adjusted for

the $40,000 coverage level in effect in 1974 and indexed for inflation from that point forward, the level would be more than

$140,000. Increasing the maximum standard deposit insurance

amount to $130,000 is a modest step and indexing the new amount

every 5 years appropriately restores and maintains the value of deposit insurance coverage.

The current deposit insurance scheme provides inadequate protection for in-State municipal deposits and certain retirement account deposits. The legislation doubles the coverage limit for insured retirement account deposits in order to enhance the retirement security of senior citizens and those planning for retirement.

Coverage limits for in-State municipal deposits are also signifiVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00022 Fmt 6659 Sfmt 6602 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
23

cantly expanded to ensure that more municipal deposits can be

kept in local financial institutions and used to meet local credit

needs.

In sum, this legislation will respond to these issues by:

• Preserving the value of insured deposits at insured depository institutions;

• Strengthening the Nation’s insured depository institutions,

especially small banks, thrifts, and credit unions;

• Ensuring that the Federal deposit insurance system does

not harm the ability of insured depository institutions to meet

the Nation’s credit needs at all stages of the economic cycle;

• Ensuring that the Federal deposit insurance system remains strong and complements the Federal and State regulatory structure that helps to maintain the safety and soundness of the Nation’s banks, thrifts, and credit unions;

•Advancing the national priority of enhancing retirement security for all Americans;

•Ensuring that the value, benefit and costs of deposit insurance are allocated equitably and fairly; and,

•Modernizing the Federal deposit insurance system by merging the BIF with the SAIF and reinforcing the risk-based nature of the system.

HEARINGS

The Subcommittee on Financial Institutions and Consumer Credit held a hearing on May 16, 2001, entitled ‘‘Keeping the Promise:

Recommendations for Deposit Insurance Reform.’’ The following

witnesses testified: former FDIC Chairwoman Donna Tanoue; Mr.

James Smith, President-Elect of the American Bankers Association; Mr. David Bochnowski, Chairman of America’s Community

Bankers; and Mr. Robert Gulledge, Chairman of the Independent

Community Bankers of America.

The Subcommittee on Financial Institutions and Consumer Credit held a hearing on July 26, 2001, entitled ‘‘Viewpoints of Select

Regulators on Deposit Insurance Reform.’’ The following witnesses

testified: The Honorable Laurence Meyer, Governor, Board of Governors of the Federal Reserve System; The Honorable Sheila Bair,

Assistant Secretary for Financial Institutions, U.S. Department of

Treasury; The Honorable John Hawke, Comptroller of the Currency; and The Honorable Ellen Seidman, Director, Office of Thrift

Supervision.

The Subcommittee on Financial Institutions and Consumer Credit held a hearing on October 17, 2001, entitled ‘‘Viewpoints of FDIC

Chairman Don Powell and Select Industry Experts on Deposit Insurance Reform.’’ The following witnesses testified: The Honorable

Donald Powell, Chairman, Federal Deposit Insurance Corporation;

Mr. Richard Carnell, Associate Professor, Fordham University

School of Law; Mr. Nolan North, Chief of Financial Markets Task

Force, Association of Financial Professionals; and Mr. Kenneth

Thomas, Ph.D., Lecturer in Finance, The Wharton School, University of Pennsylvania.

The legislation was drafted based upon the testimony received

and no legislative hearings were held on this legislation.

24

COMMITTEE CONSIDERATION

The Subcommittee on Financial Institutions and Commercial

Credit met in open session on March 7, 2002 and approved H.R.

3717 for full Committee consideration as amended by a voice vote.

The Committee on Financial Services met in open session on

April 17, 2002 and ordered H.R. 3717 reported to the House with

an amendment by a record vote of 52 yeas and 2 nays.

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion

to report legislation and amendments thereto. A motion by Mr.

Oxley to report the bill to the House with an amendment was

agreed to by a record vote of 52 yeas and 2 nays (Record vote no.

40). The names of members voting for and against follow:

YEAS NAYS

Mr. Oxley Mr. Ose

Mr. Leach Mr. Capuano

Mrs. Roukema

Mr. Bereuter

Mr. Baker

Mr. Bachus

Mr. Castle

Mr. King

Mr. Royce

Mr. Barr of Georgia

Mrs. Kelly

Mr. Gillmor

Mr. Weldon of Florida

Mr. Ryun of Kansas

Mr. Jones of North Carolina

Mr. Green of Wisconsin

Mr. Toomey

Mr. Shays

Mr. Shadegg

Mr. Gary G. Miller of

California

Mr. Cantor

Mr. Grucci

Mrs. Capito

Mr. Ferguson

Mr. Rogers of Michigan

Mr. Tiberi

Mr. LaFalce

Mr. Kanjorski

Ms. Waters

Mrs. Maloney of New York

Ms. Velazquez

Mr. Watt of North Carolina

Mr. Ackerman

Mr. Bentsen

Mr. Maloney of Connecticut

Ms. Hooley of Oregon

25

Ms. Carson of Indiana

Mr. Sherman

Mr. Sandlin

Mr. Meeks of New York

Ms. Lee

Mr. Mascara

Mr. Inslee

Ms. Schakowsky

Mr. Moore

Mr. Ford

Mr. Lucas of Kentucky

Mr. Shows

Mr. Crowley

Mr. Clay

Mr. Israel

Mr. Ross

The Committee also considered the following amendments by

record vote. The names of members voting for and against follow:

An amendment to the amendment in the nature of a

substitute by Mr. Cantor, no. 1f, striking lifeline banking

provisions, was not agreed to by a record vote of 23 yeas

and 34 nays (Record vote no. 38).

YEAS NAYS

Mr. Oxley Mr. Bachus

Mr. Bereuter Mr. Riley

Mr. Baker Mr. Shays

Mr. Royce Mr. Tiberi

Mr. Lucas of Oklahoma Mr. LaFalce

Mr. Ney Mr. Frank

Mr. Barr of Georgia Mr. Kanjorski

Mrs. Kelly Ms. Waters

Mr. Paul Mr. Sanders

Mr. Weldon of Florida Mrs. Maloney of New York

Mr. Ryun of Kansas Mr. Gutierrez

Mr. Jones of North Carolina Ms. Velazquez

Mr. Ose Mr. Ackerman

Mrs. Biggert Mr. Bentsen

Mr. Toomey Mr. Maloney of Connecticut

Mr. Shadegg Ms. Hooley of Oregon

Mr. Gary G. Miller of Ms. Carson of Indiana

California Mr. Sherman

Mr. Cantor Mr. Sandlin

Mr. Grucci Mr. Meeks of New York

Ms. Hart Ms. Lee

Mrs. Capito Mr. Mascara

Mr. Ferguson Ms. Schakowsky

Mr. Rogers of Michigan Mr. Moore

Mr. Gonzalez

Mr. Capuano

Mr. Ford

Mr. Hinojosa

Mr. Lucas of Kentucky

Mr. Shows

Mr. Crowley

26

Mr. Clay

Mr. Israel

Mr. Ross

An amendment to the amendment in the nature of a

substitute by Mr. LaFalce, no. 1i, striking municipal deposit coverage and inserting a study, was not agreed to by

a record vote, 16 yeas and 32 nays (Record vote no. 39).

YEAS NAYS

Mr. Royce Mr. Oxley

Mr. Ose Mr. Leach

Mr. LaFalce Mrs. Roukema

Mr. Frank Mr. Bereuter

Ms. Waters Mr. Baker

Mr. Sanders Mr. Bachus

Ms. Velazquez Mr. Castle

Ms. Hooley of Oregon Mr. Ney

Ms. Carson of Indiana Mr. Barr of Georgia

Mr. Sherman Mrs. Kelly

Mr. Meeks of New York Mr. Gillmor

Ms. Lee Mr. Weldon of Florida

Mr. Mascara Mr. Ryun of Kansas

Mr. Inslee Mr. Riley

Mr. Capuano Mr. Jones of North Carolina

Mr. Ford Mrs. Biggert

Mr. Green of Wisconsin

Mr. Toomey

Mr. Shays

Mr. Cantor

Mr. Grucci

Ms. Hart

Mrs. Capito

Mr. Ferguson

Mr. Rogers of Michigan

Mr. Tiberi

Mr. Kanjorski

Mr. Maloney of Connecticut

Mr. Moore

Mr. Lucas of Kentucky

Mr. Shows

Mr. Israel

The Committee also considered the following other amendments:

An amendment in the nature of a substitute by Mr.

Bachus, no. 1 was agreed to by a voice vote, as amended.

An amendment to the amendment in the nature of a

substitute by Mr. LaFalce, no. 1a, addressing time limited

restoration plans, was agreed to by a voice vote.

An amendment to the amendment in the nature of a

substitute by Mr. Baker, no. 1b, concerning the indexing of

deposit insurance coverage, was agreed to by a voice vote.

An amendment to the amendment in the nature of a

substitute by Mrs. Maloney of New York, no. 1c, striking

the increase in coverage, was not agreed to by a voice vote.

27

An amendment to the amendment in the nature of a

substitute by Mrs. Kelly and Mr. Meeks of New York, no.

1d, addressing municipal deposits, was withdrawn.

An amendment to the amendment in the nature of a

substitute by Mr. Watt of North Carolina, no. 1e, ensuring

adequate resources for supervising problem institutions,

was withdrawn.

An amendment to the amendment in the nature of a

substitute by Mr. Ney, no. 1g, allowing the FDIC more

flexibility in determining which individual institutions are

assessed special premiums when their deposit base increases faster than the industry average, was agreed to by

a voice vote.

An amendment to the amendment in the nature of a

substitute by Ms. Waters, no. 1h, requiring additional criteria for dividends and credits, was not agreed to by a

voice vote.

An amendment to the amendment in the nature of a

substitute by Mr. LaFalce, no. 1j, requiring the Board to

increase the designated reserve ratio to reflect any increase in deposit insurance coverage, was not agreed to by

a voice vote.

An amendment to the amendment in the nature of a

substitute by Mr. LaFalce, no. 1k, increasing the designated reserve ratio floor, was not agreed to by a voice

vote.

An amendment to the amendment in the nature of a

substitute by Mr. Meeks of New York, no. 1l, addressing

municipal deposit parity, was not agreed to by a voice vote.

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House

of Representatives, the Committee held a hearing and made findings that are reflected in this report.

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation:

The bill will improve the deposit insurance system while keeping

the it well-funded, as well as reflect more accurately the risks to

the fund that are imposed by institutions. As a result, the fund will

be less susceptible to problems caused by changes in the economy

and will better serve depository institutions and depositors.

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the

House of Representatives, the Committee finds that this legislation

would result in no new budget authority, entitlement authority, or

tax expenditures or revenues.

28

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by

the Director of the Congressional Budget Office pursuant to section

402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House

of Representatives, the following is the cost estimate provided by

the Congressional Budget Office pursuant to section 402 of the

Congressional Budget Act of 1974:

U.S. CONGRESS,

CONGRESSIONAL BUDGET OFFICE,

Washington, DC, May 16, 2002.

Hon. MICHAEL G. OXLEY,

Chairman, Committee on Financial Services,

House of Representatives, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3717, the Federal Deposit

Insurance Reform Act of 2002.

If you wish further details on this estimate, we will be pleased

to provide them. The CBO staff contacts are Mark Hadley (for federal costs), and Judith Ruud (for the private-sector impact).

Sincerely,

BARRY B. ANDERSON

(For Dan L. Crippen, Director).

Enclosure.

H.R. 3717—Federal Deposit Insurance Reform Act of 2002

Summary: H.R. 3717 would amend provisions of banking and

credit union law to reform the deposit insurance system. Specifically, the bill would increase insurance coverage for insured accounts from $100,000 per account to $130,000 for most accounts

(with higher levels of coverage for retirement accounts and municipal deposits). Over time, the coverage limit for insured deposits

would increase to account for inflation. Those provisions of the bill

would affect deposits held by banks and thrifts, which are insured

by the Federal Deposit Insurance Corporation (FDIC), as well as

those held by credit unions, which are insured by the National

Credit Union Administration (NCUA). In addition, the bill would

merge the Bank Insurance Fund (BIF) and the Savings Association

Insurance Fund (SAIF) to create a new Deposit Insurance Fund

(DIF), to pay the claims of depositors of failed banks and thrifts.

Finally, H.R. 3717 would amend the conditions under which banks

and thrifts would pay insurance premiums to the FDIC, which administers the funds.

CBO estimates that H.R. 3717 would increase both the costs of

resolving failed financial institutions and the income from premiums paid by financial institutions. During the 2003–2012 period,

the additional premiums that would be collected under the bill

would more than offset the added spending. On balance, CBO estimates that H.R. 3717 would reduce net direct spending by $700

million over the 2003–2012 period. Because H.R. 3717 would affect

direct spending, pay-as-you-go procedures would apply.

29

H.R. 3717 contains an intergovernmental mandate as defined in

the Unfunded Mandates Reform Act (UMRA), but CBO estimates

that the costs, if any, to comply with the requirement would not

exceed the threshold established in UMRA ($58 million in 2002, adjusted annually for inflation).

The bill also contains private-sector mandates as defined by

UMRA. CBO estimates that the direct cost of those mandates

would be well above the annual threshold specified in UMRA ($115

million in 2002, adjusted annually for inflation), but we do not

have sufficient information to provide a precise estimate of the aggregate cost.

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3717 is shown in the following table. The costs

of this legislation fall within budget function 370 (commerce and

housing credit).

By fiscal year, in millions of dollars—

2003 2004 2005 2006 2007

DIRECT SPENDING

FDIC and NCUA Spending Under Current Law:

Estimated Budget Authority ............................................. ¥31 ¥33 ¥34 ¥35 ¥36

Estimated Outlays ............................................................ 1,662 1,337 1,544 1,746 1,694

Proposed Changes to FDIC Spending:

Estimated Budget Authority .................................... 0 0 0 0 0

Estimated Outlays ................................................... ¥1,000 ¥400 0 ¥50 200

Proposed Changes to NCUA Spending:

Estimated Budget Authority .................................... 0 0 0 0 0

Estimated Outlays ................................................... ¥500 25 25 ¥125 25

Total Changes Under H.R. 3717:

Estimated Budget Authority .................................... 0 0 0 0 0

Estimated Outlays ................................................... ¥1,500 ¥375 25 ¥175 225

FDIC and NCUA Spending Under H.R. 3717:

Estimated Budget Authority ............................................. ¥31 ¥33 ¥34 ¥35 ¥36

Estimated Outlays ............................................................ 162 962 1,569 1,571 1,919

Basis of estimate: Two federal agencies are primarily responsible

for the deposit insurance system. The FDIC insures the deposits in

banks with the BIF and the deposits of thrifts with the SAIF. The

National Credit Union Administration insures the deposits in credit unions (referred to as shares) with the State Insurance Fund.

When a financial institution fails, the FDIC and the NCUA use the

insurance funds to reimburse the insured depositors of the failed

institution. These agencies then sell the assets of the failed institution and deposit any money recovered into the insurance funds.

CBO estimates that H.R. 3717 would increase both the cost of resolving failed banks and the premiums paid by financial institutions. Over the 2003–2012 period, we estimate that the added premiums paid by financial institutions would more than offset the increase in outlays to resolve failed financial institutions. Adding

these effects together, we estimate that enacting H.R. 3717 would

result in a net decrease in direct spending of about $700 million

over the 2003–2012 period. The major components of this estimate

are explained below.

Increase in the cost of resolving failed financial institutions

H.R. 3717 would increase deposit insurance coverage from

$100,000 to $130,000 for most accounts, and to $260,000 for employee benefit plans. Coverage for in-state municipal deposits

30

would be the lesser of $5 million or 80 percent of any deposits

above $130,000. Such increases would apply to deposits held by

credit unions as well as banks and thrifts. In addition, the bill

would require the FDIC and NCUA to increase deposit insurance

coverage every five years beginning January 1, 2006, to account for

inflation. (According to committee staff, the intent of section 3 of

H.R. 3717 is to increase deposit insurance coverage in 2006 and

2011 to account for inflation. Despite a drafting error in this section, CBO assumes that such increases would occur.)

By 2003, we expect that insured deposits will total more than $3.2 trillion under current law. Based on information from the

FDIC and the experience of past increases in deposit insurance coverage, CBO estimates that H.R. 3717 would increase the deposits

insured by the FDIC by about $325 billion—or around 10 percent. CBO estimates that about $33 billion of that amount would result

from new deposits attracted to banks and thrifts as a result of the

expanded coverage, an increase of about 1 percent. We expect that

the assets of failed banks and thrifts would increase correspondingly—by about 1 percent. In 2003, we expect assets of failed banks and thrifts to be $3.65 billion under current law; such assets would

increase slightly under the bill.

By insuring deposits that are currently uninsured, the bill would

increase the liability of the FDIC and NCUA without significantly

increasing the assets of institutions that will fail in the future.

Under current law, we expect the FDIC’s net losses on failed institutions to total about $12.6 billion over the 2003–2012 period. (We project that gross losses of $51.0 billion would be offset, in part, by

recoveries of $38.4 billion from disposition of the institutions’ assets.) Based on historical patterns of losses from failed institutions,

CBO estimates that increasing insured deposits by about 10 percent would increase losses by about 10 percent over the long term.

But over the next 10 years outlays would grow more rapidly because disposal of the assets of failed banks often takes many years.

As a result, CBO estimates H.R. 3717 would increase the FDIC’s

net outlays to resolve failed banks and thrifts by about $2.7 billion

over the 2003–2012 period. Similarly, we estimate that enacting

H.R. 3717 would increase NCUA’s net outlays to resolve failed

credit unions by about $100 million over the 2003–2012 period.

By increasing deposit insurance coverage, H.R. 3717 could reduce

incentives of depositors to monitor the behavior of financial institutions. Over the long term, this could lead to increased risk-taking

by those institutions and ultimately to higher losses. On the other

hand, if the DIF incurs larger losses to resolve failed banks and

thrifts, H.R. 3717 would give the FDIC the flexibility to set premiums so as to restore the balances in the fund over a few years,

thus allowing the agency to recover from large losses without imperiling other institutions. This new authority could reduce future

losses. CBO has no basis for estimating the magnitude of either of

these effects. We expect, however, that any changes in the costs of

resolving failed institutions would eventually be borne by banks

and thrifts through premiums.

Increase in premiums paid to the FDIC by financial institutions

Several provisions of H.R. 3717 would affect the total amount of

premiums collected by the FDIC. Increasing the size of insured acVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00030 Fmt 6659 Sfmt 6602 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
31

counts would lead to increased collections. Considered separately,

merging the BIF and SAIF and providing the FDIC with increased

discretion to set regulations for premium assessments would tend

to reduce collections relative to CBO’s baseline assumptions. Finally, establishing credits that certain institutions could use to pay

the FDIC assessments in lieu of cash would also reduce collections.

The amount of additional premiums that banks and thrifts would

pay through the combined effects of all these provisions of H.R.

3717 would depend on the DIF’s balance in each year, which in

turn would depend on the costs of resolving failed institutions. To

estimate the effects of the bill’s provisions on premium collections,

CBO considered several thousand scenarios of the magnitude and

timing of possible losses to the FDIC and resulting premiums collected under the bill. Because the fund balance in any given year

depends on the losses of all prior years, each scenario included an

estimate of losses over the entire 2003–2012 period. Applying a

probability distribution to those loss scenarios, CBO estimated premium income to the government under H.R. 3717 reflecting the

wide range of uncertainty about future costs of resolving failed financial institutions.

Overall, CBO estimates that the net effect of these provisions on

deposit insurance premiums would be an increase in collections of

about $2.8 billion over the next 10 years, slightly more than our

projected increase in the FDIC’s costs to resolve failed financial institutions. (We estimate that the FDIC will collect about $12 billion

in premiums from members over the 2003–2012 period under current law.) Each of the bill’s provisions that would have an impact

on premium assessments is described below.

Increasing Deposit Insurance Coverage.—Expanding deposit insurance coverage would result in increased premiums for the FDIC

because premiums are based on the amount of insured deposits.

CBO estimates that the increase in coverage would raise the

amount of insured deposits by about 10 percent. But the bill would

also give the FDIC more discretion in assessing premiums, which

CBO expects would offset part of the impact of the increased coverage.

Increasing the FDIC’s Regulatory Discretion.—Under current

law, the FDIC determines when to assess insurance premiums by

calculating a figure known as the designated reserve ratio (DRR)

for the BIF and SAIF. The DRR represents the ratio of the fund’s

balances to total insured deposits. Under current law, the FDIC is

required to assess premiums so as to maintain the DRR at all

times, but under the bill, the agency would be authorized to establish a restoration plan of up to three years to gradually collect sufficient premiums to maintain the DRR at the desired level.

Designated Reserve Ratio (DRR). The DRR is statutorily set at

1.25 percent of insured deposits. If the reserve ratio of either fund

falls below that point, the FDIC assesses institutions that are covered by that fund until the reserve ratio reaches at least 1.25 percent. H.R. 3717 would eliminate the requirement that the DRR be

1.25 percent for the FDIC’s insurance funds and, instead, allow the

FDIC the discretion to set the DRR between 1.15 percent and 1.4

percent, inclusive. The bill would require the FDIC to set the DRR

at least annually and at other times as it deems appropriate. The

bill also would require the board of directors of the FDIC to conVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00031 Fmt 6659 Sfmt 6602 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
32

sider increasing the DRR during more favorable economic conditions and reducing the DRR during less favorable economic conditions, notwithstanding the risk of loss that may occur under such

conditions.

Based on the actions of the NCUA when it was given discretion

to set such a ratio, CBO expects that the FDIC would set the DRR

at 1.25 percent for 2003 and adjust it annually as conditions warrant. To maintain stability in the banking system, we expect the

FDIC would set the DRR within a relatively narrow range around

1.25 percent, except under extreme conditions. In fact, the bill

would require the FDIC to return some collections (referred to in

the bill as dividends) if the reserve ratio of the DIF exceeds 1.35

percent. In this event, the FDIC would be required to refund half

of the amount in the fund that is above the amount necessary to

maintain 1.35 percent. If the DRR were to exceed 1.4 percent, the

FDIC would be required to refund enough to institutions to reduce

the ratio below 1.4 percent.

Restoration Plans. Under current law, the FDIC must charge assessments to return the funds to a level above the DRR within one

year. H.R. 3717 could delay some of those assessments by allowing

the FDIC to return the fund to a level above the DRR within three

years.

If the FDIC projects that the reserve ratio of the DIF will fall

below the DRR, H.R. 3717 would require it to establish a restoration plan to return the reserve ratio to the DRR within three years.

If the FDIC projects that the reserve ratio of the DIF will fall

below 1 percent, H.R. 3717 would require the FDIC to establish a

restoration plan to return the reserve ratio to 1 percent within two

years and return the reserve ratio to the DRR within three years

thereafter. The flexibility to set restoration plans would reduce the

assessment income of the FDIC because it could take up to five

years to return to the DRR, and government collections would be

below baseline levels during this period. On the other hand, this

provision of H.R. 3717 might provide the FDIC the discretion necessary to recover from a large loss in the fund without imperiling

other institutions.

Allowing the FDIC discretion over when premiums are charged

would reduce total collections below the level that would be experienced without that discretion. However, CBO estimates that such

reductions would be more than offset by the premium increases resulting from the increase in deposit insurance coverage.

Merging BIF and SAIF.—H.R. 3717 would require the FDIC to

merge the Bank Insurance Fund and the Savings Association Insurance Fund and create a new Deposit Insurance Fund. By 2003,

CB0 expects the net worth of the combined fund will be about $42

billion. By itself, merging the funds would delay the collection of

premiums on institutions insured by the BIF. Although BIF is

much larger than the SAIF, the reserve ratio of the BIF is lower—

1.26 percent—due to rapid growth in insured deposits and the costs

of recent bank failures. Under current law, we expect the FDIC to

begin charging fees to institutions insured by the BIF in 2003. The

reserve ratio of the combined fund would be about 1.3 percent, and

in the absence of other changes made by the bill, the FDIC would

not have to assess higher premiums in 2003 to maintain the reserve ratio at the designated level.

33

Credits for Future Assessments.—The bill would require the

FDIC to provide certain banks and thrifts with credits against future assessments, based on their payments to the BIF or SAIF

prior to 1997. CBO expects that the use of those credits would reduce the amount of future collections by the DIF.

Under the bill, credits would equal 12 basic points (0.12 percent)

of the combined assessment base of the BIF and SAIF as of December 31, 2001. Based on information from the FDIC, CBO estimates

that the credits would total nearly $5.4 billion. The credits would

be allocated to each institution based on their market share as of

December 31, 1996. Institutions established after that date would

be ineligible for credits against their future assessments. The bill

would prohibit institutions from using credits whenever the reserve

ratio of the fund is less than the DRR or when the DRR is less

than 1.25 percent.

H.R. 3717 also would limit the use of credits by institutions that

are not well capitalized, or that exhibit financial, operational, or

compliance weaknesses that range from moderately severe to unsatisfactory. Under the bill, such institutions could use no more in

credits than the average assessment on all depository institutions

for that period. In addition, because the least risky institutions

(i.e., those that are well capitalized and do not exhibit those weaknesses) would be assessed no more than one basis point, their use

of credits would be effectively constrained. Hence, CBO estimates

that more than half of the credits would not be used during the

2003–2012 period and would be available to reduce collections by

the FDIC in subsequent years.

Increase in premiums paid to NCUA by financial institutions

Under current law, credit unions must pay the NCUA 1 percent

of their net change in deposits each year. The NCUA provides rebates to credit unions if the balance in the share insurance fund

exceeds 1.3 percent of insured deposits. CBO estimates that the

NCUA will collect net premiums of about $2.4 billion from its members over the 2003–2012 period.

Based on information from the NCUA, CBO expects that H.R.

3717 would extend insurance coverage to about $38 billion in currently uninsured deposits in 2003 and that the higher insurance

levels would attract another $4 billion in new deposits that year.

Because these added amounts would reduce the ratio of insured deposits to fund balances below 1.3 percent in 2003, H.R. 3717 would

reduce the amount of the rebate that the NCUA would otherwise

provide that year.

CBO estimates that, under the bill, the net premiums collected

by the NCUA would increase by $700 million over the 2003–2012

period. About $500 million of that amount would be realized in

2003. The premiums collected for the expanded insurance coverage

would more than offset the estimated additional costs to the NCUA

of $100 million over the next 10 years.

Pay-as-you-go considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The net changes in

outlays that are subject to pay-as-you-go procedures are shown in

the following table. For the purposes of enforcing pay-as-you-go

procedures, only the effects through fiscal year 2006 are counted.

34

Section 252 of the Balanced Budget and Emergency Deficit Control Act exempts from pay-as-you-go procedures any changes in outlays resulting from the ‘‘full funding of, and continuation of, the deposit insurance guarantee commitment in effect under current estimates.’’ Increasing deposit insurance coverage is not part of the

current guarantee commitment, and changing the premiums paid

by banks and thrifts is not the type of change necessary for the

continuation of the current guarantee commitment. Hence, CBO

believes that the pay-as-you-go exemption for deposit insurance

would not apply to H.R. 3717.

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Changes in outlays ................................. 0 ¥1,500 ¥375 25 ¥175 225 325 325 275 ¥50 225

Changes in receipts ............................... Not applicable

Estimated impact on state, local, and tribal governments: H.R.

3717 would preempt certain state laws regarding statutes of limitation by shortening the time allowed for insured depository institutions or the FDIC to file claims related to overpayments or late

payments of assessments. Such a preemption would be an intergovernmental mandate as defined in UMRA. Because the mandate imposes no duty on states that would result in additional spending,

CBO estimates that the costs of complying with the mandate would

not exceed the threshold established in UMRA ($58 million in

2002, adjusted annually for inflation).

Estimated impact on the private sector: H.R. 3717 contains private-sector mandates as defined by UMRA. CBO estimates that the

direct cost of those mandates would be well above the annual

threshold established by UMRA for private-sector mandates ($115

million in 2002, adjusted annually for inflation). We do not have

sufficient information to provide a precise estimate of the aggregate

cost because of uncertainties about how certain regulations would

be implemented.

Banks and savings associations

Commercial banks and savings associations must have federal

deposit insurance. CBO, therefore, considers changes in the federal

deposit insurance system that increase requirements on those institutions to be private-sector mandates under UMRA. Specifically,

the bill would increase federal insurance coverage for insured depository accounts. That increase in coverage would require banks

and savings associations to pay more in deposit insurance premiums.

H.R. 3717 also would change the conditions under which banks

and savings associations would pay insurance premiums to the

FDIC. Under current law, banks and savings associations in the

lowest risk category do not have to pay any deposit insurance premiums when their deposit insurance fund (BIF or SAIF) is above

the designated reserve ration of 1.25 percent of insured deposits.

The bill would require that all banks and savings associations pay

premiums for deposit insurance regardless of the reserve ratio. In

addition, the bill would authorize the FDIC to charge fees to banks

and thrifts that increase their net deposits more rapidly than the

FDIC determines to be appropriate. The FDIC has indicated that

35

determining the criteria for deciding whether growth is inappropriate would be difficult. At this time, CBO has no basis for estimating the amount of such fees.

CBO estimates that, as a result of the increased deposit insurance coverage and the requirement that all banks and savings associations pay deposit insurance premiums regardless of the reserve ratio, those institutions would have to pay an additional $1

billion in premiums in fiscal year 2003. The additional premium

payments would total about $2.1 billion over the first five years the

mandate is in effect.

Credit unions

Because the bill would increase the coverage of insured accounts

for federally insured credit unions, those credit unions would pay

higher premiums. CBO estimates that those institutions would pay

an additional $500 million in fiscal year 2003. The additional premium payments would total about $600 million for the first five

years the increased coverage is in effect.

Estimated prepared by: Federal Costs: Mark Hadley and Judith

Ruud; Impact on State, Local, and Tribal Governments: Susan Sieg

Tompkins; and Impact on the Private Sector: Judith Ruud.

Estimate approved by: Robert A. Sunshine, Assistant Director for

Budget Analysis.

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office

pursuant to section 423 of the Unfunded Mandates Reform Act.

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the

Federal Advisory Committee Act were created by this legislation.

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House

of Representatives, the Committee finds that the Constitutional

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the

United States) and clause 3 (relating to the power to regulate interstate commerce).

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the

terms and conditions of employment or access to public services or

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act.

36

EXCHANGE OF COMMITTEE CORRESPONDENCE

COMMITTEE ON THE JUDICIARY,

Washington, DC, May 14, 2002.

Hon. MICHAEL G. OXLEY,

Chairman, Committee on the Judiciary, Rayburn House Office

Building, Washington, DC.

DEAR CHAIRMAN OXLEY: In recognition of the desire to expedite

floor consideration of H.R. 3717, the ‘‘Federal Deposit Insurance

Reform Act of 2002,’’ the Committee on the Judiciary hereby

waives consideration of the bill with the understanding that subsection 4(c), relating to certain causes of action, will be removed

from the bill on the floor. This section, as you know, contains maters within the Committee’s Rule X jurisdiction.

The Committee on the Judiciary takes this action with the understanding that the Committee’s jurisdiction over the provisions

in question are in no way diminished or altered. I would appreciate

your including this letter in your Committee’s report on H.R. 3717.

Sincerely,

F. JAMES SENSENBRENNER, Jr.

Chairman, Committee on the Judiciary.

COMMITTEE ON FINANCIAL SERVICES,

Washington, DC, May 14, 2002.

Hon. F. JAMES SENSENBRENNER, Jr.,

Chairman, Committee on the Judiciary, Rayburn House Office

Building, Washington, DC.

DEAR CHAIRMAN SENSENBRENNER: Thank you for your recent letter regarding section 4(c) of H.R. 3717, the Federal Deposit Insurance Reform Act of 2002. As you noted, this provision falls within

the jurisdiction of the Committee on the Judiciary pursuant to rule

X of the Rules of the House of Representatives. As you noted, it is

my intention to delete this provision when the bill is considered by

the House. Accordingly, I appreciate your willingness to forego consideration of the bill.

I acknowledge that by agreeing to waive its consideration of the

bill, the Committee on the Judiciary does not waive its jurisdiction

over the bill.

I will include a copy of your letter and this response in the committee’s report on the bill and the Congressional Record during

consideration of the legislation on the House floor.

Thank you for your assistance in this matter.

Sincerely,

MICHAEL G. OXLEY, Chairman.

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title; table of contents

This section establishes the short title of the bill, the ‘‘Federal

Deposit Insurance Reform Act of 2002,’’ and provides a table of contents.

37

Section 2. Merging the BIF and SAIF

This section amends provisions of the Federal Deposit Insurance

Act to merge the Bank Insurance Fund and the Savings Association Insurance Fund. The section transfers each fund’s respective

assets and liabilities into a newly created Deposit Insurance Fund

(DIF).

The section gives the FDIC at least 90 days after the bill is enacted to complete the merger of the BIF and SAIF. The effective

date of the merger would be the first day of the next calendar quarter after the grace period elapses. For example, assuming the bill

is enacted on March 10 the FDIC would have until June 8 to complete the merger, and all transactions would become operationally

effective as of July 1.

Section 3. Increase in deposit insurance coverage

This section provides for a higher level of deposit insurance coverage and an inflation index for general depositors, individual retirement accounts, and municipalities. Further, it expands coverage

to employee benefit plans. Credit unions are provided with complete parity in coverage with other insured depository institutions. The section eliminates the $100,000 deposit insurance limit on

accounts at insured depository institutions and replaces it with a

new standard maximum deposit insurance limit of $130,000.

The section provides that, beginning January 1, 2005, the new

standard maximum deposit insurance limit would be subject to a

5 year cost of living adjustment, calculated according to the Personal Consumption Expenditures Chain-Type Index (PCE) published by the Department of Commerce and rounded to the nearest

$10,000. The FDIC and NCUA Boards of Directors are required to

publish the new standard maximum deposit insurance amount in

the Federal Register and provide a corresponding report to Congress within 6 months of the new calculation. Also, the five year

inflation-adjusted standard maximum amount would automatically

increase unless a Congressional act provides otherwise. The new

standard amount would take effect on January 1 of the year immediately succeeding the calendar year in which the new amount is

calculated.

The section requires institutions to provide pass through coverage for employee benefit plans. However, institutions that are not

well-capitalized or adequately-capitalized may not accept employee

benefit plan deposits.

The section also doubles the new standard maximum deposit insurance limit for certain retirement accounts to $260,000.

Finally, this section increases coverage for in-State municipal deposits to the lesser of $5 million or the sum of the new standard

coverage amount plus 80 percent of the amount of deposits in excess of the new standard.

Section 4. Setting assessments and repeal of special rules relating

to minimum assessments and free deposit insurance

This section allows the FDIC Board to set assessments in such

amounts as it may determine to be necessary or appropriate in

order to maintain the reserve ratio at the designated reserve ratio

(DRR). This provision also eliminates the existing restrictions on

the FDIC’s authority to levy assessments for any institution above

38

amounts needed to achieve and maintain the existing DRR of 1.25

percent. In effect, the minimum statutory rate (23 basis point cliff

rate) is eliminated.

This section establishes a rate of not more than 1 basis point (exclusive of any credit or dividend) for those insured depository institutions in the lowest-risk category under the FDIC’s risk-based assessment system. This provision does not apply during any period

in which the DIF’s reserve ratio is less than 1.15 percent of aggregate insured deposits.

In testimony before the Subcommittee on Financial Institutions,

FDIC Chairman Donald Powell stated that:

Using the current system as a starting point, I believe

that the FDIC should consider additional objective financial indicators, based upon the kinds of information that

banks and thrifts already report, to distinguish and price

for risk more accurately within the existing least-risk (1A)

category. The sample ‘‘scorecard’’ included in the FDIC’s

April 2001 report represents the right kind of approach.

(Hearing before the Subcommittee on Financial Institutions and

Consumer Credit, Viewpoints of the FDIC and Select Industry Experts on Deposit Insurance Reform, Oct. 17, 2001, Serial no. 107– 47, p. 5.) This section provides a necessary balance between the expanded authority and discretion of the FDIC to charge all institutions premiums and assuring that top-rated institutions are not excessively charged.

Nothing in this provision would preclude the FDIC from providing credits or dividends should the fund be at sufficient levels

to warrant such an action.

The section also requires insured depository institutions to maintain all records that the FDIC may require for verifying the accuracy of any assessment for 3 years or, in the case of disputed assessments, until the dispute has been resolved; shortens the statute of limitations for assessment claims against the FDIC and for

claims of recovery by the FDIC against insured depository institutions to 3 years; and increases fees for late assessment payments

from $100 to 1 percent of assessments per day.

This section also provides for a 50 percent discount in the assessment rate for deposits attributable to ‘‘lifeline’’ deposit accounts

and repeals section 232 of the Federal Deposit Insurance Improvement Act of 1931 that required that credits for such accounts be

funded from congressional appropriations.

The bill repeals a number of provisions requiring the FDIC to set

premiums on a semi-annual basis, replacing them with a provision

granting the FDIC greater flexibility in the timing of those evaluations, so long as they are done at least once in a 12 month period.

In granting this flexibility, the Committee intends that the FDIC

should make these changes, absent extraordinary circumstances, in

a manner that provides insured depository institutions with sufficient lead time to make reasonable budget preparations.

Section 5. Assessments on rapid growth deposits to maintain fund

reserves without penalizing low-growth institutions

This section allows the FDIC to impose a special premium assessment fee on institutions that experience a net increase in new

39

insured deposits during the most recent assessment period in excess of such percentage as the FDIC may determine to be appropriate. In setting this fee, the FDIC is required to take into account

the levels of assessments paid by such institution in prior assessment periods.

Section 6. Replacement of fixed designated reserve ratio with reserve

range

This section eliminates the current 1.25 percent ‘‘hard target’’

DRR and provides the FDIC Board with the discretion to set the

DRR within a range of 1.15–1.40 percent for any given year, using

the following criteria as a basis for making these determinations:

(1) Present and future risk of losses to the deposit insurance

fund;

(2) Economic conditions; and

(3) Any other factors the Board may determine to be appropriate. These changes are designed to prevent sharp swings in

the assessment rates for insured depository institutions. The

FDIC is required to publish a thorough analysis of the data

and projections on which the proposed DRR is based.

Section 7. Requirements applicable to the risk-based assessment system

This section allows the FDIC to collect information from all appropriate sources in determining risk of losses to the DIF. This provision does not authorize the FDIC to impose additional recordkeeping requirements on insured depository institutions.

The FDIC is required to consult with the appropriate Federal

banking agency in assessing the risk of loss to the DIF with respect

to any insured depository institution. This risk of loss evaluation

may be done on an aggregate basis for institutions that are determined to be well-capitalized and well-managed.

The FDIC is also required to provide notice and opportunity for

comment prior to revising or modifying the risk-based assessment

system.

Section 8. Refunds, dividends, and credits from Deposit Insurance

Fund

This section provides for refunds or credits of any assessment

payment that was made by an insured depository institution in excess of the amount due the FDIC.

The section outlines three circumstances under which the FDIC

is required to pay dividends to insured depository institutions:

(1) the FDIC is required to pay dividends in the amount of

the excess of what is necessary to maintain the reserve ratio

at the DRR whenever the reserve ratio equals or exceeds 1.4

percent of estimated insured deposits;

(2) the FDIC is required to pay dividends that are equal to

50 percent of the amount in excess of 1.35 percent of estimated

insured deposits whenever the DIF’s reserve ratio equals or exceeds 1.35 percent; and

(3) an ongoing credit is required when the DRR is at or

above 1.25 percent of aggregate insured deposits and the reserve ratio is above the DRR.

40

Should the reserve ratio of the Deposit Insurance Fund (DIF) exceed 1.35 percent, the FDIC must provide a cash dividend equal to

one-half the difference between the actual fund balance and the

fund balance required to maintain a reserve ratio of 1.35 percent.

Given the expanded and significant power provided to the FDIC

under the bill to charge premiums to all institutions, this amendment would slow the fund’s growth automatically as it approaches

its upper limit and return dividends to institutions that could be

used for lending and to provide other financial services in their

communities.

Nothing in this section precludes the FDIC from providing credits, over and above the mandated dividend requirement, should it

so choose.

The Committee intends that the FDIC, in determining the appropriate distribution of dividends or ongoing credits, weigh a number

of factors in its rulemaking process with notice and an opportunity

for public comment. The calculation should recognize past contributions to the deposit insurance funds by incorporating the ratio determined for an institution in the calculation of the institution’s

one-time credit based on total assessment base at year-end 1996,

as well as the actual assessments paid since that time. In establishing the dividend and credit systems, the FDIC should also take

into account and make adjustments that reflect the higher risk profiles of some institutions so that they are not rewarded for riskier

behavior. The FDIC is given the discretion to incorporate additional factors, through the rulemaking process, as it deems appropriate.

Initially, it is anticipated that the FDIC will establish a dividend

account or similar mechanism for each insured depository institution. It is contemplated that when a dividend is declared, each institution would receive the same proportion of the total dividend

declared as its dividend account bears to the sum of all institutions’ dividend accounts for that declaration. As an example of how this

might work under such a scenario, the calculation of an institution’s dividend account could be based on the balance in the fund

multiplied by the institution’s 1996 assessment base ratio (described above). In addition, after reducing the amount of assessments paid to account for an institution’s higher risk profile, and

after considering other factors, the Corporation would incorporate

the remainder in the calculation of the dividend account.

The section also provides for a transitional credit of 12 basis

points of the total assessment base as of December 31, 2001 (or

about $5.4 billion) to eligible insured depository institutions based

on their respective share or percentage of total industry insured deposits held as of December 31, 1996. Eligible insured depository institutions had to be in existence at December 31, 1996, or be a successor to such an institution, and paid a deposit insurance assessment prior to that date.

In determining whether to provide assessment credits and the

amount of those credits, the FDIC is required to take into account

the factors for designating the reserve ratio and the factors for setting assessments.

Credits may not exceed the amount equal to the average assessment on all insured depository institutions for an insured depository institution that exhibits financial, operational, or compliance

41

weaknesses ranging from moderately severe to unsatisfactory at

the beginning of the assessment period. The section provides insured depository institutions with an opportunity for a hearing before the FDIC to challenge the amount of their credits.

Section 9. Deposit Insurance Fund restoration plans

This section requires the FDIC to establish and implement a restoration plan within 30 days if it is projected that the reserve ratio

of the DIF will fall below the DRR within 6 months or if it actually

falls below the DRR.

The FDIC has up to 3 years to return the reserve ratio to the

DRR if the reserve ratio is not projected to drop or does not drop

below 1 percent of aggregate insured deposits. If the reserve ratio

falls below 1 percent, the FDIC has 2 years to raise it to 1 percent,

and up to another 3 years to return it to the DRR established before the triggering event . The FDIC must publish the details of its

restoration plan in the Federal Register within 90 days of its implementation.

Section 10. Regulations required

This section provides that the FDIC has 270 days after the date

of enactment to prescribe final regulations, after notice and opportunity for public comment, establishing the DRR, implementing increases in deposit insurance coverage, implementing the dividend

requirement and the one time assessment credit, and providing for

premium assessments under the amended Act.

Section 11. Studies of FDIC structure and expenses and certain activities and further possible changes to deposit insurance system

This section provides that within one year of enactment, the

FDIC and GAO are required to conduct separate studies of the following issues:

(1) The efficiency and effectiveness of the administration of

the prompt corrective action (PCA) program, including the degree of effectiveness of the Federal banking agencies in identifying troubled depository institutions and the degree of accuracy of the risk assessments made by the FDIC;

(2) The appropriateness of the FDIC’s organizational structure for the mission of the FDIC, to take into account the current size and complexity of the business of insured depository

institutions; the extent to which the organizational structure

contributes to or reduces operational inefficiencies that increase operational costs; and the effectiveness of internal controls;

(3) The feasibility of establishing a voluntary deposit insurance system for deposits in excess of the maximum amount of

deposit insurance for any depositor;

(4) The feasibility of privatizing all deposit insurance at insured depository institutions and insured credit unions; and

(5) The feasibility of using actual domestic deposits rather

than estimated insured deposits in calculating the DIF’s reserve ratio and the DRR.

Finally, the section directs the FDIC (in consultation with the

GAO) to conduct a study of the reserve methodology and loss acVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00041 Fmt 6659 Sfmt 6602 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
42

counting for insured depository institutions in a troubled condition

over the period January 1, 1992–December 31, 2002.

Section 12. Technical and conforming amendments to the Federal

Deposit Insurance Act relating to the merger of the BIF and

SAIF

This section makes numerous amendments to ensure the technical conformity of the Federal Deposit Insurance Reform Act to

various provisions in the Federal Deposit Insurance Act and other

banking laws, to include the authority of the DIF to borrow from

insured depository institutions and the Federal Home Loan Banks.

In particular, this section repeals section 5(d)(2) of the Federal

Deposit Insurance Act, dealing with exit fees collected from institutions leaving the Savings Association Insurance Fund (SAIF). The

Committee intends that those funds be returned to the DIF upon

the repeal of this provision.

Section 13. Other technical and conforming amendments relating to

the merger of the BIF and SAIF

This section ensures the technical conformity of the Federal Deposit Insurance Reform Act to various provisions in the Federal Deposit Insurance Act and other banking laws. Most notably, amendments conform the Federal Deposit Insurance Reform Act to the

Balanced Budget and Emergency Control Act of 1985.

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the

House of Representatives, changes in existing law made by the bill,

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic,

existing law in which no change is proposed is shown in roman):

SECTION 2704 OF THE DEPOSIT INSURANCE FUNDS ACT

OF 1996

øSEC. 2704. MERGER OF BIF AND SAIF.

ø(a) IN GENERAL.—

ø(1) MERGER.—The Bank Insurance Fund and the Savings

Association Insurance Fund shall be merged into the Deposit

Insurance Fund established by section 11(a)(4) of the Federal

Deposit Insurance Act, as amended by this section.

ø(2) DISPOSITION OF ASSETS AND LIABILITIES.—All assets and

liabilities of the Bank Insurance Fund and the Savings Association Insurance Fund shall be transferred to the Deposit Insurance Fund.

ø(3) NO SEPARATE EXISTENCE.—The separate existence of the

Bank Insurance Fund and the Savings Association Insurance

Fund shall cease.

ø(c) EFFECTIVE DATE.—This section and the amendments made

by this section shall become effective on January 1, 1999, if no insured depository institution is a savings association on that date.

ø(d) TECHNICAL AND CONFORMING AMENDMENTS.—

ø(1) DEPOSIT INSURANCE FUND.—Section 11(a)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended—

43

ø(A) by redesignating subparagraph (B) as subparagraph

(C);

ø(B) by striking subparagraph (A) and inserting the following:

ø‘‘(A) ESTABLISHMENT.—There is established the Deposit

Insurance Fund, which the Corporation shall— ø‘‘(i) maintain and administer;

ø‘‘(ii) use to carry out its insurance purposes in the

manner provided by this subsection; and

ø‘‘(iii) invest in accordance with section 13(a).

ø‘‘(B) USES.—The Deposit Insurance Fund shall be available to the Corporation for use with respect to Deposit Insurance Fund members.’’; and

ø(C) by striking ‘‘(4) GENERAL PROVISIONS RELATING TO

FUNDS.—’’ and inserting the following:

ø‘‘(4) ESTABLISHMENT OF THE DEPOSIT INSURANCE

FUND.—’’. ø(2) OTHER REFERENCES.—Section 11(a)(4)(C) of the Federal

Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C), as redesignated

by paragraph (1) of this subsection) is amended by striking

‘‘Bank Insurance Fund and the Savings Association Insurance

Fund’’ and inserting ‘‘Deposit Insurance Fund’’. ø(3) DEPOSITS INTO FUND.—Section 11(a)(4) of the Federal

Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended by

adding at the end the following new subparagraph:

ø‘‘(D) DEPOSITS.—All amounts assessed against insured

depository institutions by the Corporation shall be deposited in the Deposit Insurance Fund.’’. ø(5) FEDERAL HOME LOAN BANK ACT.—Section 21B(f)(2)(C)(ii)

of the Federal Home Loan Bank Act (12 U.S.C.

1441b(f)(2)(C)(ii)) is amended— ø(A) in subclause (I), by striking ‘‘to Savings Associations Insurance Fund members’’ and inserting ‘‘to insured

depository institutions, and their successors, which were

Savings Association Insurance Fund members on September 1, 1995’’; and

ø(B) in subclause (II), by striking ‘‘to Savings Associations Insurance Fund members’’ and inserting ‘‘to insured

depository institutions, and their successors, which were

Savings Association Insurance Fund members on September 1, 1995’’.

ø(6) REPEALS.—

ø(A) SECTION 3.—Section 3(y) of the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) is amended to read as follows:

ø‘‘(y) DEFINITIONS RELATING TO THE DEPOSIT INSURANCE FUND.—

ø‘‘(1) DEPOSIT INSURANCE FUND.—The term ‘Deposit Insurance Fund’ means the fund established under section 11(a)(4).

ø‘‘(2) RESERVE RATIO.—The term ‘reserve ratio’ means the

ratio of the net worth of the Deposit Insurance Fund to aggregate estimated insured deposits held in all insured depository

institutions.

ø‘‘(3) DESIGNATED RESERVE RATIO.—The designated reserve

ratio of the Deposit Insurance Fund for each year shall be—

ø‘‘(A) 1.25 percent of estimated insured deposits; or

44

ø‘‘(B) a higher percentage of estimated insured deposits

that the Board of Directors determines to be justified for

that year by circumstances raising a significant risk of

substantial future losses to the fund.’’

ø(B) SECTION 7.—Section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817) is amended—

ø(i) by striking subsection (l);

ø(ii) by redesignating subsections (m) and (n) as subsections (l) and (m), respectively;

ø(iii) in subsection (b)(2), by striking subparagraphs

(B) and (F), and by redesignating subparagraphs (C),

(E), (G), and (H) as subparagraphs (B) through (E), respectively.

ø(C) SECTION 11.—Section 11(a) of the Federal Deposit

Insurance Act (12 U.S.C. 1821(a)) is amended—

ø(i) by striking paragraphs (5), (6), and (7); and

ø(ii) by redesignating paragraph (8) as paragraph

(5).’’.

ø(7) SECTION 5136 OF THE REVISED STATUTES.—The paragraph designated the ‘‘Eleventh’’ of section 5136 of the Revised

Statutes of the United States (12 U.S.C. 24) is amended in the

5th sentence, by striking ‘‘affected deposit insurance fund’’ and

inserting ‘‘Deposit Insurance Fund’’.

ø(8) INVESTMENTS PROMOTING PUBLIC WELFARE; LIMITATIONS

ON AGGREGATE INVESTMENTS.—The 23d undesignated paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 338a)

is amended in the 4th sentence, by striking ‘‘affected deposit

insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’.

ø(9) ADVANCES TO CRITICALLY UNDERCAPITALIZED DEPOSITORY

INSTITUTIONS.—Section 10B(b)(3)(A)(ii) of the Federal Reserve

Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking ‘‘any

deposit insurance fund in’’ and inserting ‘‘the Deposit Insurance Fund of’’.

ø(10) AMENDMENTS TO THE BALANCED BUDGET AND EMERGENCY DEFICIT CONTROL ACT OF 1985.—Section 255(g)(1)(A) of

the Balanced Budget and Emergency Deficit Control Act of

1985 (2 U.S.C. 905(g)(1)(A)) is amended—

ø(A) by striking ‘‘Bank Insurance Fund’’ and inserting

‘‘Deposit Insurance Fund’’; and

ø(B) by striking ‘‘Federal Deposit Insurance Corporation,

Savings Association Insurance Fund;’’.

ø(11) FURTHER AMENDMENTS TO THE FEDERAL HOME LOAN

BANK ACT.—The Federal Home Loan Bank Act (12 U.S.C. 1421

et seq.) is amended—

ø(A) in section 11(k) (12 U.S.C. 1431(k))—

ø(i) in the subsection heading, by striking ‘‘SAIF’’

and inserting ‘‘THE DEPOSIT INSURANCE FUND’’; and

ø(ii) by striking ‘‘Savings Association Insurance

Fund’’ each place such term appears and inserting

‘‘Deposit Insurance Fund’’;

ø(B) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)),

by striking ‘‘affected deposit insurance fund’’ and inserting

‘‘Deposit Insurance Fund’’;

ø(C) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))—

45

ø(i) in the subparagraph heading, by striking ‘‘SAIFINSURED BANKS’’ and inserting ‘‘CHARTER CONVERSIONS’’; and

ø(ii) by striking ‘‘Savings Association Insurance

Fund member’’ and inserting ‘‘savings association’’;

ø(D) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C.

1441a(b)(10)(A)(iv)(II)), by striking ‘‘Savings Association

Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

ø(E) in section 21B(e) (12 U.S.C. 1441b(e))—

ø(i) in paragraph (5), by inserting ‘‘as of the date of

funding’’ after ‘‘Savings Association Insurance Fund

members’’ each place such term appears;

ø(ii) by striking paragraph (7); and

ø(iii) by redesignating paragraph (8) as paragraph

(7); and

ø(F) in section 21B(k) (12 U.S.C. 1441b(k))—

ø(i) by striking paragraph (8); and

ø(ii) by redesignating paragraphs (9) and (10) as

paragraphs (8) and (9), respectively.

ø(12) AMENDMENTS TO THE HOME OWNERS’ LOAN ACT.—The

Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended—

ø(A) in section 5—

ø(i) in subsection (c)(5)(A), by striking ‘‘that is a

member of the Bank Insurance Fund’’;

ø(ii) in subsection (c)(6), by striking ‘‘As used in this

subsection—’’ and inserting ‘‘For purposes of this subsection, the following definitions shall apply:’’;

ø(iii) in subsection (o)(1), by striking ‘‘that is a Bank

Insurance Fund member’’;

ø(iv) in subsection (o)(2)(A), by striking ‘‘a Bank Insurance Fund member until such time as it changes

its status to a Savings Association Insurance Fund

member’’ and inserting ‘‘insured by the Deposit Insurance Fund’’;

ø(v) in subsection (t)(5)(D)(iii)(II), by striking ‘‘affected deposit insurance fund’’ and inserting ‘‘Deposit

Insurance Fund’’;

ø(vi) in subsection (t)(7)(C)(i)(I), by striking ‘‘affected

deposit insurance fund’’ and inserting ‘‘Deposit Insurance Fund’’; and

ø(vii) in subsection (v)(2)(A)(i), by striking ‘‘, the

Savings Association Insurance Fund’’ and inserting ‘‘or

the Deposit Insurance Fund’’; and

ø(B) in section 10—

ø(i) in subsection (e)(1)(A)(iii)(VII), by adding ‘‘or’’ at

the end;

ø(ii) in subsection (e)(1)(A)(iv), by adding ‘‘and’’ at

the end;

ø(iii) in subsection (e)(1)(B), by striking ‘‘Savings Association Insurance Fund or Bank Insurance Fund’’

and inserting ‘‘Deposit Insurance Fund’’;

ø(iv) in subsection (e)(2), by striking ‘‘Savings Association Insurance Fund or the Bank Insurance Fund’’

and inserting ‘‘Deposit Insurance Fund’’; and

46

ø(v) in subsection (m)(3), by striking subparagraph

(E), and by redesignating subparagraphs (F), (G), and

(H) as subparagraphs (E), (F), and (G), respectively.

ø(13) AMENDMENTS TO THE NATIONAL HOUSING ACT.—The

National Housing Act (12 U.S.C. 1701 et seq.) is amended—

ø(A) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by

striking ‘‘Bank Insurance Fund for banks or through the

Savings Association Insurance Fund for savings associations’’ and inserting ‘‘Deposit Insurance Fund’’; and

ø(B) in section 526(b)(1)(B)(ii) (12 U.S.C. 1735f–

14(b)(1)(B)(ii)), by striking ‘‘Bank Insurance Fund for

banks and through the Savings Association Insurance

Fund for savings associations’’ and inserting ‘‘Deposit Insurance Fund’’.

ø(14) FURTHER AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT.—The Federal Deposit Insurance Act (12 U.S.C. 1811

et seq.) is amended—

ø(A) in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by striking

subparagraph (B) and inserting the following:

ø‘‘(B) includes any former savings association.’’;

ø(B) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking

‘‘the Bank Insurance Fund or the Savings Association Insurance Fund;’’ and inserting ‘‘Deposit Insurance Fund,’’;

ø(C) in section 5(d) (12 U.S.C. 1815(d)), by striking paragraphs (2) and (3);

ø(D) in section 5(d)(1) (12 U.S.C. 1815(d)(1))—

ø(i) in subparagraph (A), by striking ‘‘reserve ratios

in the Bank Insurance Fund and the Savings Association Insurance Fund’’ and inserting ‘‘the reserve ratio

of the Deposit Insurance Fund’’;

ø(ii) by striking subparagraph (B) and inserting the

following:

ø‘‘(2) FEE CREDITED TO THE DEPOSIT INSURANCE FUND.—The

fee paid by the depository institution under paragraph (1) shall

be credited to the Deposit Insurance Fund.’’;

ø(iii) by striking ‘‘(1) UNINSURED INSTITUTIONS.—’’;

and

ø(iv) by redesignating subparagraphs (A) and (C) as

paragraphs (1) and (3), respectively, and moving the

margins 2 ems to the left;

ø(E) in section 5(e) (12 U.S.C. 1815(e))—

ø(i) in paragraph (5)(A), by striking ‘‘Bank Insurance Fund or the Savings Association Insurance Fund’’

and inserting ‘‘Deposit Insurance Fund’’;

ø(ii) by striking paragraph (6); and

ø(iii) by redesignating paragraphs (7), (8), and (9) as

paragraphs (6), (7), and (8), respectively;

ø(F) in section 6(5) (12 U.S.C. 1816(5)), by striking

‘‘Bank Insurance Fund or the Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

ø(G) in section 7(b) (12 U.S.C. 1817(b))—

ø(i) in paragraph (1)(D), by striking ‘‘each deposit insurance fund’’ and inserting ‘‘the Deposit Insurance

Fund’’;

47

ø(ii) in clauses (i)(I) and (iv) of paragraph (2)(A), by

striking ‘‘each deposit insurance fund’’ each place such

term appears and inserting ‘‘the Deposit Insurance

Fund’’;

ø(iii) in paragraph (2)(A)(iii), by striking ‘‘a deposit

insurance fund’’ and inserting ‘‘the Deposit Insurance

Fund’’;

ø(iv) by striking clause (iv) of paragraph (2)(A);

ø(v) in paragraph (2)(C) (as redesignated by paragraph (6)(B) of this subsection)—

ø(I) by striking ‘‘any deposit insurance fund’’

and inserting ‘‘the Deposit Insurance Fund’’; and

ø(II) by striking ‘‘that fund’’ each place such

term appears and inserting ‘‘the Deposit Insurance Fund’’;

ø(vi) in paragraph (2)(D) (as redesignated by paragraph (6)(B) of this subsection)—

ø(I) in the subparagraph heading, by striking

‘‘FUNDS ACHIEVE’’ and inserting ‘‘FUND ACHIEVES’’;

and

ø(II) by striking ‘‘a deposit insurance fund’’ and

inserting ‘‘the Deposit Insurance Fund’’;

ø(vii) in paragraph (3)—

ø(I) in the paragraph heading, by striking

‘‘FUNDS’’ and inserting ‘‘FUND’’;

ø(II) by striking ‘‘members of that fund’’ where

such term appears in the portion of subparagraph

(A) which precedes clause (i) of such subparagraph

and inserting ‘‘insured depository institutions’’;

ø(III) by striking ‘‘that fund’’ each place such

term appears (other than in connection with term

amended in subclause (II) of this clause) and inserting ‘‘the Deposit Insurance Fund’’;

ø(IV) in subparagraph (A), by striking ‘‘Except

as provided in paragraph (2)(F), if’’ and inserting

‘‘If’’;

ø(V) in subparagraph (A), by striking ‘‘any deposit insurance fund’’ and inserting ‘‘the Deposit

Insurance Fund’’; and

ø(VI) by striking subparagraphs (C) and (D) and

inserting the following:

ø‘‘(C) AMENDING SCHEDULE.—The Corporation may, by

regulation, amend a schedule prescribed under subparagraph (B).’’; and

ø(viii) in paragraph (6)—

ø(I) by striking ‘‘any such assessment’’ and inserting ‘‘any such assessment is necessary’’;

ø(II) by striking ‘‘(A) is necessary—’’;

ø(III) by striking subparagraph (B);

ø(IV) by redesignating clauses (i), (ii), and (iii)

as subparagraphs (A), (B), and (C), respectively,

and moving the margins 2 ems to the left; and

ø(V) in subparagraph (C) (as redesignated), by

striking ‘‘; and’’ and inserting a period;

48

ø(H) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by striking

‘‘, except that—’’ and all that follows through the end of

the paragraph and inserting a period;

ø(I) in section 11(i)(3) (12 U.S.C. 1821(i)(3))—

ø(i) by striking subparagraph (B);

ø(ii) by redesignating subparagraph (C) as subparagraph (B); and

ø(iii) in subparagraph (B) (as redesignated), by

striking ‘‘subparagraphs (A) and (B)’’ and inserting

‘‘subparagraph (A)’’;

ø(J) in section 11A(a) (12 U.S.C. 1821a(a))—

ø(i) in paragraph (2), by striking ‘‘LIABILITIES.—’’

and all that follows through ‘‘Except’’ and inserting

‘‘LIABILITIES.—Except’’;

ø(ii) by striking paragraph (2)(B); and

ø(iii) in paragraph (3), by striking ‘‘the Bank Insurance Fund, the Savings Association Insurance Fund,’’

and inserting ‘‘the Deposit Insurance Fund’’;

ø(K) in section 11A(b) (12 U.S.C. 1821a(b)), by striking

paragraph (4);

ø(L) in section 11A(f) (12 U.S.C. 1821a(f)), by striking

‘‘Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

ø(M) in section 13 (12 U.S.C. 1823)—

ø(i) in subsection (a)(1), by striking ‘‘Bank Insurance

Fund, the Savings Association Insurance Fund,’’ and

inserting ‘‘Deposit Insurance Fund, the Special Reserve of the Deposit Insurance Fund,’’;

ø(ii) in subsection (c)(4)(E)—

ø(I) in the subparagraph heading, by striking

‘‘FUNDS’’ and inserting ‘‘FUND’’; and

ø(II) in clause (i), by striking ‘‘any insurance

fund’’ and inserting ‘‘the Deposit Insurance Fund’’;

ø(iii) in subsection (c)(4)(G)(ii)—

ø(I) by striking ‘‘appropriate insurance fund’’

and inserting ‘‘Deposit Insurance Fund’’;

ø(II) by striking ‘‘the members of the insurance

fund (of which such institution is a member)’’ and

inserting ‘‘insured depository institutions’’;

ø(III) by striking ‘‘each member’s’’ and inserting

‘‘each insured depository institution’s’’; and

ø(IV) by striking ‘‘the member’s’’ each place such

term appears and inserting ‘‘the institution’s’’;

ø(iv) in subsection (c), by striking paragraph (11);

ø(v) in subsection (h), by striking ‘‘Bank Insurance

Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

ø(vi) in subsection (k)(4)(B)(i), by striking ‘‘Savings

Association Insurance Fund’’ and inserting ‘‘Deposit

Insurance Fund’’; and

ø(vii) in subsection (k)(5)(A), by striking ‘‘Savings

Association Insurance Fund’’ and inserting ‘‘Deposit

Insurance Fund’’;

ø(N) in section 14(a) (12 U.S.C. 1824(a)) in the 5th

sentence—

49

ø(i) by striking ‘‘Bank Insurance Fund or the Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance Fund’’; and

ø(ii) by striking ‘‘each such fund’’ and inserting ‘‘the

Deposit Insurance Fund’’;

ø(O) in section 14(b) (12 U.S.C. 1824(b)), by striking

‘‘Bank Insurance Fund or Savings Association Insurance

Fund’’ and inserting ‘‘Deposit Insurance Fund’’;

ø(P) in section 14(c) (12 U.S.C. 1824(c)), by striking

paragraph (3);

ø(Q) in section 14(d) (12 U.S.C. 1824(d))—

ø(i) by striking ‘‘BIF’’ each place such term appears

and inserting ‘‘DIF’’; and

ø(ii) by striking ‘‘Bank Insurance Fund’’ each place

such term appears and inserting ‘‘Deposit Insurance

Fund’’;

ø(R) in section 15(c)(5) (12 U.S.C. 1825(c)(5))—

ø(i) by striking ‘‘the Bank Insurance Fund or Savings Association Insurance Fund, respectively’’ each

place such term appears and inserting ‘‘the Deposit Insurance Fund’’; and

ø(ii) in subparagraph (B), by striking ‘‘the Bank Insurance Fund or the Savings Association Insurance

Fund, respectively’’ and inserting ‘‘the Deposit Insurance Fund’’;

ø(S) in section 17(a) (12 U.S.C. 1827(a))—

ø(i) in the subsection heading, by striking ‘‘BIF,

SAIF,’’ and inserting ‘‘THE DEPOSIT INSURANCE FUND’’;

and

ø(ii) in paragraph (1), by striking ‘‘the Bank Insurance Fund, the Savings Association Insurance Fund,’’

each place such term appears and inserting ‘‘the Deposit Insurance Fund’’;

ø(T) in section 17(d) (12 U.S.C. 1827(d)), by striking ‘‘the

Bank Insurance Fund, the Savings Association Insurance

Fund,’’ each place such term appears and inserting ‘‘the

Deposit Insurance Fund’’;

ø(U) in section 18(m)(3) (12 U.S.C. 1828(m)(3))—

ø(i) by striking ‘‘Savings Association Insurance

Fund’’ each place such term appears and inserting

‘‘Deposit Insurance Fund’’; and

ø(ii) in subparagraph (C), by striking ‘‘or the Bank

Insurance Fund’’;

ø(V) in section 18(p) (12 U.S.C. 1828(p)), by striking ‘‘deposit insurance funds’’ and inserting ‘‘Deposit Insurance

Fund’’;

ø(W) in section 24 (12 U.S.C. 1831a) in subsections (a)(1)

and (d)(1)(A), by striking ‘‘appropriate deposit insurance

fund’’ each place such term appears and inserting ‘‘Deposit

Insurance Fund’’;

ø(X) in section 28 (12 U.S.C. 1831e), by striking ‘‘affected

deposit insurance fund’’ each place such term appears and

inserting ‘‘Deposit Insurance Fund’’;

ø(Y) by striking section 31 (12 U.S.C. 1831h);

50

ø(Z) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)) by striking ‘‘affected deposit insurance fund’’ and inserting ‘‘Deposit

Insurance Fund’’;

ø(AA) in section 38(a) (12 U.S.C. 1831o(a)) in the subsection heading, by striking ‘‘FUNDS’’ and inserting ‘‘FUND’’;

ø(BB) in section 38(k) (12 U.S.C. 1831o(k))— ø(i) in paragraph (1), by striking ‘‘a deposit insurance fund’’ and inserting ‘‘the Deposit Insurance

Fund’’; and

ø(ii) in paragraph (2)(A)—

ø(I) by striking ‘‘A deposit insurance fund’’ and

inserting ‘‘The Deposit Insurance Fund’’; and

ø(II) by striking ‘‘the deposit insurance fund’s

outlays’’ and inserting ‘‘the outlays of the Deposit

Insurance Fund’’; and

ø(CC) in section 38(o) (12 U.S.C. 1831o(o))— ø(i) by striking ‘‘ASSOCIATIONS.—’’ and all that follows through ‘‘Subsections (e)(2)’’ and inserting ‘‘ASSOCIATIONS.—Subsections (e)(2)’’;

ø(ii) by redesignating subparagraphs (A), (B), and

(C) as paragraphs (1), (2), and (3), respectively, and

moving the margins 2 ems to the left; and

ø(iii) in paragraph (1) (as redesignated), by redesignating clauses (i) and (ii) as subparagraphs (A) and

(B), respectively, and moving the margins 2 ems to the

left.

ø(15) AMENDMENTS TO THE FINANCIAL INSTITUTIONS REFORM,

RECOVERY, AND ENFORCEMENT ACT OF 1989.—The Financial Institutions Reform, Recovery, and Enforcement Act is

amended—

ø(A) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by

striking ‘‘Bank Insurance Fund, the Savings Association

Insurance Fund,’’ and inserting ‘‘Deposit Insurance Fund’’;

and

ø(B) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by

striking ‘‘Bank Insurance Fund, the Savings Association

Insurance Fund,’’ and inserting ‘‘Deposit Insurance Fund’’.

ø(16) AMENDMENT TO THE BANK ENTERPRISE ACT OF 1991.—

Section 232(a)(1) of the Bank Enterprise Act of 1991 (12 U.S.C.

1834(a)(1)) is amended by striking ‘‘section 7(b)(2)(H)’’ and inserting ‘‘section 7(b)(2)(G)’’.

ø(17) AMENDMENT TO THE BANK HOLDING COMPANY ACT OF

1956.—Section 2(j)(2) of the Bank Holding Company Act of

1956 (12 U.S.C. 1841(j)(2)) is amended by striking ‘‘Savings Association Insurance Fund’’ and inserting ‘‘Deposit Insurance

Fund’’.¿

FEDERAL DEPOSIT INSURANCE ACT

* * * * * * *

SEC. 3. As used in this Act—

(a) DEFINITIONS OF BANK AND RELATED TERMS.—

(1) BANK.—The term ‘‘bank’’—

(A) * * *

ø(B) includes any former savings association that—

51

ø(i) has converted from a savings association

charter; and

ø(ii) is a Savings Association Insurance Fund

member.¿

(B) includes any former savings association.

* * * * * * *

ø(y) The term ‘‘deposit insurance fund’’ means the Bank Insurance Fund or the Savings Association Insurance Fund, as appropriate.¿

(y) DEFINITIONS RELATING TO DEPOSIT INSURANCE FUND.—

(1) DEPOSIT INSURANCE FUND.—The term ‘‘Deposit Insurance

Fund’’ means the Deposit Insurance Fund established under

section 11 (a)(4).

(2) DESIGNATED RESERVE RATIO.—The term ‘‘designated reserve ratio’’ means the reserve ratio designated by the Board of

Directors in accordance with section 7(b)(3).

(3) RESERVE RATIO.—The term ‘‘reserve ratio’’, when used

with regard to the Deposit Insurance Fund other than in connection with a reference to the designated reserve ratio, means

the ratio of the net worth of the Deposit Insurance Fund to the

value of the aggregate estimated insured deposits.

* * * * * * *

SEC. 5. DEPOSIT INSURANCE.

(a) * * *

(b) Subject to the provisions of this Act and to such terms and

conditions as the Board of Directors may impose, any branch of a

foreign bank, upon application by the bank to the Corporation, and

examination by the Corporation of the branch, and approval by the

Board of Directors, may become an insured branch. Before approving any such application, the Board of Directors shall give consideration to—

(1) * * *

* * * * * * *

(5) the risk presented to øthe Bank Insurance Fund or the

Savings Association Insurance Fund,¿ the Deposit Insurance

Fund,

* * * * * * *

(c)(1) * * *

* * * * * * *

(4) The purpose of the surety bonds and pledges of assets required under this subsection is to provide protection to the ødeposit

insurance fund¿ Deposit Insurance Fund against the risks entailed

in insuring the domestic deposits of a foreign bank whose activities,

assets, and personnel are in large part outside the jurisdiction of

the United States. In the implementation of its authority under

this subsection, however, the Corporation shall endeavor to avoid

imposing requirements on such banks which would unnecessarily

place them at a competitive disadvantage in relation to domestically incorporated banks.

* * * * * * *

(d) INSURANCE FEES.—

52

ø(1) UNINSURED INSTITUTIONS.—¿

ø(A)¿ (1) IN GENERAL.—Any institution that becomes insured

by the Corporation, and any noninsured branch that becomes

insured by the Corporation, shall pay the Corporation any fee

which the Corporation may by regulation prescribe, after giving due consideration to the need to establish and maintain

øreserve ratios in the Bank Insurance Fund and the Savings

Association Insurance Fund as required by section 7¿ the reserve ratio of the Deposit Insurance Fund.

ø(B) FEE CREDITED TO APPROPRIATE FUND.—The fee paid

by the depository institution shall be credited to the Bank

Insurance Fund if the depository institution becomes a

Bank Insurance Fund member, and to the Savings Association Insurance Fund if the depository institution becomes a Savings Association Insurance Fund member.¿

(2) FEE CREDITED TO THE DEPOSIT INSURANCE FUND.—The fee

paid by the depository institution under paragraph (1) shall be

credited to the Deposit Insurance Fund.

ø(C)¿ (3) EXCEPTION FOR CERTAIN DEPOSITORY INSTITUTIONS.—Any depository institution that becomes an insured depository institution by operation of section 4(a) shall not pay

any fee.

ø(2) CONVERSIONS.—

ø(A) IN GENERAL.—

ø(i) PRIOR APPROVAL REQUIRED.—No insured depository institution may participate in a conversion transaction without the prior approval of the Corporation.

ø(ii) 5-YEAR MORATORIUM ON CONVERSIONS.—Except

as provided in subparagraph (C), the Corporation may

not approve any conversion transaction before the

later of the end of the 5-year period beginning on the

date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 or the

date on which the Savings Association Insurance Fund

first meets or exceeds the designated reserve ratio for

such fund.

ø(B) CONVERSION DEFINED.—For purposes of this paragraph, the term ‘‘conversion transaction’’ means—

ø(i) the change of status of an insured depository institution from a Bank Insurance Fund member to a

Savings Association Insurance Fund member or from

a Savings Association Insurance Fund member to a

Bank Insurance Fund member;

ø(ii) the merger or consolidation of a Bank Insurance Fund member with a Savings Association Insurance Fund member;

ø(iii) the assumption of any liability by—

ø(I) any Bank Insurance Fund member to pay

any deposits of a Savings Association Insurance

Fund member; or

ø(II) any Savings Association Insurance Fund

member to pay any deposits of a Bank Insurance

Fund member;

ø(iv) the transfer of assets of—

53

ø(I) any Bank Insurance Fund member to any

Savings Association Insurance Fund member in

consideration of the assumption of liabilities for

any portion of the deposits of such Bank Insurance Fund member; or

ø(II) any Savings Association Insurance Fund

member to any Bank Insurance Fund member in

consideration of the assumption of liabilities for

any portion of the deposits of such Savings Association Insurance Fund member; and

ø(v) the transfer of deposits— ø(I) from a Bank Insurance Fund member to a

Savings Association Insurance Fund member; or

ø(II) from a Savings Association Insurance Fund

member to a Bank Insurance Fund member;

in a transaction in which the deposit is received from

a depositor at an insured depository institution for

which a receiver has been appointed and the receiving

insured depository institution is acting as agent for

the Corporation in connection with the payment of

such deposit to the depositor at the institution for

which a receiver has been appointed.

ø(C) APPROVAL DURING MORATORIUM.—The Corporation

may approve a conversion transaction at any time if— ø(i) the conversion transaction affects an insubstantial portion, as determined by the Corporation, of the

total deposits of each depository institution participating in the conversion transaction;

ø(ii) the conversion occurs in connection with the acquisition of a Savings Association Insurance Fund

member in default or in danger of default, and the

Corporation determines that the estimated financial

benefits to the Savings Association Insurance Fund or

Resolution Trust Corporation equal or exceed the Corporation’s estimate of loss of assessment income to

such insurance fund over the remaining balance of the

moratorium period established by subparagraph (A),

and the Resolution Trust Corporation concurs in the

Corporation’s determination; or

ø(iii) the conversion occurs in connection with the

acquisition of a Bank Insurance Fund member in default or in danger of default and the Corporation determines that the estimated financial benefits to the

Bank Insurance Fund equal or exceed the Corporation’s estimate of the loss of assessment income to the

insurance fund over the remaining balance of the moratorium period established by subparagraph (A).

ø(D) CERTAIN TRANSFERS DEEMED TO AFFECT INSUBSTANTIAL PORTION OF TOTAL DEPOSITS.—For purposes of subparagraph (C)(i), any conversion transaction shall be

deemed to affect an insubstantial portion of the total deposits of an insured depository institution, to the extent

the aggregate amount of the total deposits transferred in

such transaction and in all conversion transactions occurring after the date of the enactment of the Financial InstiVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00053 Fmt 6659 Sfmt 6601 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
54

tutions Reform, Recovery, and Enforcement Act of 1989

does not exceed 35 percent of the lesser of— ø(i) the amount which is equal to the sum of— ø(I) the total deposits of such insured depository

institution on May 1, 1989; and

ø(II) the total amount of net interest credited to

the depository institution’s deposits during the period beginning on May 1, 1989, and ending on the

date of the transfer of deposits in connection with

such transaction; or

ø(ii) the amount which is equal to the total deposits

of such insured depository institution on the date of

the transfer of deposits in connection with such transaction.

ø(E) EXIT AND ENTRANCE FEES.—Each insured depository

institution participating in a conversion transaction shall

pay— ø(i) in the case of a conversion transaction in which

the resulting or acquiring depository institution is not

a Savings Association Insurance Fund member, an

exit fee (in an amount to be determined and assessed

in accordance with subparagraph (F)) which— ø(I) shall be deposited in the Savings Association Insurance Fund; or

ø(II) shall be paid to the Financing Corporation,

if the Secretary of the Treasury determines that

the Financing Corporation has exhausted all other

sources of funding for interest payments on the

obligations of the Financing Corporation and orders that such fees be paid to the Financing Corporation;

ø(ii) in the case of a conversion transaction in which

the resulting or acquiring depository institution is not

a Bank Insurance Fund member, an exit fee in an

amount to be determined by the Corporation (and assessed in accordance with subparagraph (F)(ii)) which

shall be deposited in the Bank Insurance Fund; and

ø(iii) an entrance fee in an amount to be determined

by the Corporation (and assessed in accordance with

subparagraph (F)(ii)), except that—

ø(I) in the case of a conversion transaction in

which the resulting or acquiring depository institution is a Bank Insurance Fund member, the fee

shall be the approximate amount which the Corporation calculates as necessary to prevent dilution of the Bank Insurance Fund, and shall be

paid to the Bank Insurance Fund; and

ø(II) in the case of a conversion transaction in

which the resulting or acquiring depository institution is a Savings Association Insurance Fund

member, the fee shall be the approximate amount

which the Corporation calculates as necessary to

prevent dilution of the Savings Association Insurance Fund, and shall be paid to the Savings Association Insurance Fund.

55

ø(F) ASSESSMENT OF EXIT AND ENTRANCE FEES.— ø(i) DETERMINATION OF AMOUNT OF EXIT FEES.— ø(I) CONVERSIONS BEFORE JANUARY 1, 1997.—In

the case of any exit fee assessed under subparagraph (E)(i) for any conversion transaction consummated before January 1, 1997, the amount of

such fee shall be determined jointly by the Corporation and the Secretary of the Treasury.

ø(II) ASSESSMENTS AFTER DECEMBER, 31, 1996.— In the case of any exit fee assessed under subparagraph (E)(i) for any conversion transaction

consummated after December 31, 1996, the

amount of such fee shall be determined by the

Corporation.

ø(ii) PROCEDURES.—The Corporation shall prescribe,

by regulation, procedures for assessing any exit or entrance fee under subparagraph (E).

ø(G) CHARTER CONVERSION OF SAIF MEMBERS.—This subsection shall not be construed as prohibiting any savings

association which is a Savings Association Insurance Fund

member from converting to a bank charter during the period described in subparagraph (A)(ii) if the resulting bank

remains a Savings Association Insurance Fund member.

ø(3) OPTIONAL CONVERSIONS SUBJECT TO SPECIAL RULES ON

DEPOSIT INSURANCE PAYMENTS.— ø(A) CONVERSIONS ALLOWED.—Notwithstanding paragraph (2)(A), and subject to the requirements of this paragraph, any insured depository institution may participate

in a transaction described in clause (ii), (iii), or (iv) of paragraph (2)(B) if the transaction is approved by the responsible agency under section 18(c)(2).

ø(B) ASSESSMENTS ON DEPOSITS ATTRIBUTABLE TO

FORMER DEPOSITORY INSTITUTION.— ø(i) ASSESSMENTS BY SAIF.—In the case of any acquiring, assuming, or resulting depository institution

which is a Bank Insurance Fund member, that portion

of the deposits of such member for any semiannual period which is equal to the adjusted attributable deposit

amount (determined under subparagraph (C) with respect to the transaction) shall be treated as deposits

which are insured by the Savings Association Insurance Fund.

ø(ii) ASSESSMENTS BY BIF.—In the case of any acquiring, assuming, or resulting depository institution

which is a Savings Association Insurance Fund member, that portion of the deposits of such member for

any semiannual period which is equal to the adjusted

attributable deposit amount (determined under subparagraph (C) with respect to the transaction) shall be

treated as deposits which are insured by the Bank

Insurance Fund.

ø(C) DETERMINATION OF ADJUSTED ATTRIBUTABLE DE- POSIT AMOUNT.—Except as provided in subparagraph (K),

the adjusted attributable deposit amount which shall be

taken into account for purposes of determining the amount

56

of the assessment under subparagraph (B) for any semiannual period by any acquiring, assuming, or resulting depository institution in connection with a transaction under

subparagraph (A) is the amount which is equal to the sum

of— ø(i) the amount of any deposits acquired by the institution in connection with the transaction (as determined at the time of such transaction);

ø(ii) the total of the amounts determined under

clause (iii) for semiannual periods preceding the semiannual period for which the determination is being

made under this subparagraph; and

ø(iii) the amount by which the sum of the amounts

described in clauses (i) and (ii) would have increased

during the preceding semiannual period (other than

any semiannual period beginning before the date of

such transaction) if such increase occurred at a rate

equal to the annual rate of growth of deposits of the

acquiring, assuming, or resulting depository institution minus the amount of any deposits acquired

through the acquisition, in whole or in part, of another

insured depository institution.

ø(D) DEPOSIT OF ASSESSMENT.—That portion of any assessment under section 7 which— ø(i) is determined in accordance with subparagraph

(B)(i) shall be deposited in the Savings Association Insurance Fund; and

ø(ii) is determined in accordance with subparagraph

(B)(ii) shall be deposited in the Bank Insurance Fund.

ø(E) CONDITIONS FOR APPROVAL, GENERALLY.— ø(i) INFORMATION REQUIRED.—An application to engage in any transaction under this paragraph shall

contain such information relating to the factors to be

considered for approval as the responsible agency may

require, by regulation or by specific request, in connection with any particular application.

ø(ii) NO TRANSFER OF DEPOSIT INSURANCE PER- MITTED.—This paragraph shall not be construed as authorizing transactions which result in the transfer of

any insured depository institution’s Federal deposit insurance from 1 Federal deposit insurance fund to the

other Federal deposit insurance fund.

ø(iii) CAPITAL REQUIREMENTS.—A transaction described in this paragraph shall not be approved under

section 18(c)(2) unless the acquiring, assuming, or resulting depository institution will meet all applicable

capital requirements upon consummation of the transaction.

ø(F) CERTAIN INTERSTATE TRANSACTIONS.—A Bank Insurance Fund member which is a subsidiary of a bank

holding company may not be the acquiring, assuming, or

resulting depository institution in a transaction under subparagraph (A) unless the transaction would comply with

the requirements of section 3(d) of the Bank Holding Company Act of 1956 if, at the time of such transaction, the

57

Savings Association Insurance Fund member involved in

such transaction was a State bank that the bank holding

company was applying to acquire.

ø(G) ALLOCATION OF COSTS IN EVENT OF DEFAULT.—If

any acquiring, assuming, or resulting depository institution is in default or danger of default at any time before

this paragraph ceases to apply, any loss incurred by the

Corporation shall be allocated between the Bank Insurance

Fund and the Savings Association Insurance Fund, in

amounts reflecting the amount of insured deposits of such

acquiring, assuming, or resulting depository institution assessed by the Bank Insurance Fund and the Savings Association Insurance Fund, respectively, under subparagraph

(B).

ø(H) SUBSEQUENT APPROVAL OF CONVERSION TRANS- ACTION.—This paragraph shall cease to apply if— ø(i) after the end of the moratorium period established by paragraph (2)(A), the Corporation approves

an application by any acquiring, assuming, or resulting depository institution to treat the transaction described in subparagraph (A) as a conversion transaction; and

ø(ii) the acquiring, assuming, or resulting depository

institution pays the amount of any exit and entrance

fee assessed by the Corporation under subparagraph

(E) of paragraph (2) with respect to such transaction.

ø(I) ACQUIRING, ASSUMING, OR RESULTING DEPOSITORY

INSTITUTION DEFINED.—For purposes of this paragraph,

the term ‘‘acquiring, assuming, or resulting depository institution’’ means any insured depository institution

which—

ø(i) results from any transaction described in paragraph (2)(B)(ii) and approved under this paragraph;

ø(ii) in connection with a transaction described in

paragraph (2)(B)(iii) and approved under this paragraph, assumes any liability to pay deposits of another

insured depository institution; or

ø(iii) in connection with a transaction described in

paragraph (2)(B)(iv) and approved under this paragraph, acquires assets from any insured depository institution in consideration of the assumption of liability

for any deposits of such institution.

ø(K) ADJUSTMENT OF ADJUSTED ATTRIBUTABLE DEPOSIT

AMOUNT.—The amount determined under subparagraph

(C)(i) for deposits acquired by March 31, 1995, shall be reduced by 20 percent for purposes of computing the adjusted attributable deposit amount for the payment of any

assessment for any semiannual period that begins after

the date of the enactment of the Deposit Insurance Funds

Act of 1996 (other than the special assessment imposed

under section 2702(a) of such Act), for a Bank Insurance

Fund member bank that, as of June 30, 1995— ø(i) had an adjusted attributable deposit amount

that was less than 50 percent of the total deposits of

that member bank; or

58

ø(ii)(I) had an adjusted attributable deposit amount

equal to less than 75 percent of the total assessable

deposits of that member bank;

ø(II) had total assessable deposits greater than $5,000,000,000; and

ø(III) was owned or controlled by a bank holding

company that owned or controlled insured depository

institutions having an aggregate amount of deposits

insured or treated as insured by the Bank Insurance

Fund greater than the aggregate amount of deposits

insured or treated as insured by the Savings Association Insurance Fund.¿

(4) NET INCREASE IN NEW DEPOSITS.— (A) IN GENERAL.—In the case of any insured depository

institution that experiences a net increase in new insured

deposits, during the most recent assessment period, in excess of such percentage as the Corporation may determine

to be appropriate, the Board of Directors may, subject to

subparagraph (B), impose a fee on the depository institution in the manner provided under paragraph (1) with respect to the amount of such net increase in new insured deposits, taking into account the levels of assessments paid by

such insured depository institution in prior assessment periods.

(B) REGULATIONS.—The Corporation shall prescribe regulations, after notice and opportunity for comment, establishing procedures for imposing fees under subparagraph

(A).

(e) LIABILITY OF COMMONLY CONTROLLED DEPOSITORY INSTITU- TIONS.—

(1) * * *

* * * * * * *

(5) WAIVER AUTHORITY.—

(A) IN GENERAL.—The Corporation, in its discretion, may

exempt any insured depository institution from the provisions of this subsection if the Corporation determines that

such exemption is in the best interests of the øBank Insurance Fund or the Savings Association Insurance Fund¿ Deposit Insurance Fund.

* * * * * * *

ø(6) 5-YEAR TRANSITION RULE.—During the 5-year period beginning on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989—

ø(A) no Savings Association Insurance Fund member

shall have any liability to the Corporation under this subsection arising out of assistance provided by the Corporation or any loss incurred by the Corporation as a result of

the default of a Bank Insurance Fund member which was

acquired by such Savings Association Insurance Fund

member or any affiliate of such member before the date of

the enactment of such Act; and

ø(B) no Bank Insurance Fund member shall have such

liability with respect to assistance provided by or loss incurred by the Corporation as a result of the default of a

59

Savings Association Insurance Fund member which was

acquired by such Bank Insurance Fund member or any affiliate of such member before the date of the enactment of

such Act.¿

ø(7)¿ (6) EXCLUSION FOR INSTITUTIONS ACQUIRED IN DEBT

COLLECTIONS.—Any depository institution shall not be treated

as commonly controlled, for purposes of this subsection, during

the 5-year period beginning on the date of an acquisition described in subparagraph (A) or such longer period as the

Corporation may determine after written application by the

acquirer, if— (A) * * *

* * * * * * *

ø(8)¿ (7) EXCEPTION FOR CERTAIN FSLIC ASSISTED INSTITUTIONS.—No depository institution shall have any liability to the

Corporation under this subsection as the result of the default

of, or assistance provided with respect to, an insured depository institution which is an affiliate of such depository institution if—

(A) * * *

* * * * * * *

ø(9)¿ (8) COMMONLY CONTROLLED DEFINED.—For purposes of

this subsection, depository institutions are commonly controlled if—

(A) * * *

* * * * * * *

SEC. 6. FACTORS TO BE CONSIDERED.

The factors that are required, under section 4, to be considered

in connection with, and enumerated in, any certificate issued pursuant to section 4 and that are required, under section 5, to be considered by the Board of Directors in connection with any determination by such Board pursuant to section 5 are the following:

(1) * * *

* * * * * * *

(5) The risk presented by such depository institution to the

øBank Insurance Fund or the Savings Association Insurance

Fund¿ Deposit Insurance Fund.

* * * * * * *

SEC. 7. (a)(1) * * *

* * * * * * *

(3) Each insured depository institution shall make to the appropriate Federal banking agency 4 reports of condition annually upon

dates which shall be selected by the Chairman of the Board of Directors, the Comptroller of the Currency, the Chairman of the

Board of Governors of the Federal Reserve System, and the Director of the Office of Thrift Supervision. The dates selected shall be

the same for all insured depository institutions, except that when

any of said reporting dates is a nonbusiness day for any depository

institution, the preceding business day shall be its reporting date.

øTwo dates shall be selected within the semiannual period of January to June inclusive, and the reports on such dates shall be the

60

basis for the certified statement to be filed in July pursuant to subsection (c) of this section, and two dates shall be selected within

the semiannual period of July to December inclusive, and the reports on such dates shall be the basis for the certified statement

to be filed in January pursuant to subsection (c) of this section.¿

Such reports of condition shall be the basis for the certified statements to be filed pursuant to subsection (c). The deposit liabilities

shall be reported in said reports of condition in accordance with

and pursuant to paragraphs (4) and (5) of this subsection, and such

other information shall be reported therein as may be required by

the respective agencies. Each said report of condition shall contain

a declaration by the president, a vice president, the cashier or the

treasurer, or by any other officer designated by the board of directors or trustees of the reporting depository institution to make such

declaration, that the report is true and correct to the best of his

knowledge and belief. The correctness of said report of conditions

shall be attested by the signatures of at least two directors or

trustees of the reporting depository institution other than the officer making such declaration, with a declaration that the report has

been examined by them and to the best of their knowledge and belief is true and correct. At the time of making said reports of condition each insured depository institution shall furnish to the Corporation a copy thereof containing such signed declaration and attestations. Nothing herein shall preclude any of the foregoing agencies from requiring the banks or savings associations under its jurisdiction to make additional reports of condition at any time.

* * * * * * *

(b) ASSESSMENTS.—

(1) RISK-BASED ASSESSMENT SYSTEM.—

(A) * * *

(B) PRIVATE REINSURANCE AUTHORIZED.—In carrying out

this paragraph, the Corporation may— (i) * * *

(ii) base that institution’s øsemiannual¿ assessment

(in whole or in part) on the cost of the reinsurance.

(C) RISK-BASED ASSESSMENT SYSTEM DEFINED.—For purposes of this paragraph, the term ‘‘risk-based assessment

system’’ means a system for calculating a depository institution’s øsemiannual¿ assessment based on— (i) the probability that the ødeposit insurance fund¿

Deposit Insurance Fund will incur a loss with respect

to the institution, taking into consideration the risks

attributable to— (I) * * *

* * * * * * *

(iii) the revenue needs of the ødeposit insurance

fund¿ Deposit Insurance Fund.

(D) SEPARATE ASSESSMENT SYSTEMS.—The Board of Directors may establish separate risk-based assessment systems for large and small members of øeach deposit insurance fund¿ the Deposit Insurance Fund. (E) INFORMATION CONCERNING RISK OF LOSS AND ECO- NOMIC CONDITIONS.—

61

(i) SOURCES OF INFORMATION.—For purposes of determining risk of losses at insured depository institutions and economic conditions generally affecting depository institutions, the Corporation shall collect information, as appropriate, from all sources the Board

of Directors considers appropriate, such as reports of

condition, inspection reports, and other information

from all Federal banking agencies, any information

available from State bank supervisors, State insurance

and securities regulators, the Securities and Exchange

Commission (including information described in section 35), the Secretary of the Treasury, the Commodity

Futures Trading Commission, the Farm Credit Administration, the Federal Trade Commission, any Federal

reserve bank or Federal home loan bank, and other

regulators of financial institutions, and any information available from credit rating entities, and other private economic or business analysts.

(ii) CONSULTATION WITH FEDERAL BANKING AGEN- CIES.—

(I) IN GENERAL.—Except as provided in subclause (II), in assessing the risk of loss to the Deposit Insurance Fund with respect to any insured

depository institution, the Corporation shall consult with the appropriate Federal banking agency

of such institution.

(II) TREATMENT ON AGGREGATE BASIS.—In the

case of insured depository institutions that are well

capitalized (as defined in section 38) and, in the

most recent examination, were found to be well

managed, the consultation under subclause (I) concerning the assessment of the risk of loss posed by

such institutions may be made on an aggregate

basis.

(iii) RULE OF CONSTRUCTION.—No provision of this

paragraph shall be construed as providing any new

authority for the Corporation to require submission of

information by insured depository institutions to the

Corporation.

(F) MODIFICATIONS TO THE RISK-BASED ASSESSMENT SYSTEM ALLOWED ONLY AFTER NOTICE AND COMMENT.—In revising or modifying the risk-based assessment system at

any time after the date of the enactment of the Federal Deposit Insurance Reform Act of 2002, the Board of Directors

may implement such revisions or modification in final form

only after notice and opportunity for comment.

(2) SETTING ASSESSMENTS.—

ø(A) ACHIEVING AND MAINTAINING DESIGNATED RESERVE

RATIO.—

ø(i) IN GENERAL.—The Board of Directors shall set

semiannual assessments for insured depository institutions when necessary, and only to the extent

necessary— ø(I) to maintain the reserve ratio of each deposit

insurance fund at the designated reserve ratio; or

62

ø(II) if the reserve ratio is less than the designated reserve ratio, to increase the reserve ratio

to the designated reserve ratio as provided in

paragraph (3).

ø(ii) FACTORS TO BE CONSIDERED.—In carrying out

clause (i), the Board of Directors shall consider the deposit insurance fund’s—

ø(I) expected operating expenses,

ø(II) case resolution expenditures and income,

ø(III) the effect of assessments on members’

earnings and capital, and

ø(IV) any other factors that the Board of Directors may deem appropriate.

ø(iii) LIMITATION ON ASSESSMENT.—Except as provided in clause (v), the Board of Directors shall not set

semiannual assessments with respect to a deposit insurance fund in excess of the amount needed—

ø(I) to maintain the reserve ratio of the fund at

the designated reserve ratio; or

ø(II) if the reserve ratio is less than the designated reserve ratio, to increase the reserve ratio

to the designated reserve ratio.

ø(iv) DESIGNATED RESERVE RATIO DEFINED.—The

designated reserve ratio of each deposit insurance

fund for each year shall be—

ø(I) 1.25 percent of estimated insured deposits;

or

ø(II) a higher percentage of estimated insured

deposits that the Board of Directors determines to

be justified for that year by circumstances raising

a significant risk of substantial future losses to

the fund.

ø(v) EXCEPTION TO LIMITATION ON ASSESSMENTS.—

The Board of Directors may set semiannual assessments in excess of the amount permitted under

clauses (i) and (iii) with respect to insured depository

institutions that exhibit financial, operational, or compliance weaknesses ranging from moderately severe to

unsatisfactory, or are not well capitalized, as that

term is defined in section 38.

ø(B) INDEPENDENT TREATMENT OF FUNDS.—The Board of

Directors shall—

ø(i) set semiannual assessments for members of

each deposit insurance fund independently from semiannual assessments for members of any other deposit

insurance fund; and

ø(ii) set the designated reserve ratio of each deposit

insurance fund independently from the designated

reserve ratio of any other deposit insurance fund.¿

(A) IN GENERAL.—The Board of Directors shall set assessments for insured depository institutions in such amounts

as the Board of Directors may determine to be necessary or

appropriate, subject to subparagraph (D).

63

(B) FACTORS TO BE CONSIDERED.—In setting assessments

under subparagraph (A), the Board of Directors shall consider the following factors:

(i) The estimated operating expenses of the Deposit

Insurance Fund.

(ii) The estimated case resolution expenses and income of the Deposit Insurance Fund.

(iii) The projected effects of the payment of assessments on the capital and earnings of insured depository institutions.

(iv) the risk factors and other factors taken into account pursuant to paragraph (1) under the risk-based

assessment system, including the requirement under

such paragraph to maintain a risk-based system.

(v) Any other factors the Board of Directors may determine to be appropriate.

(C) NOTICE OF ASSESSMENTS.—The Corporation shall notify each insured depository institution of that institution’s

øsemiannual¿ assessment.

(D) BASE RATE FOR ASSESSMENTS.— (i) IN GENERAL.—In setting assessment rates pursuant to subparagraph (A), the Board of Directors shall

establish a base rate of not more than 1 basis point (exclusive of any credit or dividend) for those insured depository institutions in the lowest-risk category under

the risk-based assessment system established pursuant

to paragraph (1).

(ii) SUSPENSION.—Clause (i) shall not apply during

any period in which the reserve ratio of the Deposit Insurance Fund is less than the amount which is equal

to 1.15 percent of the aggregate estimated insured deposits.

ø(E) MINIMUM ASSESSMENTS.—The Corporation shall design the risk-based assessment system for any deposit insurance fund so that, if the Corporation has borrowings

outstanding under section 14 on behalf of that fund or the

reserve ratio of that fund remains below the designated reserve ratio, the total amount raised by semiannual assessments on members of that fund shall be not less than the

total amount that would have been raised if—

ø(i) section 7(b) as in effect on July 15, 1991 remained in effect;

ø(ii) the assessment rate in effect on July 15, 1991

remained in effect; and

ø(iii) notwithstanding any other provision of this

subsection, during the period beginning on the date of

enactment of the Deposit Insurance Funds Act of

1996, and ending on December 31, 1998, the assessment rate for a Savings Association Insurance Fund

member may not be less than the assessment rate for

a Bank Insurance Fund member that poses a comparable risk to the deposit insurance fund.

ø(F) TRANSITION RULE FOR SAVINGS ASSOCIATION INSUR- ANCE FUND.—With respect to the Savings Association Insurance Fund, during the period beginning on the effective

64

date of the amendments made by section 302(a) of the Federal Deposit Insurance Corporation Improvement Act of

1991 and ending on December 31, 1997— ø(i) subparagraph (A)(i)(II) shall apply as if such

subparagraph did not include ‘‘as provided in paragraph (3)’’; and

ø(ii) subparagraph (E) shall be applied by substituting ‘‘if section 7(b) as in effect on July 15, 1991

remained in effect.’’ for ‘‘if—’’ and all that follows

through clause (ii).

ø(G) SPECIAL RULE UNTIL THE INSURANCE FUNDS

ACHIEVE THE DESIGNATED RESERVE RATIO.—Until a deposit

insurance fund achieves the designated reserve ratio, the

Corporation may limit the maximum assessment on insured depository institutions under the risk-based assessment system authorized under paragraph (1) to not less

than 10 basis points above the average assessment on insured depository institutions under that system.¿

ø(H)¿ (E) BANK ENTERPRISE ACT REQUIREMENT.—The

Corporation shall design the risk-based assessment system

so that, insofar as the system bases assessments, directly

or indirectly, on deposits, the portion of the deposits of any

insured depository institution which are attributable to

lifeline accounts established in accordance with the Bank

Enterprise Act of 1991 shall be subject to assessment øat

a rate determined in accordance with such Act¿ at 1⁄2 the

assessment rate otherwise applicable for such insured depository institution. ø(3) SPECIAL RULE FOR RECAPITALIZING UNDERCAPITALIZED

FUNDS.—

ø(A) IN GENERAL.—Except as provided in paragraph

(2)(F), if the reserve ratio of any deposit insurance fund is

less than the designated reserve ratio under paragraph

(2)(A)(iv), the Board of Directors shall set semiannual assessment rates for members of that fund—

ø(i) that are sufficient to increase the reserve ratio

for that fund to the designated reserve ratio not later

than 1 year after such rates are set; or

ø(ii) in accordance with a schedule promulgated by

the Corporation under subparagraph (B).

ø(B) RECAPITALIZATION SCHEDULES.—For purposes of

subparagraph (A)(ii), the Corporation shall by regulation

promulgate a schedule that specifies, at semiannual intervals, target reserve ratios for that fund, culminating in a

reserve ratio that is equal to the designated reserve ratio

not later than 15 years after the date on which the schedule is implemented.

ø(C) AMENDING SCHEDULE.—The Corporation may, by

regulation, amend a schedule promulgated under subparagraph (B) and such amendment may extend the date specified in subparagraph (B) to such later date as the Corporation determines will, over time, maximize the amount of

semiannual assessments received by the Savings Association Insurance Fund, net of insurance losses incurred by

the Fund.

65

ø(D) APPLICATION TO SAIF MEMBERS.—This paragraph

shall become applicable to Savings Association Insurance

Fund members on January 1, 1998.

ø(4) SEMIANNUAL PERIOD DEFINED.—For purposes of this section, the term ‘‘semiannual period’’ means a period beginning

on January 1 of any calendar year and ending on June 30 of

the same year, or a period beginning on July 1 of any calendar

year and ending on December 31 of the same year.

ø(5) RECORDS TO BE MAINTAINED.—Each insured depository

institution shall maintain all records that the Corporation may

require for verifying the correctness of the institution’s semiannual assessments. No insured depository institution shall be

required to retain those records for that purpose for a period

of more than 5 years from the date of the filing of any certified

statement, except that when there is a dispute between the insured depository institution and the Corporation over the

amount of any assessment, the depository institution shall retain the records until final determination of the issue.¿

(3) DESIGNATED RESERVE RATIO.— (A) ESTABLISHMENT.— (i) IN GENERAL.—The Board of Directors shall designate, by regulation after notice and opportunity for

comment, the reserve ratio applicable with respect to

the Deposit Insurance Fund.

(ii) NOT LESS THAN ANNUAL REDETERMINATION.—A

determination under clause (i) shall be made by the

Board of Directors at least before the beginning of each

calendar year, for such calendar year, and at such

other times as the Board of Directors may determine to

be appropriate.

(B) RANGE.—The reserve ratio designated by the Board of

Directors for any year— (i) may not exceed 1.4 percent of estimated insured

deposits; and

(ii) may not be less than 1.15 percent of estimated insured deposits.

(C) FACTORS.—In designating a reserve ratio for any

year, the Board of Directors shall— (i) take into account the risk of losses to the Deposit

Insurance Fund in such year and future years, including historic experience and potential and estimated

losses from insured depository institutions;

(ii) take into account economic conditions generally

affecting insured depository institutions so as to allow

the designated reserve ratio to increase during more favorable economic conditions and to decrease during

less favorable economic conditions, notwithstanding the

increased risks of loss that may exist during such less

favorable conditions, as determined to be appropriate

by the Board of Directors;

(iii) seek to prevent sharp swings in the assessment

rates for insured depository institutions; and

(iv) take into account such other factors as the Board

of Directors may determine to be appropriate, consistent with the requirements of this subparagraph.

66

(D) PUBLICATION OF PROPOSED CHANGE IN RATIO.—In soliciting comment on any proposed change in the designated

reserve ratio in accordance with subparagraph (A), the

Board of Directors shall include in the published proposal

a thorough analysis of the data and projections on which

the proposal is based.

(E) DIF RESTORATION PLANS.— (i) IN GENERAL.—Whenever— (I) the Corporation projects that the reserve ratio

of the Deposit Insurance Fund will fall below the

designated reserve ratio within 6 months of such

determination; or

(II) the reserve ratio of the Deposit Insurance

Fund actually falls below the designated reserve

ratio without any determination under subclause

(I) having been made,

the Corporation shall establish and implement a Deposit Insurance Fund restoration plan within 30 days

that meets the requirements of clause (ii) or (iii), as the

case may be, and such other conditions as the Corporation determines to be appropriate.

(ii) REQUIREMENTS OF PLAN IF RESERVE RATIO DOES

NOT FALL BELOW 1.0 PERCENT.—If the reserve ratio of

the Deposit Insurance Fund is not projected to or has

not fallen below an amount equal to 1.0 percent of the

aggregate estimated insured deposits, a Deposit Insurance Fund restoration plan meets the requirements of

this clause if the plan provides that the reserve ratio of

the Fund will meet or exceed the designated reserve

ratio that was in effect before the occurrence of the

event described in subclause (I) or (II) of clause (i) before the end of the 3-year period beginning upon implementation of the plan.

(iii) REQUIREMENTS OF PLAN IF RESERVE RATIO FALLS

BELOW 1.0 PERCENT.—If the reserve ratio of the Deposit

Insurance Fund has fallen below an amount equal to

1.0 percent of the aggregate estimated insured deposits,

a Deposit Insurance Fund restoration plan meets the

requirements of this clause if the plan provides that the

reserve ratio of the Fund— (I) will meet or exceed an amount equal to 1.0

percent of the aggregate estimated insured deposits

before the end of the 2-year period beginning upon

implementation of the plan; and

(II) will meet or exceed the designated reserve

ratio that was in effect before the occurrence of the

event described in subclause (I) or (II) of clause (i)

before the end of the 3-year period beginning on

the date the reserve ratio first meets or exceeds an

amount equal to 1.0 percent of the aggregate estimated insured deposits after the implementation of

the plan.

(iv) TRANSPARENCY.—Not more than 90 days after

the Corporation establishes and implements a restoration plan under clause (i), the Corporation shall pubVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00066 Fmt 6659 Sfmt 6603 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
67

lish in the Federal Register a detailed analysis of the

factors considered and the basis for the actions taken

with regard to the plan.

(4) DEPOSITORY INSTITUTION REQUIRED TO MAINTAIN ASSESSMENT-RELATED RECORDS.—Each insured depository institution

shall maintain all records that the Corporation may require for

verifying the correctness of any assessment on the insured depository institution under this subsection until the later of—

(A) the end of the 3-year period beginning on the due date

of the assessment; or

(B) in the case of a dispute between the insured depository institution and the Corporation with respect to such

assessment, the date of a final determination of any such

dispute.

ø(6)¿ (5) EMERGENCY SPECIAL ASSESSMENTS.—In addition to

the other assessments imposed on insured depository institutions under this subsection, the Corporation may impose 1 or

more special assessments on insured depository institutions in

an amount determined by the Corporation if the amount of

øany such assessment¿ any such assessment is necessary—

ø(A) is necessary—¿

ø(i)¿ (A) to provide sufficient assessment income to repay

amounts borrowed from the Secretary of the Treasury

under section 14(a) in accordance with the repayment

schedule in effect under section 14(c) during the period

with respect to which such assessment is imposed;

ø(ii)¿ (B) to provide sufficient assessment income to

repay obligations issued to and other amounts borrowed

from øBank Insurance Fund members¿ insured depository

institutions under section 14(d); or

ø(iii)¿ (C) for any other purpose that the Corporation

may deem necessaryø; and¿.

ø(B) is allocated between Bank Insurance Fund members and Savings Association Insurance Fund members in

amounts which reflect the degree to which the proceeds of

the amounts borrowed are to be used for the benefit of the

respective insurance funds.¿

ø(7)¿ (6) COMMUNITY ENTERPRISE CREDITS.—The Corporation

shall allow a credit against any semiannual assessment to any

insured depository institution which satisfies the requirements

of the Community Enterprise Assessment Credit Board under

section 233(a)(1) of the Bank Enterprise Act of 1991 in the

amount determined by such Board by regulation.

(c) CERTIFIED STATEMENTS; PAYMENTS.—

(1) CERTIFIED STATEMENTS REQUIRED.—

(A) IN GENERAL.—Each insured depository institution

shall file with the Corporation a certified statement containing such information as the Corporation may require

for determining the institution’s øsemiannual¿ assessment.

* * * * * * *

(2) PAYMENTS REQUIRED.—

68

(A) IN GENERAL.—Each insured depository institution

shall pay to the Corporation the øsemiannual¿ assessment

imposed under subsection (b).

* * * * * * *

(3) NEWLY INSURED INSTITUTIONS.—To facilitate the administration of this section, the Board of Directors may waive the

requirements of paragraphs (1) and (2) for the øsemiannual period¿ initial assessment period in which a depository institution becomes insured.

* * * * * * *

ø(e) REFUNDS.— ø(1) OVERPAYMENTS.—In the case of any payment of an assessment by an insured depository institution in excess of the

amount due to the Corporation, the Corporation may— ø(A) refund the amount of the excess payment to the insured depository institution; or

ø(B) credit such excess amount toward the payment of

subsequent semiannual assessments until such credit is

exhausted.

ø(2) BALANCE IN INSURANCE FUND IN EXCESS OF DESIGNATED

RESERVE.— ø(A) IN GENERAL.—Subject to subparagraphs (B) and (C),

if, as of the end of any semiannual assessment period beginning after the date of the enactment of the Deposit Insurance Funds Act of 1996, the amount of the actual reserves in—ø(i) the Bank Insurance Fund (until the merger of

such fund into the Deposit Insurance Fund pursuant

to section 2704 of the Deposit Insurance Funds Act of

1996); or

ø(ii) the Deposit Insurance Fund (after the establishment of such fund),

exceeds the balance required to meet the designated reserve ratio applicable with respect to such fund, such excess amount shall be refunded to insured depository institutions by the Corporation on such basis as the Board of

Directors determines to be appropriate, taking into account

the factors considered under the risk-based assessment

system.

ø(B) REFUND NOT TO EXCEED PREVIOUS SEMIANNUAL ASSESSMENT.—The amount of any refund under this paragraph to any member of a deposit insurance fund for any

semiannual assessment period may not exceed the total

amount of assessments paid by such member to the insurance fund with respect to such period.

ø(C) REFUND LIMITATION FOR CERTAIN INSTITUTIONS.—

No refund may be made under this paragraph with respect

to the amount of any assessment paid for any semiannual

assessment period by any insured depository institution

described in clause (v) of subsection (b)(2)(A).¿

(e) REFUNDS, DIVIDENDS, AND CREDITS.—

(1) REFUNDS OF OVERPAYMENTS.—In the case of any payment

of an assessment by an insured depository institution in excess

of the amount due to the Corporation, the Corporation may—

69

(A) refund the amount of the excess payment to the insured depository institution; or

(B) credit such excess amount toward the payment of subsequent assessments until such credit is exhausted.

(2) DIVIDENDS FROM EXCESS AMOUNTS IN DEPOSIT INSURANCE

FUND.—

(A) RESERVE RATIO EQUAL TO OR IN EXCESS OF 1.4 PER- CENT OF ESTIMATED INSURED DEPOSITS.—Whenever the reserve ratio of the Deposit Insurance Fund equals or exceeds

1.4 percent of estimated insured deposits, the Corporation

shall declare the amount in the Fund in excess of the

amount required to maintain the reserve ratio at the designated reserve ratio in effect at such time, as dividends to

be paid to insured depository institutions.

(B) RESERVE RATIO EQUAL TO OR IN EXCESS OF 1.35 PER- CENT OF ESTIMATED INSURED DEPOSITS AND LESS THAN 1.4

PERCENT.—Whenever the reserve ratio of the Deposit Insurance Fund equals or exceeds 1.35 percent of estimated insured deposits and is less than 1.4 percent of such deposits,

the Corporation shall declare the amount in the Fund that

is equal to 50 percent of the amount in excess of the amount

required to maintain the reserve ratio at 1.35 percent of the

estimated insured deposits as dividends to be paid to insured depository institutions.

(C) BASIS FOR DISTRIBUTION OF DIVIDENDS.— (i) IN GENERAL.—The Corporation shall determine

each insured depository institution’s relative share of

the Deposit Insurance Fund, for the purposes of determining that institution’s relative percentage share of

any dividends declared under this paragraph, based

upon the contributions made by such institution (and

any predecessor institution) to such Fund or the Bank

Insurance Fund or the Savings Association Insurance

Fund, as the case may be.

(ii) FACTORS.—The Corporation shall determine, pursuant to clause (i), the relative percentage share of any

insured depository institution in any dividend declared

under this paragraph based on— (I) the institution’s relative share of the Deposit

Insurance Fund as determined using the assessment base of the institution (including any predecessor institution) on December 31, 1996, compared

to the assessment base of all insured depository institutions on such date, taking into account such

other factors as the Corporation may determine to

be appropriate; and

(II) the effect on such share of any assessments

paid after December 31, 1996, by such insured depository institution (including any predecessor institution) to the Deposit Insurance Fund or the

Bank Insurance Fund or the Savings Association

Insurance Fund, as the case may be, excluding

that portion of any assessment paid for any assessment period that exceeds, if any, the amount of the

assessment such institution would have paid for

70

such assessment period if the institution had been

classified in the lowest-risk category under the

risk-based assessment established under subsection

(b)(1).

(D) NOTICE AND OPPORTUNITY FOR COMMENT.—The declaration and payment of dividends under this paragraph

shall be made in such manner and on such conditions as

the Corporation shall prescribe by regulation, after notice

and opportunity for comment.

(3) CREDIT POOL.— (A) ONE-TIME CREDIT BASED ON TOTAL ASSESSMENT BASE

AT YEAR-END 1996.— (i) IN GENERAL.—Before the end of the 270-day period beginning on the date of the enactment of the Federal Deposit Insurance Reform Act of 2002, the Board

of Directors shall, by regulation, provide for a credit to

each eligible insured depository institution, based on

the assessment base of the institution (including any

predecessor institution) on December 31, 1996, as compared to the combined aggregate assessment base of all

eligible insured depository institutions, taking into account such factors as the Board of Directors may determine to be appropriate.

(ii) CREDIT LIMIT.—The aggregate amount of credits

available under clause (i) to all eligible insured depository institutions shall equal the amount that the Corporation could collect if the Corporation imposed an

assessment of 12 basis points on the combined assessment base of the Bank Insurance Fund and the Savings Association Insurance Fund as of December 31,

2001.

(iii) ELIGIBLE INSURED DEPOSITORY INSTITUTION DE- FINED.—For purposes of this paragraph, the term ‘‘eligible insured depository institution’’ means any insured

depository institution that—

(I) was in existence on December 31, 1996, and

paid a deposit insurance assessment prior to that

date; or

(II) is a successor to any insured depository institution described in subclause (II).

(iv) APPLICATION OF CREDITS.—

(I) IN GENERAL.—The amount of a credit to any

eligible insured depository institution under this

paragraph may be applied by the Corporation to

those portions of the assessments imposed on such

institution under subsection (b) that become due

for assessment periods beginning after the effective

date of regulations prescribed under clause (i).

(II) REGULATIONS.—The regulations prescribed

under clause (i) shall establish the qualifications

and procedures governing the application of assessment credits pursuant to subclause (I).

(v) CRITERIA FOR DETERMINATION.—In determining

whether to provide assessment credits under this paragraph and the amounts of any such credits, the Board

71

of Directors shall take into account the factors for designating the reserve ratio under subsection (b)(3) and

the factors for setting assessments under subsection

(b)(2)(B).

(vi) LIMITATION ON AMOUNT OF CREDIT FOR CERTAIN

DEPOSITORY INSTITUTIONS.—In the case of an insured

depository institution that exhibits financial, operational, or compliance weaknesses ranging from moderately severe to unsatisfactory, or is not adequately

capitalized (as defined in section 38) at the beginning

of an assessment period, the amount of any credit allowed under this paragraph against the assessment on

that depository institution for such period may not exceed the amount equal to the average assessment on all

insured depository institutions for such assessment period.

(vii) ADMINISTRATIVE REVIEW.— (I) IN GENERAL.—The regulations prescribed

under clause (i) shall include provisions allowing

an eligible insured depository institution a reasonable opportunity for a hearing before the Corporation to challenge the amount of the credit determined under this paragraph for such institution.

(II) FINALITY OF ADMINISTRATIVE REVIEW.—Any

review under subclause (i) of any determination of

the Corporation under this paragraph shall be

final and not subject to judicial review.

(viii) PREDECESSOR DEFINED.—For purposes of this

paragraph, the term ‘‘predecessor’’, when used with respect to any insured depository institution, includes

any other insured depository institution acquired by or

merged with such insured depository institution.

(B) ON-GOING CREDIT POOL.— (i) IN GENERAL.—In addition to the credit provided

pursuant to subparagraph (A) and subject to the limitation contained in clause (vi) of such subparagraph,

the Corporation shall, by regulation, establish an ongoing system of credits to be applied against future assessments under subsection (b)(1) on the same basis as

the dividends provided under paragraph (2)(C).

(ii) LIMITATION ON CREDITS UNDER CERTAIN CIR- CUMSTANCES.—No credits may be allowed by the Corporation under this subparagraph during any period

in which—(I) the reserve ratio of the Deposit Insurance

Fund is less than the designated reserve ratio of

such Fund; or

(II) the designated reserve ratio of the Fund is

less than 1.25 percent of the amount of estimated

insured deposits.

* * * * * * *

ø(g) The Corporation, in a suit brought at law or in equity¿

(g) ACTIONS ON CLAIMS ARISING FROM ASSESSMENTS.— (1) CAUSE OF ACTION ESTABLISHED.—The Corporation, in an

action brought in any court of competent jurisdiction, shall be

72

entitled to recover from any insured depository institution the

amount of any unpaid assessment lawfully payable by such insured depository institution to the Corporation, whether or not

such depository institution shall have made any such report of

condition under subsection (a) of this section or filed any such

certified statement and whether or not suit shall have been

brought to compel the depository institution to make any such

report or file any such statement. øNo action or proceeding

shall be brought for the recovery of any assessment due to the

Corporation, or for the recovery of any amount paid to the Corporation in excess of the amount due to it, unless such action

or proceeding shall have been brought within five years after

the right accrued for which the claim is made, except where

the insured depository institution has made or filed with the

Corporation a false or fraudulent certified statement with the

intent to evade, in whole or in part, the payment of assessment, in which case the claim shall not be deemed to have accrued until the discovery by the Corporation that the certified

statement is false or fraudulent: Provided, however, That

where a cause of action has already accrued, and the period

herein prescribed within which an action may be brought has

expired, or will expire within one year from the date this

amendment becomes effective, an action may be brought on

such cause of action within one year from the effective date of

this amendment: And provided further, That no action or proceeding shall be brought for the recovery of any assessment on

deposits alleged to have been omitted from the assessment

base of any insured depository institution for any year prior to

1945 except that any claim of the Corporation for the payment

of any assessment may be offset by it against any claim of the

depository institution for the overpayment of any assessment.¿

(2) CLAIMS OF INSURED DEPOSITORY INSTITUTIONS.—An action by an insured depository institution to recover from the

Corporation on a claim relating to the alleged overpayment of

any assessment may not be brought against the Corporation

after the end of the 3-year period beginning on the date the payment of the assessment is due.

(3) CLAIMS OF THE CORPORATION.—Subject to paragraph (4),

an action by the Corporation to recover from an insured depository institution on a claim relating to the alleged nonpayment

or underpayment of an assessment may not be brought by the

Corporation after the end of the 3-year period beginning on the

date the payment of the assessment is due.

(4) FALSE OR FRAUDULENT STATEMENT.—If an insured depository institution has made or filed a false or fraudulent statement with the intent to evade any amount of any assessment,

the 3-year period referred to in paragraph (3) shall commence

on the date the Corporation discovers the falsity or fraudulent

nature of the statement.

(5) TOLLING OF STATUTE OF LIMITATIONS.—In accordance

with regulations which the Corporation shall prescribe establishing procedures for administrative review of claims described

in paragraphs (2), (3), and (4), the period of any administrative

review by the Corporation of any such claim shall not be taken

73

into account for purposes of the 3-year period referred to in any

such paragraph.

(6) FINALITY OF RECORDS.—Deposit information that is relevant to the determination of the amount of an assessment and

is based on records required to be maintained under subsection

(b)(4) shall become conclusive and not subject to change after

the expiration of the period described in such subsection.

(7) COORDINATION WITH OTHER LAW.—The provisions of this

subsection shall apply with respect to actions described in this

subsection, notwithstanding any provision of any other Federal

or State law.

* * * * * * *

(i) INSURANCE OF TRUST FUNDS.—

(1) IN GENERAL.—Trust funds held on deposit by an insured

depository institution in a fiduciary capacity as trustee pursuant to any irrevocable trust established pursuant to any statute or written trust agreement shall be insured in an amount

not to exceed ø$100,000¿ the standard maximum deposit insurance amount (as determined under section 11(a)(1)) for each

trust estate.

* * * * * * *

(3) BANK DEPOSIT FINANCIAL ASSISTANCE PROGRAM.—Notwithstanding paragraph (1), funds deposited by an insured depository institution pursuant to the Bank Deposit Financial

Assistance Program of the Department of Energy shall be separately insured in an amount not to exceed ø$100,000¿ the

standard maximum deposit insurance amount (as determined

under section 11(a)(1)) for each insured depository institution

depositing such funds.

* * * * * * *

(j)(1) * * *

* * * * * * *

(7) The appropriate Federal banking agency may disapprove any

proposed acquisition if— (A) * * *

* * * * * * *

(F) the appropriate Federal banking agency determines that

the proposed transaction would result in an adverse effect on

the øBank Insurance Fund or the Savings Association Insurance Fund¿ Deposit Insurance Fund.

* * * * * * *

SEC. 8. (a) * * *

* * * * * * *

(p) Notwithstanding any other provision of law, whenever the

Board of Directors shall determine that an insured depository institution is not engaged in the business of receiving deposits, other

than trust funds as herein defined, the Corporation shall notify the

depository institution that its insured status will terminate at the

expiration of the first full øsemiannual¿ assessment period following such notice. A finding by the Board of Directors that a depository institution is not engaged in the business of receiving deVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00073 Fmt 6659 Sfmt 6601 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
74

posits, other than such trust funds, shall be conclusive. The Board

of Directors shall prescribe the notice to be given by the depository

institution of such termination and the Corporation may publish

notice thereof. Upon the termination of the insured status of any

such depository institution, its deposits shall thereupon cease to be

insured and the depository institution shall thereafter be relieved

of all future obligations to the Corporation, including the obligation

to pay future assessments.

(q) Whenever the liabilities of an insured depository institution

for deposits shall have been assumed by another insured depository

institution or depository institutions, whether by way of merger,

consolidation, or other statutory assumption, or pursuant to contract (1) the insured status of the depository institution whose liabilities are so assumed shall terminate on the date of receipt by

the Corporation of satisfactory evidence of such assumption; (2) the

separate insurance of all deposits so assumed shall terminate at

the end of six months from the date such assumption takes effect

or, in the case of any time deposit, the earliest maturity date after

the six-month period. Where the deposits of an insured depository

institution are assumed by a newly insured depository institution,

the depository institution whose deposits are assumed shall not be

required to pay any assessment with respect to the deposits which

have been so assumed after the øsemiannual¿ assessment period in

which the assumption takes effect.

* * * * * * *

(t) AUTHORITY OF FDIC TO TAKE ENFORCEMENT ACTION AGAINST

INSURED DEPOSITORY INSTITUTIONS AND INSTITUTION-AFFILIATED

PARTIES.—

(1) * * *

(2) FDIC’S AUTHORITY TO ACT IF APPROPRIATE FEDERAL BANKING AGENCY FAILS TO FOLLOW RECOMMENDATION.—If the appropriate Federal banking agency does not, before the end of the

60-day period beginning on the date on which the agency receives the recommendation under paragraph (1), take the enforcement action recommended by the Corporation or provide

a plan acceptable to the Corporation for responding to the Corporation’s concerns, the Corporation may take the recommended enforcement action if the Board of Directors determines, upon a vote of its members, that—

(A) * * *

* * * * * * *

(C) the conduct or threatened conduct (including any

acts or omissions) poses a risk to the ødeposit insurance

fund¿ Deposit Insurance Fund, or may prejudice the interests of the institution’s depositors.

* * * * * * *

SEC. 11. (a) DEPOSIT INSURANCE.—

(1) INSURED AMOUNTS PAYABLE.—

(A) * * *

ø(B) NET AMOUNT OF INSURED DEPOSIT.—The net

amount due to any depositor at an insured depository institution shall not exceed $100,000 as determined in accordance with subparagraphs (C) and (D).¿

75

(B) NET AMOUNT OF INSURED DEPOSIT.—The net amount

due to any depositor at an insured depository institution

shall not exceed the standard maximum deposit insurance

amount as determined in accordance with subparagraphs

(C), (D), (E) and (F) and paragraph (3).

* * * * * * *

ø(D) COVERAGE ON PRO RATA OR ‘‘PASS-THROUGH’’ BASIS.—

ø(i) IN GENERAL.—Except as provided in clause (ii),

for the purpose of determining the amount of insurance due under subparagraph (B), the Corporation

shall provide deposit insurance coverage with respect

to deposits accepted by any insured depository institution on a pro rata or ‘‘pass-through’’ basis to a participant in or beneficiary of an employee benefit plan (as

defined in section 11(a)(8)(B)(ii)), including any eligible

deferred compensation plan described in section 457 of

the Internal Revenue Code of 1986.

ø(ii) EXCEPTION.—After the end of the 1-year period

beginning on the date of the enactment of the Federal

Deposit Insurance Corporation Improvement Act of

1991, the Corporation shall not provide insurance coverage on a pro rata or ‘‘pass-through’’ basis pursuant

to clause (i) with respect to deposits accepted by any

insured depository institution which, at the time such

deposits are accepted, may not accept brokered deposits under section 29.

ø(iii) COVERAGE UNDER CERTAIN CIRCUMSTANCES.— Clause (ii) shall not apply with respect to any deposit

accepted by an insured depository institution described in such clause if, at the time the deposit is

accepted—

ø(I) the institution meets each applicable capital

standard; and

ø(II) the depositor receives a written statement

from the institution that such deposits at such institution are eligible for insurance coverage on a

pro rata or ‘‘pass-through’’ basis.¿

(D) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT PLAN DE- POSITS.—

(i) PASS-THROUGH INSURANCE.—The Corporation

shall provide pass-through deposit insurance for the

deposits of any employee benefit plan.

(ii) PROHIBITION ON ACCEPTANCE OF BENEFIT PLAN

DEPOSITS.—An insured depository institution that is

not well capitalized or adequately capitalized may not

accept employee benefit plan deposits.

(iii) DEFINITIONS.—For purposes of this subparagraph, the following definitions shall apply:

(I) CAPITAL STANDARDS.—The terms ‘‘well capitalized’’ and ‘‘adequately capitalized’’ have the

same meanings as in section 38.

(II) EMPLOYEE BENEFIT PLAN.—The term ‘‘employee benefit plan’’ has the same meaning as in

paragraph (8)(B)(ii), and includes any eligible deVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00075 Fmt 6659 Sfmt 6603 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
76

ferred compensation plan described in section 457

of the Internal Revenue Code of 1986.

(III) PASS-THROUGH DEPOSIT INSURANCE.—The

term ‘‘pass-through deposit insurance’’ means, with

respect to an employee benefit plan, deposit insurance coverage provided on a pro rata basis to the

participants in the plan, in accordance with the interest of each participant.

(E) STANDARD MAXIMUM DEPOSIT INSURANCE AMOUNT DEFINED.—For purposes of this Act, the term ‘‘standard maximum deposit insurance amount’’ means—

(i) until the effective date of final regulations prescribed pursuant to section 10(a)(2) of the Federal Deposit Insurance Reform Act of 2002, $100,000; and

(ii) on and after such effective date, $130,000, adjusted as provided under subparagraph (F).

(F) INFLATION ADJUSTMENT.—

(i) IN GENERAL.—By April 1 of 2005, and the 1st day

of each subsequent 5-year period, the Board of Directors and the National Credit Union Administration

Board shall jointly prescribe the amount by which the

standard maximum deposit insurance amount and the

standard maximum share insurance amount (as defined in section 207(k) of the Federal Credit Union Act)

applicable to any depositor at an insured depository institution shall be increased by calculating the product

of—

(I) $130,000; and

(II) the ratio of the value of the Personal Consumption Expenditures Chain-Type Index (or any

successor index thereto), published by the Department of Commerce, as in effect on the date this

subparagraph takes effect, to the value of such

index as of December 31 of the year preceding the

year in which the adjustment is calculated under

this clause.

(ii) ROUNDING.—If the amount determined under

clause (ii) for any period is not a multiple of $10,000,

the amount so determined shall be rounded to the

nearest $10,000.

(iii) PUBLICATION AND REPORT TO THE CONGRESS.—

Not later than April 5 of any calendar year in which

an adjustment is required to be calculated under

clause (i) to the standard maximum deposit insurance

amount and the standard maximum share insurance

amount under such clause, the Board of Directors and

the National Credit Union Administration Board

shall—

(I) publish in the Federal Register the standard

maximum deposit insurance amount, the standard

maximum share insurance amount, and the

amount of coverage under paragraph (3)(A) and

section 207(k)(3) of the Federal Credit Union Act,

as so calculated; and

77

(II) jointly submit a report to the Congress containing the amounts described in subclause (I).

(iv) 6-MONTH IMPLEMENTATION PERIOD.—Unless an

Act of Congress enacted before July 1 of the calendar

year in which an adjustment is required to be calculated under clause (i) provides otherwise, the increase in the standard maximum deposit insurance

amount and the standard maximum share insurance

amount shall take effect on January 1 of the year immediately succeeding such calendar year.

ø(2)(A) Notwithstanding any limitation in this Act or in any

other provision of law relating to the amount of deposit insurance

available for the account of any one depositor, in the case of a depositor who is—¿

(2) MUNICIPAL DEPOSITORS.— (A) IN GENERAL.—Notwithstanding any limitation in this

Act or in any other provision of law relating to the amount

of deposit insurance available to any 1 depositor— (i) a municipal depositor shall, for the purpose of determining the amount of insured deposits under this

subsection, be deemed to be a depositor separate and

distinct from any other officer, employee, or agent of

the United States or any public unit referred to in subparagraph (D); and

(ii) except as provided in subparagraph (B), the deposits of a municipal depositor shall be insured in an

amount equal to the standard maximum deposit insurance amount (as determined under paragraph (1)).

(B) IN-STATE MUNICIPAL DEPOSITORS.—In the case of the

deposits of an in-State municipal depositor described in

clause (ii), (iii), (iv), or (v) of subparagraph (D) at an insured depository institution, such deposits shall be insured

in an amount not to exceed the lesser of— (i) $5,000,000; or

(ii) the sum of the standard maximum deposit insurance amount and 80 percent of the amount of any deposits in excess of the standard maximum deposit insurance amount.

(C) IN-STATE MUNICIPAL DEPOSITOR DEFINED.—For purposes of this paragraph, the term ‘‘in-State municipal depositor’’ means a municipal depositor that is located in the

same State as the office or branch of the insured depository

institution at which the deposits of that depositor are held.

(D) MUNICIPAL DEPOSITOR.—In this paragraph, the term ‘‘municipal depositor’’ means a depositor that is— (i) * * *

* * * * * * *

(v) an officer, employee, or agent of any Indian tribe (as defined in section 3(c) of the Indian Financing Act of 1974) or

agency thereof having official custody of tribal funds and lawfully investing or depositing the same in time and savings deposits in an insured depository institutionø;¿. øsuch depositor shall, for the purpose of determining the amount

of insured deposits under this subsection, be deemed a depositor in

such custodial capacity separate and distinct from any other officer,

78

employee, or agent of the United States or any public unit referred

to in clause (ii), (iii), (iv), or (v) and the deposit of any such depositor shall be insured in an amount not to exceed $100,000 per account in an amount not to exceed $100,000 per account.¿

ø(B) The¿

(E) AUTHORITY TO LIMIT DEPOSITS.—The Corporation

may limit the aggregate amount of funds that may be invested or deposited in deposits in any insured depository

institution by any ødepositor referred to in subparagraph

(A) of this paragraph¿ municipal depositor on the basis of

the size of any such bank in terms of its assets: Provided,

however, such limitation may be exceeded by the pledging

of acceptable securities to the ødepositor referred to in subparagraph (A) of this paragraph¿ municipal depositor

when and where required.

(3) CERTAIN RETIREMENT ACCOUNTS.—

(A) IN GENERAL.—Notwithstanding any limitation in this

Act relating to the amount of deposit insurance available

for the account of any 1 depositor, deposits in an insured

depository institution made in connection with—

(i) * * *

* * * * * * *

shall be aggregated and insured in an amount not to exceed ø$100,000¿ 2 times the standard maximum deposit insurance amount (as determined under paragraph (1)) per

participant per insured depository institution.

* * * * * * *

ø(4) GENERAL PROVISIONS RELATING TO FUNDS.—

ø(A) MAINTENANCE AND USE OF FUNDS.—The Bank Insurance Fund established under paragraph (5) and the

Savings Association Insurance Fund established under

paragraph (6) shall each be—

ø(i) maintained and administered by the Corporation;

ø(ii) maintained separately and not commingled;

and

ø(iii) used by the Corporation to carry out its insurance purposes in the manner provided in this subsection.

ø(B) LIMITATION ON USE.—Notwithstanding any provision of law other than section 13(c)(4)(G), the Bank Insurance Fund and the Savings Association Insurance Fund

shall not be used in any manner to benefit any shareholder or affiliate (other than an insured depository institution that receives assistance in accordance with the provisions of this Act) of—

ø(i) any insured depository institution for which the

Corporation or the Resolution Trust Corporation has

been appointed conservator or receiver, in connection

with any type of resolution by the Corporation or the

Resolution Trust Corporation;

ø(ii) any other insured depository institution in default or in danger of default, in connection with any

79

type of resolution by the Corporation or the Resolution

Trust Corporation; or

ø(iii) any insured depository institution, in connection with the provision of assistance under this section

or section 13 with respect to such institution, except

that this clause shall not prohibit any assistance to

any insured depository institution that is not in default, or that is not in danger of default, that is acquiring (as defined in section 13(f)(8)(B)) another insured

depository institution.

ø(5) BANK INSURANCE FUND.—

ø(A) ESTABLISHMENT.—There is established a fund to be

known as the Bank Insurance Fund.

ø(B) TRANSFER TO FUND.—On the date of the enactment

of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Permanent Insurance Fund

shall be dissolved and all assets and liabilities of the Permanent Insurance Fund shall be transferred to the Bank

Insurance Fund.

ø(C) USES.—The Bank Insurance Fund shall be available to the Corporation for use with respect to Bank Insurance Fund members.

ø(D) DEPOSITS.—All amounts assessed against Bank Insurance Fund members by the Corporation shall be deposited into the Bank Insurance Fund.

ø(6) SAVINGS ASSOCIATION INSURANCE FUND.—

ø(A) ESTABLISHMENT.—There is established a fund to be

known as the Savings Association Insurance Fund.

ø(B) USES.—The Savings Association Insurance Fund

shall be available to the Corporation for use with respect

to Savings Association Insurance Fund members.

ø(C) DEPOSITS.—All amounts assessed against Savings

Association Insurance Fund members which are not required for the Financing Corporation, the Resolution

Funding Corporation, or the FSLIC Resolution Fund shall

be deposited in the Savings Association Insurance Fund.

ø(D) TREASURY PAYMENTS TO FUND.—To the extent of

the availability of amounts provided in appropriation Acts

and subject to subparagraphs (E) and (G), the Secretary of

the Treasury shall pay to the Savings Association Insurance Fund such amounts as may be needed to pay losses

incurred by the Fund in fiscal years 1994 through 1998.

ø(E) CERTIFICATION CONDITIONS ON AVAILABILITY OF

FUNDING.—No amount appropriated for payments by the

Secretary of the Treasury in accordance with subparagraph (D) for any fiscal year may be expended unless the

Chairperson of the Board of Directors certifies to the Congress, at any time before the beginning of or during such

fiscal year, that—

ø(i) such amount is needed to pay for losses which

have been incurred or can reasonably be expected to

be incurred by the Savings Association Insurance

Fund;

ø(ii) the Board of Directors has determined that—

80

ø(I) Savings Association Insurance Fund members, in the aggregate, are unable to pay additional semiannual assessments under section 7(b)

at the assessment rates which would be required

in order to cover, from such additional assessments, losses which have been incurred or can

reasonably be expected to be incurred by the Fund

without adversely affecting the ability of such

members to raise and maintain capital or to maintain the members’ assessment base; and

ø(II) an increase in the assessment rates for

Savings Association Insurance Fund members to

cover such losses could reasonably be expected to

result in greater losses to the Government;

ø(iii) the Board of Directors has determined that— ø(I) Savings Association Insurance Fund members, in the aggregate, are unable to pay additional semiannual assessments under section 7(b)

at the assessment rates which would be required

in order to meet the repayment schedule required

under section 14(c) for any amount borrowed

under section 14(a) to cover losses which have

been incurred or can reasonably be expected to be

incurred by the Fund without adversely affecting

the ability of such members to raise and maintain

capital or to maintain the members’ assessment

base; and

ø(II) an increase in the assessment rates for

Savings Association Insurance Fund members to

meet any such repayment schedule could reasonably be expected to result in greater losses to the

Government;

ø(iv) as of the date of certification, the Corporation

has in effect procedures designed to ensure that the

activities of the Savings Association Insurance Fund

and the affairs of any Savings Association Insurance

Fund member for which a conservator or receiver has

been appointed are conducted in an efficient manner

and the Corporation is in compliance with such procedures;

ø(v) with respect to the most recent audit of the

Savings Association Insurance Fund by the Comptroller General of the United States before the date of

the certification—

ø(I) the Corporation has taken or is taking appropriate action to implement any recommendation made by the Comptroller General; or

ø(II) no corrective action is necessary or appropriate;

ø(vi) the Corporation has provided for the appointment of a chief financial officer who—

ø(I) does not have other operating responsibilities;

ø(II) will report directly to the Chairperson of

the Corporation; and

81

ø(III) will have such authority and duties of

chief financial officers under section 902 of title

31, United States Code, as the Board of Directors

of the Corporation determines to be appropriate

with respect to the Corporation;

ø(vii) the Corporation has provided for the appointment of a senior officer whose responsibilities shall include setting uniform standards for contracting and

contracting enforcement in connection with the administration of the Fund;

ø(viii) the Corporation is implementing the minority

outreach provisions mandated by section 1216 of the

Financial Institutions Reform, Recovery, and Enforcement Act of 1989;

ø(ix) the Corporation has provided for the appointment of a senior attorney, at the assistant general

counsel level or above, responsible for professional liability cases; and

ø(x) the Corporation has improved the management

of legal services by—

ø(I) utilizing staff counsel when such utilization

would provide the same level of quality in legal

services as the use of outside counsel at the same

or a lower estimated cost; and

ø(II) employing outside counsel only if the use of

outside counsel would provide the most practicable, efficient, and cost-effective resolution to

the action and only under a negotiated fee, contingent fee, or competitively bid fee agreement.

ø(F) AVAILABILITY OF RTC FUNDING.—At any time before

the end of the 2-year period beginning on the date of the

termination of the Resolution Trust Corporation, the Secretary of the Treasury shall provide, out of funds appropriated to the Resolution Trust Corporation pursuant to

section 21A(i)(3) of the Federal Home Loan Bank Act and

not expended by the Resolution Trust Corporation, to the

Savings Association Insurance Fund, for any year such

amounts as are needed by the Fund and are not needed by

the Resolution Trust Corporation, if the Chairperson of the

Board of Directors has certified to the Congress that—

ø(i) such amount is needed to pay for losses which

have been incurred or can reasonably be expected to

be incurred by the Savings Association Insurance

Fund;

ø(ii) the Board of Directors has determined that—

ø(I) Savings Association Insurance Fund members, in the aggregate, are unable to pay additional semiannual assessments under section 7(b)

at the assessment rates which would be required

in order to cover, from such additional assessments, losses which have been incurred or can

reasonably be expected to be incurred by the Savings Association Insurance Fund without adversely affecting the ability of such members to

82

raise and maintain capital or to maintain the

members’ assessment base; and

ø(II) an increase in the assessment rates for

Savings Association Insurance Fund members to

cover such losses could reasonably be expected to

result in greater losses to the Government;

ø(iii) the Board of Directors has determined that—

ø(I) Savings Association Insurance Fund members, in the aggregate, are unable to pay additional semiannual assessments under section 7(b)

at the assessment rates which would be required

in order to meet the repayment schedule required

under section 14(c) for any amount borrowed

under section 14(a) to cover losses which have

been incurred or can reasonably be expected to be

incurred by the Savings Association Insurance

Fund without adversely affecting the ability of

such members to raise and maintain capital or to

maintain such members’ assessment base; and

ø(II) an increase in the assessment rates for

Savings Association Insurance Fund members to

meet any such repayment schedule could reasonably be expected to result in greater losses to the

Government;

ø(iv) the Corporation has provided for the appointment of a chief financial officer who—

ø(I) does not have other operating responsibilities;

ø(II) will report directly to the Chairperson of

the Corporation; and

ø(III) will have such authority and duties of

chief financial officers under section 902 of title

31, United States Code, as the Board of Directors

of the Corporation determines to be appropriate

with respect to the Corporation;

ø(v) the Corporation has provided for the appointment of a senior officer whose responsibilities shall include setting uniform standards for contracting and

contracting enforcement in connection with the administration of the Fund;

ø(vi) the Corporation is implementing the minority

outreach provisions mandated by section 1216 of the

Financial Institutions Reform, Recovery, and Enforcement Act of 1989;

ø(vii) the Corporation has provided for the appointment of a senior attorney, at the assistant general

counsel level or above, responsible for professional liability cases; and

ø(viii) the Corporation has improved the management of legal services by—

ø(I) utilizing staff counsel when such utilization

would provide the same level of quality in legal

services as the use of outside counsel at the same

or a lower estimated cost; and

83

ø(II) employing outside counsel only if the use of

outside counsel would provide the most practicable, efficient, and cost-effective resolution to

the action and only under a negotiated fee, contingent fee, or competitively bid fee agreement.

ø(G) EXCEPTION TO SUBPARAGRAPH (D).—Notwithstanding subparagraph (D), no payment may be made pursuant to such subparagraphs after the Savings Association

Insurance Fund achieves a reserve ratio of 1.25 percent.

ø(H) APPEARANCE UPON REQUEST.—The Secretary of the

Treasury and the Chairperson of the Board of Directors of

the Federal Deposit Insurance Corporation shall appear

before the Committee on Banking, Finance and Urban Affairs of the House of Representatives or the Committee on

Banking, Housing, and Urban Affairs of the Senate, upon

the request of the chairman of the committee, to report on

any certification made to the Congress under subparagraph (E) or (F).

ø(I) BORROWING AUTHORITY.—

ø(i) IN GENERAL.—The Corporation may borrow from

the Federal home loan banks, with the concurrence of

the Federal Housing Finance Board, such funds as the

Corporation considers necessary for the use of the Savings Association Insurance Fund.

ø(ii) TERMS AND CONDITIONS.—Any loan from any

Federal home loan bank under clause (i) to the Savings Association Insurance Fund shall—

ø(I) bear a rate of interest of not less than such

bank’s current marginal cost of funds, taking into

account the maturities involved;

ø(II) be adequately secured, as determined by

the Federal Housing Finance Board;

ø(III) be a direct liability of such Fund; and

ø(IV) be subject to the limitations of section

15(c).

ø(J) AUTHORIZATION OF APPROPRIATIONS.—Subject to

subparagraph (E), there are authorized to be appropriated

to the Secretary of the Treasury, such sums as may be necessary to carry out the provisions of subparagraph (D) for

fiscal years 1994 through 1998, except that the aggregate

amount appropriated pursuant to this authorization may

not exceed $8,000,000,000.

ø(K) RETURN TO TREASURY.—If the aggregate amount of

funds transferred to the Savings Association Insurance

Fund under subparagraph (D) or (F) exceeds the amount

needed to cover losses incurred by the Fund, such excess

amount shall be deposited in the general fund of the

Treasury.

ø(7) PROVISIONS APPLICABLE TO MAINTENANCE OF ACCOUNTS.—

ø(A) CORPORATION’S AUTHORITY.—Any provision of this

Act forbidding the commingling of the Bank Insurance

Fund with the Savings Association Insurance Fund, or requiring the separate maintenance of the Bank Insurance

84

Fund and the Savings Association Insurance Fund, is not

intended—ø(i) to limit or impair the authority of the Corporation to use the same facilities and resources in the

course of conducting supervisory, regulatory, conservatorship, receivership, or liquidation functions

with respect to banks and savings associations, or to

integrate such functions; or

ø(ii) to limit or impair the Corporation’s power to

combine assets or liabilities belonging to banks and

savings associations in conservatorship or receivership

for managerial purposes, or to limit or impair the Corporation’s power to dispose of such assets or liabilities

on an aggregate basis.

ø(B) ACCOUNTING REQUIREMENTS.— ø(i) ACCOUNTING FOR USE OF FACILITIES AND RE- SOURCES.—The Corporation shall keep a full and complete accounting of all costs and expenses associated

with the use of any facility or resource used in the

course of any function specified in subparagraph (A)(i)

and shall allocate, in the manner provided in subparagraph (C), any such costs and expenses incurred by

the Corporation— ø(I) with respect to Bank Insurance Fund members to the Bank Insurance Fund; and

ø(II) with respect to Savings Association Insurance Fund members to the Savings Association Insurance Fund.

ø(ii) ACCOUNTING FOR HOLDING AND MANAGING AS- SETS AND LIABILITIES.—The Corporation shall keep a

full and complete accounting of all costs and expenses

associated with the holding and management of any

asset or liability specified in subparagraph (A)(ii).

ø(iii) ACCOUNTING FOR DISPOSITION OF ASSETS AND

LIABILITIES.—The Corporation shall keep a full and

complete accounting of all expenses and receipts associated with the disposition of any asset or liability

specified in subparagraph (A)(ii).

ø(iv) ALLOCATION OF COST, EXPENSES AND RE- CEIPTS.—The Corporation shall allocate any cost, expense, and receipt described in clause (ii) or clause (iii)

which is associated with any asset or liability belonging to—

ø(I) any Bank Insurance Fund member to the

Bank Insurance Fund; and

ø(II) any Savings Association Insurance Fund

member to the Savings Association Insurance

Fund.

ø(C) ALLOCATION OF ADMINISTRATIVE EXPENSES.—Any

personnel, administrative, or other overhead expense of

the Corporation shall be allocated— ø(i) fully to the Bank Insurance Fund, if the expense

was incurred directly as a result of the Corporation’s

responsibilities solely with respect to Bank Insurance

Fund members;

85

ø(ii) fully to the Savings Association Insurance

Fund, if the expense was incurred directly as a result

of the Corporation’s responsibilities solely with respect

to Savings Association Insurance Fund members;

ø(iii) between the Bank Insurance Fund and the

Savings Association Insurance Fund, in amounts reflecting the relative degree to which the expense was

incurred as a result of the activities of Bank Insurance

Fund and Savings Association Insurance Fund members; or

ø(iv) between the Bank Insurance Fund and the

Savings Association Insurance Fund, in amounts reflecting the relative total assets as of the end of the

preceding calendar year of Bank Insurance Fund

members and Savings Association Insurance Fund

members, to the extent that the Board of Directors is

unable to make a determination under clause (i), (ii),

or (iii).¿

(4) DEPOSIT INSURANCE FUND.— (A) ESTABLISHMENT.—There is established the Deposit

Insurance Fund, which the Corporation shall— (i) maintain and administer;

(ii) use to carry out its insurance purposes, in the

manner provided by this subsection; and

(iii) invest in accordance with section 13(a).

(B) USES.—The Deposit Insurance Fund shall be available to the Corporation for use with respect to insured depository institutions the deposits of which are insured by

the Deposit Insurance Fund.

(C) LIMITATION ON USE.—Notwithstanding any provision

of law other than section 13(c)(4)(G), the Deposit Insurance

Fund shall not be used in any manner to benefit any shareholder or affiliate (other than an insured depository institution that receives assistance in accordance with the provisions of this Act) of—

(i) any insured depository institution for which the

Corporation has been appointed conservator or receiver, in connection with any type of resolution by the

Corporation;

(ii) any other insured depository institution in default or in danger of default, in connection with any

type of resolution by the Corporation; or

(iii) any insured depository institution, in connection

with the provision of assistance under this section or

section 13 with respect to such institution, except that

this clause shall not prohibit any assistance to any insured depository institution that is not in default, or

that is not in danger of default, that is acquiring (as

defined in section 13(f)(8)(B)) another insured depository institution.

(D) DEPOSITS.—All amounts assessed against insured depository institutions by the Corporation shall be deposited

into the Deposit Insurance Fund.

ø(8)¿ (5) CERTAIN INVESTMENT CONTRACTS NOT TREATED AS

INSURED DEPOSITS.—

86

(A) * * *

* * * * * * *

(c) APPOINTMENT OF CORPORATION AS CONSERVATOR OR

RECEIVER.—

(1) * * *

* * * * * * *

(5) GROUNDS FOR APPOINTING CONSERVATOR OR RECEIVER.—

The grounds for appointing a conservator or receiver (which

may be the Corporation) for any insured depository institution

are as follows:

(A) * * *

* * * * * * *

(H) VIOLATIONS OF LAW.—Any violation of any law or

regulation, or any unsafe or unsound practice or condition

that is likely to— (i) * * *

* * * * * * *

(iii) otherwise seriously prejudice the interests of the

institution’s depositors or the ødeposit insurance

fund¿ Deposit Insurance Fund.

* * * * * * *

(10) CORPORATION MAY APPOINT ITSELF AS CONSERVATOR OR

RECEIVER FOR INSURED DEPOSITORY INSTITUTION TO PREVENT

LOSS TO øDEPOSIT INSURANCE FUND¿ DEPOSIT INSURANCE

FUND.—The Board of Directors may appoint the Corporation as

sole conservator or receiver of an insured depository institution, after consultation with the appropriate Federal banking

agency and the appropriate State supervisor (if any), if the

Board of Directors determines that—

(A) * * *

(B) the appointment is necessary to reduce—

(i) the risk that the ødeposit insurance fund¿ Deposit Insurance Fund would incur a loss with respect

to the insured depository institution, or

(ii) any loss that the ødeposit insurance fund¿ Deposit Insurance Fund is expected to incur with respect

to that institution.

* * * * * * *

(e) PROVISIONS RELATING TO CONTRACTS ENTERED INTO BEFORE

APPOINTMENT OF CONSERVATOR OR RECEIVER.—

(1) * * *

* * * * * * *

(14) SELLING CREDIT CARD ACCOUNTS RECEIVABLE.—

(A) * * *

(B) WAIVER BY CORPORATION.—The Corporation may at

any time, in its sole discretion and upon such terms as it

may prescribe, waive its right to repudiate an agreement

to sell credit card accounts receivable if the Corporation— (i) determines that the waiver is in the best interests of the ødeposit insurance fund¿ Deposit Insurance

Fund; and

87

(ii) provides a written waiver to the selling institution.

* * * * * * *

(f) PAYMENT OF INSURED DEPOSITS.— (1) IN GENERAL.—In case of the liquidation of, or other closing or winding up of the affairs of, any insured depository institution, payment of the insured deposits in such institution

shall be made by the Corporation as soon as possible, subject

to the provisions of subsection (g), either by cash or by making

available to each depositor a transferred deposit in a new insured depository institution in the same community or in another insured depository institution in an amount equal to the

insured deposit of such depositorø, except that— ø(A) all payments made pursuant to this section on account of a closed Bank Insurance Fund member shall be

made only from the Bank Insurance Fund, and

ø(B) all payments made pursuant to this section on account of a closed Savings Association Insurance Fund

member shall be made only from the Savings Association

Insurance Fund.¿.

* * * * * * *

(i) VALUATION OF CLAIMS IN DEFAULT.—

(1) * * *

* * * * * * *

(3) ADDITIONAL PAYMENTS AUTHORIZED.—

(A) * * *

ø(B) SOURCE OF FUNDS.—If the depository institution in

default is a Bank Insurance Fund member, the Corporation may only make such payments out of funds held in

the Bank Insurance Fund. If the depository institution in

default is a Savings Association Insurance Fund member,

the Corporation may only make such payments out of

funds held in the Savings Association Insurance Fund.¿

ø(C)¿ (B) MANNER OF PAYMENT.—The Corporation may

make the payments or credit the amounts specified in

øsubparagraphs (A) and (B)¿ subparagraph (A) directly to

the claimants or may make such payments or credit such

amounts to an open insured depository institution to induce such institution to accept liability for such claims.

* * * * * * *

(m) NEW BANKS.—

(1) * * *

* * * * * * *

(6) NEW DEPOSITS.—The new bank may, with the approval of

the Corporation, accept new deposits which shall be subject to

withdrawal on demand and which, except where the new bank

is the only bank in the community, shall not exceed

ø$100,000¿ an amount equal to the standard maximum deposit

insurance amount from any depositor.

* * * * * * *

(p) CERTAIN SALES OF ASSETS PROHIBITED.—

(1) * * *

88

(2) CONVICTED DEBTORS.—Except as provided in paragraph

(3), any person who— (A) * * *

(B) is in default on any loan or other extension of credit

from such insured depository institution which, if not paid,

will cause substantial loss to the øinstitution, any deposit

insurance fund¿ institution, the Deposit Insurance Fund, the Corporation, the FSLIC Resolution Fund, or the Resolution Trust Corporation,

may not purchase any asset of such institution from the conservator or receiver.

* * * * * * *

SEC. 11A. FSLIC RESOLUTION FUND.

(a) ESTABLISHED.—

(1) * * *

(2) TRANSFER OF FSLIC ASSETS AND øLIABILITIES.—

ø(A) IN GENERAL.—Except¿ LIABILITIES.—Except as provided in section 21A of the Federal Home Loan Bank Act,

all assets and liabilities of the Federal Savings and Loan

Insurance Corporation on the day before the date of the

enactment of the Financial Institutions Reform, Recovery,

and Enforcement Act of 1989 shall be transferred to the

FSLIC Resolution Fund.

ø(B) ADDITIONAL CLAIMS ON ASSETS.—The FSLIC Resolution Fund shall pay to the Savings Association Insurance

Fund such amounts as are needed for administrative and

supervisory expenses from the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement

Act of 1989 through September 30, 1992.¿

(3) SEPARATE HOLDING.—Assets and liabilities transferred to

the FSLIC Resolution Fund shall be the assets and liabilities

of the Fund and not of the Corporation and shall not be consolidated with the assets and liabilities of øthe Bank Insurance

Fund, the Savings Association Insurance Fund,¿ the Deposit

Insurance Fund or the Corporation for accounting, reporting,

or any other purpose.

* * * * * * *

(b) SOURCE OF FUNDS.—The FSLIC Resolution Fund shall be

funded from the following sources to the extent funds are needed

in the listed priority:

(1) * * *

* * * * * * *

ø(4) During the period beginning on the date of the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and ending on December 31, 1992,

amounts assessed against Savings Association Insurance Fund

members by the Corporation pursuant to section 7 which are

not required by the Financing Corporation pursuant to section

21 of the Federal Home Loan Bank Act or by the Resolution

Funding Corporation pursuant to section 21B of the Federal

Home Loan Bank Act.¿

* * * * * * *

89

(f) DISSOLUTION.—The FSLIC Resolution Fund shall be dissolved

upon satisfaction of all debts and liabilities and sale of all assets.

Upon dissolution any remaining funds shall be paid into the Treasury. Any administrative facilities and supplies, including offices

and office supplies, shall be transferred to the Corporation for use

by and to be held as assets of the øSavings Association Insurance

Fund¿ Deposit Insurance Fund.

SEC. 12. (a) * * *

* * * * * * *

(f) CONFLICT OF INTEREST.— (1) * * *

* * * * * * *

(4) DISAPPROVAL OF CONTRACTORS.— (A) * * *

* * * * * * *

(E) PROHIBITION REQUIRED IN CERTAIN CASES.—The

standards established under subparagraph (A) shall require the Corporation to prohibit any person who has— (i) * * *

* * * * * * *

(iv) caused a substantial loss to øFederal deposit insurance funds¿ the Deposit Insurance Fund (or any

predecessor deposit insurance fund);

from performing any service on behalf of the Corporation.

* * * * * * *

SEC. 13. (a) INVESTMENT OF CORPORATION’S FUNDS.— (1) AUTHORITY.—Funds held in the øBank Insurance Fund,

the Savings Association Insurance Fund,¿ Deposit Insurance

Fund or the FSLIC Resolution Fund, that are not otherwise

employed shall be invested in obligations of the United States

or in obligations guaranteed as to principal and interest by the

United States.

* * * * * * *

(c)(1) * * *

* * * * * * *

(4) LEAST-COST RESOLUTION REQUIRED.—

(A) IN GENERAL.—Notwithstanding any other provision

of this Act, the Corporation may not exercise any authority

under this subsection or subsection (d), (f), (h), (i), or (k)

with respect to any insured depository institution unless—

(i) * * *

(ii) the total amount of the expenditures by the Corporation and obligations incurred by the Corporation

(including any immediate and long-term obligation of

the Corporation and any direct or contingent liability

for future payment by the Corporation) in connection

with the exercise of any such authority with respect to

such institution is the least costly to the ødeposit insurance fund¿ Deposit Insurance Fund of all possible

methods for meeting the Corporation’s obligation

under this section.

90

(B) DETERMINING LEAST COSTLY APPROACH.—In determining how to satisfy the Corporation’s obligations to an

institution’s insured depositors at the least possible cost to

the ødeposit insurance fund¿ Deposit Insurance Fund, the

Corporation shall comply with the following provisions:

(i) * * *

(ii) FOREGONE TAX REVENUES.—Federal tax revenues

that the Government would forego as the result of a

proposed transaction, to the extent reasonably ascertainable, shall be treated as if they were revenues

foregone by the ødeposit insurance fund¿ Deposit Insurance Fund.

* * * * * * *

(E) DEPOSIT INSURANCE øFUNDS¿ FUND AVAILABLE FOR

INTENDED PURPOSE ONLY.—

(i) IN GENERAL.—After December 31, 1994, or at

such earlier time as the Corporation determines to be

appropriate, the Corporation may not take any action,

directly or indirectly, with respect to any insured depository institution that would have the effect of increasing losses to øany insurance fund¿ the Deposit Insurance Fund by protecting—

(I) * * *

* * * * * * *

(G) SYSTEMIC RISK.—

(i) * * *

(ii) REPAYMENT OF LOSS.—The Corporation shall recover the loss to the øappropriate insurance fund¿ Deposit Insurance Fund arising from any action taken or

assistance provided with respect to an insured depository institution under clause (i) expeditiously from 1

or more emergency special assessments on øthe members of the insurance fund (of which such institution

is a member)¿ insured depository institutions equal to

the product of—

(I) an assessment rate established by the Corporation; and

(II) the amount of øeach member’s¿ each insured depository institution’s average total assets

during the øsemiannual period¿ assessment period, minus the sum of the amount of the ømember’s¿ institution’s average total tangible equity

and the amount of the ømember’s¿ institution’s

average total subordinated debt.

* * * * * * *

ø(11) Payments made under this subsection shall be made— ø(A) from the Bank Insurance Fund in the case of payments

to or on behalf of a member of such Fund; or

ø(B) from the Savings Association Insurance Fund or from

funds made available by the Resolution Trust Corporation in

the case of payments to or on behalf of any Savings Association

Insurance Fund member.¿

* * * * * * *

91

(h) The powers conferred on the Board of Directors and the Corporation by this section to take action to reopen an insured depository institution in default or to avert the default of an insured depository institution may be used with respect to an insured branch

of a foreign bank if, in the judgment of the Board of Directors, the

public interest in avoiding the closing of such branch substantially

outweighs any additional risk of loss to the øBank Insurance

Fund¿ Deposit Insurance Fund which the exercise of such powers

would entail.

* * * * * * *

(k) EMERGENCY ACQUISITIONS.—

(1) * * *

* * * * * * *

(4) BRANCHING PROVISIONS.—

(A) * * *

(B) RESTRICTIONS.—

(i) IN GENERAL.—Notwithstanding subparagraph (A),

if—

(I) * * *

* * * * * * *

such savings association shall be subject to the conditions upon which a bank may retain, operate, and establish branches in the State in which the øSavings

Association Insurance Fund member¿ savings association is located.

* * * * * * *

(5) ASSISTANCE BEFORE APPOINTMENT OF CONSERVATOR OR

RECEIVER.—

(A) ASSISTANCE PROPOSALS.—The Corporation shall consider proposals by øSavings Association Insurance Fund

members¿ savings associations for assistance pursuant to

subsection (c) before grounds exist for appointment of a

conservator or receiver for such member under the following circumstances:

(i) * * *

* * * * * * *

SEC. 14. BORROWING AUTHORITY.

(a) BORROWING FROM TREASURY.—The Corporation is authorized

to borrow from the Treasury, and the Secretary of the Treasury is

authorized and directed to loan to the Corporation on such terms

as may be fixed by the Corporation and the Secretary, such funds

as in the judgment of the Board of Directors of the Corporation are

from time to time required for insurance purposes, not exceeding

in the aggregate $30,000,000,000 outstanding at any one time, subject to the approval of the Secretary of the Treasury: Provided,

That the rate of interest to be charged in connection with any loan

made pursuant to this subsection shall not be less than an amount

determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations

of the United States of comparable maturities. For such purpose

the Secretary of the Treasury is authorized to use as a public-debt

transaction the proceeds of the sale of any securities hereafter

92

issued under the Second Liberty Bond Act, as amended, and the

purposes for which securities may be issued under the Second Liberty Bond Act, as amended, are extended to include such loans.

Any such loan shall be used by the Corporation solely in carrying

out its functions with respect to such insurance. All loans and repayments under this subsection shall be treated as public-debt

transactions of the United States. The Corporation may employ any

funds obtained under this section for purposes of the øBank Insurance Fund or the Savings Association Insurance Fund¿ Deposit Insurance Fund and the borrowing shall become a liability of øeach

such fund¿ the Deposit Insurance Fund to the extent funds are employed therefor. There are hereby appropriated to the Secretary, for

fiscal year 1989 and each fiscal year thereafter, such sums as may

be necessary to carry out this subsection.

(b) BORROWING FROM FEDERAL FINANCING BANK.—The Corporation is authorized to issue and sell the Corporation’s obligations, on

behalf of the øBank Insurance Fund or Savings Association Insurance Fund¿ Deposit Insurance Fund, to the Federal Financing

Bank established by the Federal Financing Bank Act of 1973. The

Federal Financing Bank is authorized to purchase and sell the Corporation’s obligations on terms and conditions determined by the

Federal Financing Bank. Any such borrowings shall be obligations

subject to the obligation limitation of section 15(c) of this Act. This

subsection does not affect the eligibility of any other entity to borrow from the Federal Financing Bank.

(c) REPAYMENT SCHEDULES REQUIRED FOR ANY BORROWING.— (1) * * *

* * * * * * *

ø(3) INDUSTRY REPAYMENT.— ø(A) BIF MEMBER PAYMENTS.—No agreement or repayment schedule under paragraph (1) shall require any payment by a Bank Insurance Fund member for funds obtained under subsection (a) for purposes of the Savings Association Fund.

ø(B) SAIF MEMBER PAYMENTS.—No agreement or repayment schedule under paragraph (1) shall require any payment by a Savings Association Insurance Fund member for

funds obtained under subsection (a) for purposes of the

Bank Insurance Fund.¿

ø(d) BORROWING FOR BIF FROM BIF MEMBERS.—¿

(d) BORROWING FOR THE DEPOSIT INSURANCE FUND FROM IN- SURED DEPOSITORY INSTITUTIONS.— (1) BORROWING AUTHORITY.—The Corporation may issue obligations to øBank Insurance Fund members¿ insured depository

institutions, and may borrow from øBank Insurance Fund

members¿ insured depository institutions and give security for

any amount borrowed, and may pay interest on (and any redemption premium with respect to) any such obligation or

amount to the extent— (A) the proceeds of any such obligation or amount are

used by the Corporation solely for purposes of carrying out

the Corporation’s functions with respect to the øBank Insurance Fund¿ Deposit Insurance Fund; and

(B) the terms of the obligation or instrument limit the

liability of the Corporation or the øBank Insurance Fund¿

93

Deposit Insurance Fund for the payment of interest and

the repayment of principal to the amount which is equal

to the amount of assessment income received by the Fund

from assessments under section 7.

(2) LIMITATIONS ON BORROWING.—

(A) APPLICABILITY OF PUBLIC DEBT LIMIT.—For purposes

of the public debt limit established in section 3101(b) of

title 31, United States Code, any obligation issued, or

amount borrowed, by the Corporation under paragraph (1)

shall be considered to be an obligation to which such limit

applies.

(B) APPLICABILITY OF FDIC BORROWING LIMIT.—For purposes of the dollar amount limitation established in section

14(a) of the Federal Deposit Insurance Act (12 U.S.C.

1824(a)), any obligation issued, or amount borrowed, by

the Corporation under paragraph (1) shall be considered to

be an amount borrowed from the Treasury under such section.

(C) INTEREST RATE LIMIT.—The rate of interest payable

in connection with any obligation issued, or amount borrowed, by the Corporation under paragraph (1) shall not

exceed an amount determined by the Secretary of the

Treasury, taking into consideration current market yields

on outstanding marketable obligations of the United States

of comparable maturities.

(D) OBLIGATIONS TO BE HELD ONLY BY BIF MEMBERS.—

The terms of any obligation issued by the Corporation

under paragraph (1) shall provide that the obligation will

be valid only if held by a øBank Insurance Fund member¿

insured depository institution.

(3) LIABILITY OF øBIF¿ THE DEPOSIT INSURANCE FUND.—Any

obligation issued or amount borrowed under paragraph (1)

shall be a liability of the øBank Insurance Fund¿ Deposit Insurance Fund.

(4) TERMS AND CONDITIONS.—Subject to paragraphs (1) and

(2), the Corporation shall establish the terms and conditions

for obligations issued or amounts borrowed under paragraph

(1), including interest rates and terms to maturity.

(5) INVESTMENT BY øBIF MEMBERS¿ INSURED DEPOSITORY INSTITUTIONS.—

(A) AUTHORITY TO INVEST.—Subject to subparagraph (B)

and notwithstanding any other provision of Federal law or

the law of any State, any øBank Insurance Fund member¿

insured depository institution may purchase and hold for

investment any obligation issued by the Corporation under

paragraph (1) without limitation, other than any limitation

the appropriate Federal banking agency may impose specifically with respect to such obligations.

(B) INVESTMENT ONLY FROM CAPITAL AND RETAINED

EARNINGS.—Any øBank Insurance Fund member¿ insured

depository institution may purchase obligations or make

loans to the Corporation under paragraph (1) only to the

extent the purchase money or the money loaned is derived

from the member’s capital or retained earnings.

94

(6) ACCOUNTING TREATMENT.—In accounting for any investment in an obligation purchased from, or any loan made to, the

Corporation for purposes of determining compliance with any

capital standard and preparing any report required pursuant

to section 7(a), the amount of such investment or loan shall be

treated as an asset.

(e) BORROWING FOR THE DEPOSIT INSURANCE FUND FROM FED- ERAL HOME LOAN BANKS.— (1) IN GENERAL.—The Corporation may borrow from the Federal home loan banks, with the concurrence of the Federal

Housing Finance Board, such funds as the Corporation considers necessary for the use of the Deposit Insurance Fund.

(2) TERMS AND CONDITIONS.—Any loan from any Federal

home loan bank under paragraph (1) to the Deposit Insurance

Fund shall— (A) bear a rate of interest of not less than the current

marginal cost of funds to that bank, taking into account the

maturities involved;

(B) be adequately secured, as determined by the Federal

Housing Finance Board;

(C) be a direct liability of the Deposit Insurance Fund;

and

(D) be subject to the limitations of section 15(c).

SEC. 15. (a) * * *

* * * * * * *

(c) LIMITATION ON BORROWING.—

(1) * * *

* * * * * * *

(5) MAXIMUM AMOUNT LIMITATION ON OUTSTANDING OBLIGA- TIONS.—Notwithstanding any other provisions of this Act, the

Corporation may not issue or incur any obligation, if, after

issuing or incurring the obligation, the aggregate amount of obligations of øthe Bank Insurance Fund or Savings Association

Insurance Fund, respectively¿ the Deposit Insurance Fund, outstanding would exceed the sum of—

(A) the amount of cash or the equivalent of cash held by

øthe Bank Insurance Fund or Savings Association Insurance Fund, respectively¿ the Deposit Insurance Fund;

(B) the amount which is equal to 90 percent of the Corporation’s estimate of the fair market value of assets held

by øthe Bank Insurance Fund or the Savings Association

Insurance Fund, respectively¿ the Deposit Insurance Fund,

other than assets described in subparagraph (A); and

(C) the total of the amounts authorized to be borrowed

from the Secretary of the Treasury pursuant to section

14(a).

* * * * * * *

SEC. 17. (a) ANNUAL REPORTS ON øBIF, SAIF,¿ THE DEPOSIT INSURANCE FUND AND THE FSLIC RESOLUTION FUND.—

(1) IN GENERAL.—The Corporation shall annually submit a

full report of its operations, activities, budget, receipts, and expenditures for the preceding 12-month period. The report shall

include, with respect to øthe Bank Insurance Fund, the SavVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00094 Fmt 6659 Sfmt 6601 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
95

ings Association Insurance Fund,¿ the Deposit Insurance Fund

and the FSLIC Resolution Fund, an analysis by the Corporation of—

(A) * * *

* * * * * * *

(D) the exposure of øeach insurance fund¿ the Deposit

Insurance Fund to changes in those economic factors most

likely to affect the condition of that fund;

(E) a current estimate of the resources needed for øthe

Bank Insurance Fund, the Savings Association Insurance

Fund,¿ the Deposit Insurance Fund or the FSLIC Resolution Fund to achieve the purposes of this Act; and

(F) any findings, conclusions, and recommendations for

legislative and administrative actions considered appropriate to future resolution activities by the Corporation.

* * * * * * *

(d) AUDIT.—

(1) AUDIT REQUIRED.—The Comptroller General shall audit

annually the financial transactions of the Corporation, øthe

Bank Insurance Fund, the Savings Association Insurance

Fund,¿ the Deposit Insurance Fund and the FSLIC Resolution

Fund in accordance with generally accepted government auditing standards.

(2) ACCESS TO BOOKS AND RECORDS.—All books, records, accounts, reports, files, and property belonging to or used by the

Corporation, øthe Bank Insurance Fund, the Savings Association Insurance Fund,¿ the Deposit Insurance Fund and the

FSLIC Resolution Fund, or by an independent certified public

accountant retained to audit the Fund’s financial statements,

shall be made available to the Comptroller General.

* * * * * * *

SEC. 18. ø(a) INSURANCE LOGO.—

ø(1) INSURED SAVINGS ASSOCIATIONS.—Each insured savings

association shall display at each place of business maintained

by such association a sign containing only the following items:

ø(A) A statement that insured deposits are backed by

the full faith and credit of the United States Government.

ø(B) A statement that deposits are federally insured to

$100,000.

ø(C) The symbol of an eagle.

The sign shall not contain any reference to a Government

agency and shall accord each item substantially equal prominence.

ø(2) INSURED BANKS.—Not later than 30 days after the date

of enactment of the Financial Institutions Reform, Recovery,

and Enforcement Act of 1989, each insured bank shall display

at each place of business maintained by such bank one of the

following:

ø(A) The sign required to be displayed by insured banks

under regulations prescribed by the Corporation in effect

on January 1, 1989.

ø(B) The sign prescribed under paragraph (1).

96

ø(3) REGULATIONS.—The Corporation shall prescribe regulations to carry out the purposes of this subsection, including

regulations governing the manner of display or use of such

signs, except that the size of the sign prescribed under paragraph (1) shall be similar to that prescribed under paragraph

(2)(A). Initial regulations under this subsection shall be prescribed on the date of enactment of the Financial Institutions

Recovery, Reform, and Enforcement Act of 1989. For each day

an insured depository institution continues to violate any provisions of this subsection or any lawful provisions of said regulations, it shall be subject to a penalty of not more than $100,

which the Corporation may recover for its use. ¿

(a) INSURANCE LOGO.— (1) INSURED DEPOSITORY INSTITUTIONS.—Each insured depository institution shall display at each place of business maintained by that institution a sign or signs relating to the insurance of the deposits of the institution, in accordance with regulations to be prescribed by the Corporation.

(2) REGULATIONS.—The Corporation shall prescribe regulations to carry out this subsection, including regulations governing the substance of signs required by paragraph (1) and the

manner of display or use of such signs.

(3) PENALTIES.—For each day that an insured depository institution continues to violate this subsection or any regulation

issued under this subsection, it shall be subject to a penalty of

not more than $100, which the Corporation may recover for its

use.

* * * * * * *

ø(h) Any insured depository institution which willfully fails or refuses to file any certified statement or pay any assessment required

under this Act shall be subject to a penalty of not more than $100

for each day that such violations continue, which penalty the Corporation may recover for its use: Provided, That this subsection

shall not be applicable under the circumstances stated in the proviso of subsection (b) of this section.¿

(h) PENALTY FOR FAILURE TO TIMELY PAY ASSESSMENTS.—

(1) IN GENERAL.—Any insured depository institution which

fails or refuses to pay any assessment shall be subject to a penalty in an amount not more than 1 percent of the amount of the

assessment due for each day that such violation continues.

(2) EXCEPTION IN CASE OF DISPUTE.—Paragraph (1) shall not

apply if—

(A) the failure to pay an assessment is due to a dispute

between the insured depository institution and the Corporation over the amount of such assessment; and

(B) the insured depository institution deposits security

satisfactory to the Corporation for payment upon final determination of the issue.

(3) AUTHORITY TO MODIFY OR REMIT PENALTY.—The Corporation, in the sole discretion of the Corporation, may compromise,

modify or remit any penalty which the Corporation may assess

or has already assessed under paragraph (1) upon a finding

that good cause prevented the timely payment of an assessment.

* * * * * * *

97

(m) ACTIVITIES OF SAVINGS ASSOCIATIONS AND THEIR SUBSIDIARIES.—

(1) * * *

* * * * * * *

(3) ACTIVITIES INCOMPATIBLE WITH DEPOSIT INSURANCE.—

(A) IN GENERAL.—The Corporation may determine by

regulation or order that any specific activity poses a serious threat to the øSavings Association Insurance Fund¿

Deposit Insurance Fund. Prior to adopting any such regulation, the Corporation shall consult with the Director of

the Office of Thrift Supervision and shall provide appropriate State supervisors the opportunity to comment thereon, and the Corporation shall specifically take such comments into consideration. Any such regulation shall be

issued in accordance with section 553 of title 5, United

States Code. If the Board of Directors makes such a determination with respect to an activity, the Corporation shall

have authority to order that no øSavings Association Insurance Fund member¿ savings association may engage in

the activity directly.

* * * * * * *

(C) ADDITIONAL AUTHORITY OF FDIC TO PREVENT SERIOUS

RISKS TO INSURANCE FUND.—Notwithstanding subparagraph (A), the Corporation may prescribe and enforce such

regulations and issue such orders as the Corporation determines to be necessary to prevent actions or practices of

savings associations that pose a serious threat to the øSavings Association Insurance Fund or the Bank Insurance

Fund¿ Deposit Insurance Fund.

* * * * * * *

(o) REAL ESTATE LENDING.—

(1) * * *

(2) STANDARDS.—

(A) CRITERIA.—In prescribing standards under paragraph (1), the agencies shall consider—

(i) the risk posed to the ødeposit insurance funds¿

Deposit Insurance Fund by such extensions of credit;

* * * * * * *

(B) VARIATIONS PERMITTED.—In prescribing standards

under paragraph (1), the appropriate Federal banking

agencies may differentiate among types of loans—

(i) as may be required by Federal statute;

(ii) as may be warranted, based on the risk to the

ødeposit insurance fund¿ Deposit Insurance Fund; or

* * * * * * *

(p) PERIODIC REVIEW OF CAPITAL STANDARDS.—Each appropriate

Federal banking agency shall, in consultation with the other Federal banking agencies, biennially review its capital standards for

insured depository institutions to determine whether those standards require sufficient capital to facilitate prompt corrective action

98

to prevent or minimize loss to the ødeposit insurance funds¿ Deposit Insurance Fund, consistent with section 38.

* * * * * * *

SEC. 24. ACTIVITIES OF INSURED STATE BANKS.

(a) PERMISSIBLE ACTIVITIES.— (1) IN GENERAL.—After the end of the 1-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, an insured

State bank may not engage as principal in any type of activity

that is not permissible for a national bank unless— (A) the Corporation has determined that the activity

would pose no significant risk to the øappropriate deposit

insurance fund¿ Deposit Insurance Fund; and

(B) the State bank is, and continues to be, in compliance

with applicable capital standards prescribed by the appropriate Federal banking agency.

* * * * * * *

(d) SUBSIDIARIES OF INSURED STATE BANKS.— (1) IN GENERAL.—After the end of the 1-year period beginning on the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991, a subsidiary of

an insured State bank may not engage as principal in any type

of activity that is not permissible for a subsidiary of a national

bank unless— (A) the Corporation has determined that the activity

poses no significant risk to the øappropriate deposit insurance fund¿ Deposit Insurance Fund; and

* * * * * * *

(e) SAVINGS BANK LIFE INSURANCE.— (1) * * *

(2) FDIC FINDING AND ACTION REGARDING RISK.— (A) FINDING.—Before the end of the 1-year period beginning on the date of the enactment of the Federal Deposit

Insurance Corporation Improvement Act of 1991, the Corporation shall make a finding whether savings bank life

insurance activities of insured banks pose or may pose any

significant ørisk to the insurance fund of which such banks

are members.¿ risk to the Deposit Insurance Fund.

(B) ACTIONS.— (i) * * *

(ii) AUTHORIZED ACTIONS.—Actions the Corporation

may take under this subparagraph include requiring

the modification, suspension, or termination of insurance activities conducted by any insured bank if the

Corporation finds that the activities pose a significant

risk to any insured bank described in paragraph (1)(A)

or to øthe insurance fund of which such bank is a

member¿ the Deposit Insurance Fund. (f) COMMON AND PREFERRED STOCK INVESTMENT.— (1) * * *

* * * * * * *

(6) NOTICE AND APPROVAL.—An insured State bank may only

engage in any investment pursuant to paragraph (2) if—

99

(A) the bank has filed a 1-time notice of the bank’s intention to acquire and retain investments described in

paragraph (1); and

(B) the Corporation has determined, within 60 days of

receiving such notice, that acquiring or retaining such investments does not pose a significant risk to øthe insurance fund of which such bank is a member¿ the Deposit Insurance Fund.

* * * * * * *

SEC. 28. ACTIVITIES OF SAVINGS ASSOCIATIONS.

(a) IN GENERAL.—On and after January 1, 1990, a savings association chartered under State law may not engage as principal in

any type of activity, or in any activity in an amount, that is not

permissible for a Federal savings association unless— (1) the Corporation has determined that the activity would

pose no significant risk to the øaffected deposit insurance

fund¿ Deposit Insurance Fund; and

* * * * * * *

(b) DIFFERENCES OF MAGNITUDE BETWEEN STATE AND FEDERAL

POWERS.—Notwithstanding subsection (a)(1), if an activity (other

than an activity described in section 5(c)(2)(B) of the Home Owners’

Loan Act) is permissible for a Federal savings association, a savings association chartered under State law may engage as principal

in that activity in an amount greater than the amount permissible

for a Federal savings association if—

(1) the Corporation has not determined that engaging in that

amount of the activity poses any significant risk to the øaffected deposit insurance fund¿ Deposit Insurance Fund; and

* * * * * * *

(c) EQUITY INVESTMENTS BY STATE SAVINGS ASSOCIATIONS.—

(1) * * *

(2) EXCEPTION FOR SERVICE CORPORATIONS.—Paragraph (1)

does not prohibit a savings association from acquiring or retaining shares of one or more service corporations if—

(A) the Corporation has determined that no significant

risk to the øaffected deposit insurance fund¿ Deposit Insurance Fund is posed by—

(i) * * *

* * * * * * *

øSEC. 31. SAVINGS ASSOCIATION INSURANCE FUND INDUSTRY ADVISORY COMMITTEE.

ø(a) ESTABLISHMENT.—There is hereby established the Savings

Association Insurance Fund Industry Advisory Committee (hereinafter referred to in this section as the ‘‘Committee’’).

ø(b) MEMBERSHIP.—The Committee shall consist of 18 members,

appointed as follows:

ø(1) 1 member elected from each Federal home loan bank

district (by the members of the board of directors of each such

bank who were elected by the members of such bank) from

among individuals residing therein who are officers of insured

depository institutions that are Savings Association Insurance

Fund members.

100

ø(2) 6 members appointed by the Corporation from among individuals who shall represent the public interest.

ø(c) VACANCIES.—Any vacancy on the Committee shall be filled

in the same manner in which the original appointment was made.

ø(d) PAY AND EXPENSES.—Members of the Committee shall serve

without pay, but each member shall be reimbursed, in such manner as the Corporation shall prescribe by regulation, for expenses

incurred in connection with attendance of such members at meetings of the Committee.

ø(e) TERMS.—Members shall be appointed or elected for terms of

1 year.

ø(f) AUTHORITY OF THE COMMITTEE.—The Committee may select

its Chairperson, Vice Chairperson, and Secretary, and adopt methods of procedure, and shall have power—

ø(1) to confer with the Board of Directors on general and special business conditions and regulatory and other matters affecting insured financial institutions that are members of the

Savings Association Insurance Fund; and

ø(2) to request information, and to make recommendations,

with respect to matters within the jurisdiction of the Corporation.

ø(g) MEETINGS.—The Committee shall meet 4 times each year,

and more frequently if requested by the Corporation.

ø(h) REPORTS.—The Committee shall submit a semiannual written report to the Committee on Banking, Finance and Urban Affairs of the House and to the Committee on Banking, Housing, and

Urban Affairs of the Senate. Such report shall describe the activities of the Committee for such semiannual period and contain such

recommendations as the Committee considers appropriate.

ø(i) PROVISION OF STAFF AND OTHER RESOURCES.—The Corporation shall provide the Committee with the use of such resources,

including staff, as the Committee reasonably shall require to carry

out its duties, including the preparation and submission of reports

to Congress, under this section.

ø(j) FEDERAL ADVISORY COMMITTEE ACT DOES NOT APPLY.—The

Federal Advisory Committee Act shall not apply to the Committee.

ø(k) SUNSET.—The Committee shall cease to exist 10 years after

the enactment of this section.¿

* * * * * * *

SEC. 36. EARLY IDENTIFICATION OF NEEDED IMPROVEMENTS IN FINANCIAL MANAGEMENT.

(a) * * *

* * * * * * *

(i) REQUIREMENTS FOR INSURED SUBSIDIARIES OF HOLDING COMPANIES.—

(1) * * *

* * * * * * *

(3) APPLICABILITY BASED ON RISK TO FUND.—The appropriate

Federal banking agency may require an institution with total

assets in excess of $9,000,000,000 to comply with this section,

notwithstanding the exemption provided by this subsection, if

it determines that such exemption would create a significant

101

risk to the øaffected deposit insurance fund¿ Deposit Insurance

Fund if applied to that institution.

* * * * * * *

SEC. 37. ACCOUNTING OBJECTIVES, STANDARDS, AND REQUIREMENTS.

(a) IN GENERAL.— (1) OBJECTIVES.—Accounting principles applicable to reports

or statements required to be filed with Federal banking agencies by insured depository institutions should— (A) * * *

* * * * * * *

(C) facilitate prompt corrective action to resolve the institutions at the least cost to the øinsurance funds¿ Deposit Insurance Fund.

* * * * * * *

SEC. 38. PROMPT CORRECTIVE ACTION.

(a) RESOLVING PROBLEMS TO PROTECT DEPOSIT INSURANCE

øFUNDS¿ FUND.—

(1) PURPOSE.—The purpose of this section is to resolve the

problems of insured depository institutions at the least possible

long-term loss to øthe deposit insurance fund¿ the Deposit Insurance Fund.

* * * * * * *

(k) REVIEW REQUIRED WHEN DEPOSIT INSURANCE FUND INCURS

MATERIAL LOSS.—

(1) IN GENERAL.—If øa deposit insurance fund¿ the Deposit

Insurance Fund incurs a material loss with respect to an insured depository institution on or after July 1, 1993, the inspector general of the appropriate Federal banking agency

shall—

(A) make a written report to that agency reviewing the

agency’s supervision of the institution (including the agency’s implementation of this section), which shall—

(i) ascertain why the institution’s problems resulted

in a material loss to øthe deposit insurance fund¿ the

Deposit Insurance Fund; and

(ii) make recommendations for preventing any such

loss in the future; and

* * * * * * *

(2) MATERIAL LOSS INCURRED.—For purposes of this subsection:

(A) LOSS INCURRED.—øA deposit insurance fund¿ The

Deposit Insurance Fund incurs a loss with respect to an insured depository institution—

(i) if the Corporation provides any assistance under

section 13(c) with respect to that institution; and—

(I) * * *

* * * * * * *

(ii) if the Corporation is appointed receiver of the institution, and it is or becomes apparent that the

present value of øthe deposit insurance fund’s outlays¿

102

the outlays of the Deposit Insurance Fund with respect

to that institution will exceed the present value of receivership dividends or other payments on the claims

held by the Corporation.

* * * * * * *

(3) DEADLINE FOR REPORT.—The inspector general of the appropriate Federal banking agency shall comply with paragraph

(1) expeditiously, and in any event (except with respect to

paragraph (1)(B)(iv)) as follows:

(A) * * *

(B) If the institution is described in paragraph (2)(A)(ii),

during the 6-month period beginning on the date on which

it becomes apparent that the present value of øthe deposit

insurance fund’s outlays¿ the outlays of the Deposit Insurance Fund with respect to that institution will exceed the

present value of receivership dividends or other payments

on the claims held by the Corporation.

* * * * * * *

(o) TRANSITION RULES FOR SAVINGS øASSOCIATIONS.— ø(1) RTC’S ROLE DOES NOT DIMINISH CARE REQUIRED OF

OTS.—ø(A) IN GENERAL.—In implementing this section, the appropriate Federal banking agency (and, to the extent applicable, the Corporation) shall exercise the same care as if

the Savings Association Insurance Fund (rather than the

Resolution Trust Corporation) bore the cost of resolving

the problems of insured savings associations described in

clauses (i) and (ii)(II) of section 21A(b)(3)(A) of the Federal

Home Loan Bank Act.

ø(B) REPORTS.—Subparagraph (A) does not require reports under subsection (k).

ø(2) ADDITIONAL FLEXIBILITY FOR CERTAIN SAVINGS ASSOCIATIONS.—Subsections (e)(2)¿ ASSOCIATIONS.—Subsections (e)(2),

(f), and (h) shall not apply before July 1, 1994, to any insured

savings association if—

ø(A)¿ (1) before the date of enactment of the Federal Deposit

Insurance Corporation Improvement Act of 1991—

ø(i)¿ (A) the savings association had submitted a plan

meeting the requirements of section 5(t)(6)(A)(ii) of the

Home Owners’ Loan Act; and

ø(ii)¿ (B) the Director of the Office of Thrift Supervision

had accepted the plan;

ø(B)¿ (2) the plan remains in effect; and

ø(C)¿ (3) the savings association remains in compliance with

the plan or is operating under a written agreement with the

appropriate Federal banking agency.

* * * * * * *

SEC. 43. DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE.

(a) * * *

* * * * * * *

(d) EXCEPTIONS FOR INSTITUTIONS NOT RECEIVING RETAIL DEPOSITS.—The Federal Trade Commission may, by regulation or order,

103

make exceptions to subsection (b) for any depository institution

that, within the United States, does not receive initial deposits of

less than ø$100,000¿ an amount equal to the standard maximum

deposit insurance amount from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit

money.

* * * * * * *

SECTION 6 OF THE INTERNATIONAL BANKING ACT OF

1978

INSURANCE OF DEPOSITS

SEC. 6. (a) * * *

(b) No foreign bank may establish or operate a Federal branch

which receives deposits of less than ø$100,000¿ an amount equal

to the standard maximum deposit insurance amount unless the

branch is an insured branch as defined in section 3(s) of the Federal Deposit Insurance Act, or unless the Comptroller determines

by order or regulation that the branch is not engaged in domestic

retail deposit activities requiring deposit insurance protection, taking account of the size and nature of depositors and deposit accounts.

(c)(1) After the date of enactment of this Act no foreign bank may

establish a branch, and after one year following such date no foreign bank may operate a branch, in any State in which the deposits

of a bank organized and existing under the laws of that State

would be required to be insured, unless the branch is an insured

branch as defined in section 3(s) of the Federal Deposit Insurance

Act, or unless the branch will not thereafter accept deposits of less

than ø$100,000¿ an amount equal to the standard maximum deposit insurance amount or unless the Federal Deposit Insurance

Corporation determines by order or regulation that the branch is

not engaged in domestic retail deposit activities requiring deposit

insurance protection, taking account of the size and nature of depositors and deposit accounts.

* * * * * * *

(d) RETAIL DEPOSIT-TAKING BY FOREIGN BANKS.—

(1) IN GENERAL.—After the date of enactment of this subsection, notwithstanding any other provision of this Act or any

provision of the Federal Deposit Insurance Act, in order to accept or maintain domestic retail deposit accounts having balances of less than ø$100,000¿ an amount equal to the standard

maximum deposit insurance amount, and requiring deposit insurance protection, a foreign bank shall—

* * * * * * *

(2) EXCEPTION.—Domestic retail deposit accounts with balances of less than ø$100,000¿ an amount equal to the standard

maximum deposit insurance amount that require deposit insurance protection may be accepted or maintained in a branch of

104

a foreign bank only if such branch was an insured branch on

the date of the enactment of this subsection.

* * * * * * *

(e) STANDARD MAXIMUM DEPOSIT INSURANCE AMOUNT DEFINED.—For purposes of this section, the term ‘‘standard maximum

deposit insurance amount’’ means the amount of the maximum

amount of deposit insurance as determined under section 11(a)(1) of

the Federal Deposit Insurance Act.

SECTION 207 OF THE FEDERAL CREDIT UNION ACT

PAYMENT OF INSURANCE

SEC. 207. (a) * * *

* * * * * * *

ø(k)(1) Subject to the provisions of paragraph (2), for the purposes of this subsection, the term ‘‘insured account’’ means the

total amount of the account in the member’s name (after deducting offsets) less any part thereof which is in excess of $100,000. Such

amount shall be determined according to such regulations as the

Board may prescribe, and, in determining the amount due to any

member, there shall be added together all accounts in the credit

union maintained by him for his own benefit either in his own

name or in the names of others. The Board may define, with such

classifications and exceptions as it may prescribe, the extent of the

insurance coverage provided for member accounts, including member accounts in the name of a minor, in trust, or in joint tenancy.¿

(k) INSURED AMOUNTS PAYABLE.— (1) NET INSURED AMOUNT.— (A) IN GENERAL.—Subject to the provisions of paragraph

(2), the net amount of share insurance payable to any member at an insured credit union shall not exceed the total

amount of the shares or deposits in the name of the member

(after deducting offsets), less any part thereof which is in

excess of the standard maximum share insurance amount,

as determined in accordance with this paragraph and

paragraphs (5) and (6), and consistently with actions taken

by the Federal Deposit Insurance Corporation under section

11(a) of the Federal Deposit Insurance Act.

(B) AGGREGATION.—Determination of the net amount of

share insurance under subparagraph (A), shall be in accordance with such regulations as the Board may prescribe,

and, in determining the amount payable to any member,

there shall be added together all accounts in the credit

union maintained by that member for that member’s own

benefit, either in the member’s own name or in the names

of others.

(C) AUTHORITY TO DEFINE THE EXTENT OF COVERAGE.— The Board may define, with such classifications and exceptions as it may prescribe, the extent of the share insurance

coverage provided for member accounts, including member

accounts in the name of a minor, in trust, or in joint tenancy.

105

ø(2)(A) Notwithstanding any limitation in this Act or in any

other provision of law relating to the amount of insurance available

for the account of any one depositor or member, in the case of a

depositor or member who is—¿

(2) MUNICIPAL DEPOSITORS OR MEMBERS.— (A) IN GENERAL.—Notwithstanding any limitation in this

Act or in any other provision of law relating to the amount

of insurance available to any 1 depositor or member, deposits or shares of a municipal depositor or member shall be

insured in an amount equal to the standard maximum

share insurance amount (as determined under paragraph

(5)), except as provided in subparagraph (B).

(B) IN-STATE MUNICIPAL DEPOSITORS.—In the case of the

deposits of an in-State municipal depositor described in

clause (ii), (iii), (iv), or (v) of subparagraph (E) at an insured credit union, such deposits shall be insured in an

amount equal to the lesser of— (i) $5,000,000; or

(ii) the sum of the standard maximum deposit insurance amount and 80 percent of the amount of any deposits in excess of the standard maximum deposit insurance amount.

(C) RULE OF CONSTRUCTION.—No provision of this paragraph shall be construed as authorizing an insured credit

union to accept the deposits of a municipal depositor in an

amount greater than such credit union is authorized to accept under any other provision of Federal or State law.

(D) IN-STATE MUNICIPAL DEPOSITOR DEFINED.—For purposes of this paragraph, the term ‘‘in-State municipal depositor’’ means a municipal depositor that is located in the

same State as the office or branch of the insured credit

union at which the deposits of that depositor are held.

(E) MUNICIPAL DEPOSITOR.—In this paragraph, the term ‘‘municipal depositor’’ means a depositor that is— (i) * * *

* * * * * * *

(v) an officer, employee, or agent of any Indian tribe

(as defined in section 3(c) of the Indian Financing Act

of 1974) or agency thereof having official custody of

tribal funds and lawfully investing the same in a credit union insured in accordance with this titleø;¿. øhis account shall be insured in an amount not to exceed $100,000

per account.¿

ø(B) The¿

(F) AUTHORITY TO LIMIT DEPOSITS.—The Board may

limit the aggregate amount of funds that may be invested

or deposited in any credit union insured in accordance

with this title by any ødepositor or member referred to in

subparagraph (A)¿ municipal depositor or member on the

basis of the size of any such credit union in terms of its

assets.

(3) Notwithstanding any limitation in this title or in any other

provision of law relating to the amount of insurance available for

the account of any one depositor or member, funds invested in a

credit union insured in accordance with this title pursuant to a

106

pension or profit-sharing plan described in section 401(d) of the Internal Revenue Code of 1954, as amended, and funds invested in

such an insured credit union in the form of individual retirement

accounts as described in section 408(a) of the Internal Revenue

Code of 1954, as amended, shall be insured in the amount of

ø$100,000¿ 2 times the standard maximum share insurance

amount (as determined under paragraph (1)) per account. As to any

plan qualifying under section 401(d) or section 408(a) of the Internal Revenue Code of 1954, the term ‘‘per account’’ means the

present vested and ascertainable interest of each beneficiary under

the plan, excluding any remainder interest created by, or as a result of, the plan.

(4) COVERAGE FOR CERTAIN EMPLOYEE BENEFIT PLAN DEPOSITS.—

(A) PASS-THROUGH INSURANCE.—The Administration

shall provide pass-through share insurance for the deposits

or shares of any employee benefit plan.

(B) PROHIBITION ON ACCEPTANCE OF DEPOSITS.—An insured credit union that is not well capitalized or adequately capitalized may not accept employee benefit plan

deposits.

(C) DEFINITIONS.—For purposes of this paragraph, the

following definitions shall apply:

(i) CAPITAL STANDARDS.—The terms ‘‘well capitalized’’ and ‘‘adequately capitalized’’ have the same

meanings as in section 216(c).

(ii) EMPLOYEE BENEFIT PLAN.—The term ‘‘employee

benefit plan’’—

(I) has the meaning given to such term in section

3(3) of the Employee Retirement Income Security

Act of 1974;

(II) includes any plan described in section 401(d)

of the Internal Revenue Code of 1986; and

(III) includes any eligible deferred compensation

plan described in section 457 of the Internal Revenue Code of 1986.

(iii) PASS-THROUGH SHARE INSURANCE.—The term

‘‘pass-through share insurance’’ means, with respect to

an employee benefit plan, insurance coverage provided

on a pro rata basis to the participants in the plan, in

accordance with the interest of each participant.

(D) RULE OF CONSTRUCTION.—No provision of this paragraph shall be construed as authorizing an insured credit

union to accept the deposits of an employee benefit plan in

an amount greater than such credit union is authorized to

accept under any other provision of Federal or State law.

(5) STANDARD MAXIMUM SHARE INSURANCE AMOUNT DEFINED.—For purposes of this Act, the term ‘‘standard maximum

share insurance amount’’ means—

(A) until the effective date of final regulations prescribed

pursuant to section 10(a)(2) of the Federal Deposit Insurance Reform Act of 2002, $100,000; and

107

(B) on and after such effective date, $130,000, adjusted

as provided under section 11(a)(1)(F) of the Federal Deposit

Insurance Act.

* * * * * * *

SECTION 232 OF THE FEDERAL DEPOSIT INSURANCE

CORPORATION IMPROVEMENT ACT OF 1991

SEC. 232. REDUCED ASSESSMENT RATE FOR DEPOSITS ATTRIBUTABLE TO LIFELINE ACCOUNTS.

(a) QUALIFICATION OF LIFELINE ACCOUNTS BY FEDERAL RESERVE

BOARD.—

(1) IN GENERAL.—The øBoard of Governors of the Federal

Reserve System, and the¿ Federal Deposit Insurance Corporation shall establish minimum requirements for accounts providing basic transaction services for consumers at insured depository institutions in order for such accounts to qualify as

lifeline accounts for purposes of this section and section

7(b)(2)(G) of the Federal Deposit Insurance Act.

(2) FACTORS TO BE CONSIDERED.—In determining the minimum requirements under paragraph (1) for lifeline accounts

at insured depository institutions, øthe Board and¿ the Corporation shall consider the following factors:

(A) * * *

* * * * * * *

(J) Such other factors as øthe Board¿ the Corporation

may determine to be appropriate.

(3) DEFINITIONS.—For purposes of this subsection—

ø(A) BOARD.—The term ‘‘Board’’ means the Board of

Governors of the Federal Reserve System.¿

(A) CORPORATION.—The term ‘‘Corporation’’ means the

Federal Deposit Insurance Corporation.

* * * * * * *

(C) LIFELINE ACCOUNT.—The term ‘‘lifeline account’’

means any transaction account (as defined in section

19(b)(1)(C) of the Federal Reserve Act) which meets the

minimum requirements established by the øBoard¿ Corporation under this subsection.

* * * * * * *

ø(c) AVAILABILITY OF FUNDS.—The provisions of this section shall

not take effect until appropriations are specifically provided in advance. There are hereby authorized to be appropriated such sums

as may be necessary to carry out the provisions of this section.¿

SECTION 5136 OF THE REVISED STATUTES OF THE

UNITED STATES

SEC. 5136. Upon duly making and filing articles of association

and an organization certificate, the association shall become, as

from the date of the execution of its organization certificate, a body

corporate, and as such, and in the name designated in the organization certificate, it shall have power—

108

First. To adopt and use a corporate seal.

* * * * * * *

Eleventh. To make investments designed primarily to promote the public welfare, including the welfare of low- and moderate-income communities or families (such as by providing

housing, services, or jobs). A national banking association may

make such investments directly or by purchasing interests in

an entity primarily engaged in making such investments. An

association shall not make any such investment if the investment would expose the association to unlimited liability. The

Comptroller of the Currency shall limit an association’s investments in any 1 project and an association’s aggregate investments under this paragraph. An association’s aggregate

investments under this paragraph shall not exceed an amount

equal to the sum of 5 percent of the association’s capital stock

actually paid in and unimpaired and 5 percent of the association’s unimpaired surplus fund, unless the Comptroller

determines by order that the higher amount will pose no significant risk to the øaffected deposit insurance fund¿ Deposit

Insurance Fund, and the association is adequately capitalized.

In no case shall an association’s aggregate investments under

this paragraph exceed an amount equal to the sum of 10 percent of the association’s capital stock actually paid in and

unimpaired and 10 percent of the association’s unimpaired surplus fund.

* * * * * * *

FEDERAL RESERVE ACT

* * * * * * *

STATE BANKS AS MEMBERS

SEC. 9. Any bank incorporated by special law of any State, or organized under the general laws of any State or of the United

States, including Morris Plan banks and other incorporated banking institutions engaged in similar business, desiring to become a

member of the Federal Reserve System, may make application to

the Board of Governors of the Federal Reserve System, under such

rules and regulations as it may prescribe, for the right to subscribe

to the stock of the Federal reserve bank organized within the district in which the applying bank is located. Such application shall

be for the same amount of stock that the applying bank would be

required to subscribe to as a national bank. For the purposes of

membership of any such bank the terms ‘‘capital’’ and ‘‘capital

stock’’ shall include the amount of outstanding capital notes and

debentures legally issued by the applying bank and purchased by

the Reconstruction Finance Corporation. The Board of Governors of

the Federal Reserve System, subject to the provisions of this Act

and to such conditions as it may prescribe pursuant thereto may

permit the applying bank to become a stockholder of such Federal

reserve bank.

* * * * * * *

109

State member banks may make investments designed primarily to promote the public welfare, including the welfare of

low- and moderate-income communities or families (such as by

providing housing, services, or jobs), to the extent permissible

under State law, and subject to such restrictions and requirements as the Board of Governors of the Federal Reserve System may prescribe by regulation or order. A bank shall not

make any such investment if the investment would expose the

bank to unlimited liability. The Board shall limit a bank’s investments in any 1 project and bank’s aggregate investments

under this paragraph. A bank’s aggregate investments under

this paragraph shall not exceed an amount equal to the sum

of 5 percent of the bank’s capital stock actually paid in and

unimpaired and 5 percent of the bank’s unimpaired surplus

fund, unless the Board determines by order that the higher

amount will pose no significant risk to the øaffected deposit insurance fund¿ Deposit Insurance Fund, and the bank is adequately capitalized. In no case shall a bank’s aggregate investments under this paragraph exceed an amount equal to the

sum of 10 percent of the bank’s capital stock actually paid in

and unimpaired and 10 percent of the bank’s unimpaired surplus fund.

* * * * * * *

SEC. 10B. (a) * * *

(b) LIMITATIONS ON ADVANCES.—

(1) * * *

* * * * * * *

(3) ADVANCES TO CRITICALLY UNDERCAPITALIZED DEPOSITORY

INSTITUTIONS.—

(A) LIABILITY FOR INCREASED LOSS.—Notwithstanding

any other provision of this section, if—

(i) * * *

(ii) after the end of that 5-day period, øany deposit

insurance fund in¿ the Deposit Insurance Fund of the

Federal Deposit Insurance Corporation incurs a loss

exceeding the loss that the Corporation would have incurred if it had liquidated that institution as of the

end of that period,

* * * * * * *

SECTION 255 OF THE BALANCED BUDGET AND

EMERGENCY DEFICIT CONTROL ACT OF 1985

SEC. 255. EXEMPT PROGRAMS AND ACTIVITIES.

(a) * * *

* * * * * * *

(g) OTHER PROGRAMS AND ACTIVITIES.—

(1)(A) The following budget accounts and activities shall be

exempt from reduction under any order issued under this part:

Activities resulting from private donations, bequests, or

voluntary contributions to the Government;

110

Activities financed by voluntary payments to the Government for goods or services to be provided for such payments;

* * * * * * *

Federal Deposit Insurance Corporation, øBank Insurance Fund¿ Deposit Insurance Fund (51–4064–0–3–373);

* * * * * * *

øFederal Deposit Insurance Corporation, Savings Association Insurance Fund (51–4066–0–3–373);¿

* * * * * * *

FEDERAL HOME LOAN BANK ACT

* * * * * * *

GENERAL POWERS AND DUTIES OF BANKS

SEC. 11. (a) * * *

* * * * * * *

(k) BANK LOANS TO øSAIF¿ THE DEPOSIT INSURANCE FUND.—

(1) LOANS AUTHORIZED.—Subject to paragraph (3), the Federal Home Loan Banks may, upon the request of the Federal

Deposit Insurance Corporation, make loans to such Corporation for the use of the øSavings Association Insurance Fund¿

Deposit Insurance Fund.

(2) LIABILITY OF THE FUND.—Any loan by a Federal Home

Loan Bank pursuant to paragraph (1) shall be a direct liability

of the øSavings Association Insurance Fund¿ Deposit Insurance

Fund.

* * * * * * *

SEC. 21. FINANCING CORPORATION.

(a) * * *

* * * * * * *

(f) SOURCES OF FUNDS FOR INTEREST PAYMENTS; FINANCING CORPORATION ASSESSMENT AUTHORITY.—The Financing Corporation

shall obtain funds for anticipated interest payments, issuance

costs, and custodial fees on obligations issued hereunder from the

following sources:

(1) * * *

(2) NEW ASSESSMENT AUTHORITY.—In addition to the

amounts obtained pursuant to paragraph (1), the Financing

Corporation, with the approval of the Board of Directors of the

Federal Deposit Insurance Corporation, shall assess against

each insured depository institution an assessment (in the same

manner as assessments are assessed against such institutions

by the Federal Deposit Insurance Corporation under section 7

of the Federal Deposit Insurance Act)ø, except that—

ø(A) the assessments imposed on insured depository institutions with respect to any BIF-assessable deposit shall

be assessed at a rate equal to 1⁄5 of the rate of the assessments imposed on insured depository institutions with respect to any SAIF-assessable deposit; and

111

ø(B) no limitation under clause (i) or (iii) of section

7(b)(2)(A) of the Federal Deposit Insurance Act shall apply

for purposes of this paragraph¿.

* * * * * * *

(k) DEFINITIONS.—For purposes of this section, the following definitions shall apply:

(1) * * *

* * * * * * *

ø(4) DEPOSIT TERMS.— ø(A) BIF-ASSESSABLE DEPOSITS.—The term ‘‘BIF-assessable deposit’’ means a deposit that is subject to assessment

for purposes of the Bank Insurance Fund under the Federal Deposit Insurance Act (including a deposit that is

treated as a deposit insured by the Bank Insurance Fund

under section 5(d)(3) of the Federal Deposit Insurance

Act).

ø(B) SAIF-ASSESSABLE DEPOSIT.—The term ‘‘SAIF-assessable deposit’’ has the meaning given to such term in

section 2710 of the Deposit Insurance Funds Act of 1996.¿

* * * * * * *

SEC. 21A. THRIFT DEPOSITOR PROTECTION OVERSIGHT BOARD AND

RESOLUTION TRUST CORPORATION.

(a) * * *

(b) RESOLUTION TRUST CORPORATION ESTABLISHED.—

(1) * * *

* * * * * * *

(4) CONSERVATORSHIP, RECEIVERSHIP, AND ASSISTANCE POWERS.—

(A) * * *

(B) MANNER OF APPLICATION OF LEAST-COST RESOLUTION.—For purposes of applying section 13(c)(4) of the Federal Deposit Insurance Act to the Corporation under subparagraph (A), the Corporation shall be treated as the

øaffected deposit insurance fund¿ Deposit Insurance Fund.

* * * * * * *

(6) CONTINUATION OF RTC RECEIVERSHIP OR CONSERVATOR- SHIP.—

(A) * * *

(B) øSAIF-INSURED BANKS¿ CHARTER CONVERSIONS.— Notwithstanding any other provision of Federal or State

law, if the Federal Deposit Insurance Corporation is appointed as conservator or receiver for any øSavings Association Insurance Fund member¿ savings association that

has converted to a bank charter and otherwise meets the

criteria in paragraph (3)(A) or (6)(A), the Federal Deposit

Insurance Corporation may tender such appointment to

the Corporation, and the Corporation shall accept such appointment, if the Corporation is authorized to accept such

appointment under this section.

* * * * * * *

(10) SPECIAL POWERS.—

112

(A) IN GENERAL.—In addition to the powers of the Corporation described in paragraph (9), the Corporation shall

have the following powers:

(i) * * *

* * * * * * *

(iv) ORGANIZATION OF SAVINGS ASSOCIATIONS.—The

Corporation may organize 1 or more Federal savings

associations—

(I) * * *

(II) the deposits of which, if any, shall be insured by the Federal Deposit Insurance Corporation through the øSavings Association Insurance

Fund¿ Deposit Insurance Fund, and

* * * * * * *

(n) CONFLICT OF INTEREST.— (1) * * *

* * * * * * *

(6) DISAPPROVAL OF CONTRACTORS.—

(A) * * *

* * * * * * *

(E) PROHIBITION REQUIRED IN CERTAIN CASES.—The

standards established under subparagraph (A) shall require the Corporation to prohibit any person who has— (i) * * *

* * * * * * *

(iv) caused a substantial loss to øFederal deposit insurance funds¿ the Deposit Insurance Fund,

* * * * * * *

SEC. 21B. RESOLUTION FUNDING CORPORATION ESTABLISHED.

(a) * * *

* * * * * * *

(e) CAPITALIZATION OF FUNDING CORPORATION, ETC.—

(1) * * *

* * * * * * *

(5) PRO RATA DISTRIBUTION OF AMOUNTS REQUIRED TO BE INVESTED IN EXCESS OF $1,000,000,000.—Of any amount which the

Thrift Depositor Protection Oversight Board may require the

Federal Home Loan Banks to invest in capital stock of the

Funding Corporation under this subsection in excess of the

$1,000,000,000 amount referred to in paragraph (4), the

amount which each Federal Home Loan Bank (or any successor

to such Bank) shall invest shall be determined by the Thrift

Depositor Protection Oversight Board by multiplying the excess amount by the percentage arrived at by dividing—

(A) the sum of the total assets (as of the most recent December 31) held by all Savings Association Insurance Fund

members as of the date of funding which are members of

such Bank; by

(B) the sum of the total assets (as of such date) held by

all Savings Association Insurance Fund members as of the

113

date of funding which are members of a Federal Home

Loan Bank.

* * * * * * *

ø(7) ADDITIONAL SOURCES.—If each Federal Home Loan

Bank has exhausted the amount applicable with respect to the

Bank under paragraph (3) after purchases under paragraphs

(4), (5), and (6), the amounts necessary to provide additional

funding for the Funding Corporation Principal Fund shall be

obtained from the following sources:

ø(A) ASSESSMENTS.—The Funding Corporation, with the

approval of the Board of Directors of the Federal Deposit

Insurance Corporation, shall assess against each Savings

Association Insurance Fund member an assessment (in the

same manner as assessments are assessed against such

members by the Federal Deposit Insurance Corporation

pursuant to section 7 of the Federal Deposit Insurance

Act) except that—

ø(i) the maximum amount of the aggregate amount

assessed shall be the amount of additional funds necessary to fund the Funding Corporation Principal

Fund;

ø(ii) the sum of—

ø(I) the amount assessed under this subparagraph; and

ø(II) the amount assessed by the Financing Corporation under section 21;

shall not exceed the amount authorized to be assessed

against Savings Association Insurance Fund members

pursuant to section 7 of the Federal Deposit Insurance

Act;

ø(iii) the Financing Corporation shall have first priority to make the assessment; and

ø(iv) the amount of the applicable assessment determined under such section 7 shall be reduced by the

sum described in clause (ii) of this subparagraph.

ø(B) RECEIVERSHIP PROCEEDS.—To the extent the

amounts available pursuant to subparagraph (A) are insufficient to fund the Funding Corporation Principal Fund,

the Federal Deposit Insurance Corporation shall transfer

amounts to the Funding Corporation from the liquidating

dividends and payments made on claims received by the

FSLIC Resolution Fund from receiverships.

ø(8) TRANSFER TO RTC.—The Funding Corporation shall

transfer to the Resolution Trust Corporation $1,200,000,000 in

fiscal year 1989.¿

* * * * * * *

(k) DEFINITIONS.—For purposes of this section, the following definitions shall apply:

(1) * * *

* * * * * * *

ø(8) SAVINGS ASSOCIATION INSURANCE FUND MEMBER.—The

term ‘‘Savings Association Insurance Fund member’’ means a

114

Savings Association Insurance member as such term is defined

by section 7(l) of the Federal Deposit Insurance Act.¿

ø(9)¿ (8) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of the Treasury.

ø(10)¿ (9) UNDIVIDED PROFITS.—The term ‘‘undivided profits’’ means earnings retained after dividends have been paid minus

the sum of— (A) that portion required to be added to reserves maintained pursuant to the first 2 sentences of section 16; and

(B) the dollar amounts held by the respective Federal

Home Loan Banks in special dividend stabilization reserves on December 31, 1985, as determined by the table

set forth in section 21(d)(7).

* * * * * * *

HOME OWNERS’ LOAN ACT

* * * * * * *

SEC. 5. FEDERAL SAVINGS ASSOCIATIONS.

(a) * * *

* * * * * * *

(c) LOANS AND INVESTMENTS.—To the extent specified in regulations of the Director, a Federal savings association may invest in,

sell, or otherwise deal in the following loans and other investments:

(1) * * *

* * * * * * *

(5) TRANSITION RULE FOR SAVINGS ASSOCIATIONS ACQUIRING

BANKS.—

(A) IN GENERAL.—If, under section 5(d)(3) of the Federal

Deposit Insurance Act, a savings association acquires all

or substantially all of the assets of a bank øthat is a member of the Bank Insurance Fund¿, the Director may permit

the savings association to retain any such asset during the

2-year period beginning on the date of the acquisition.

* * * * * * *

(6) DEFINITIONS.—øAs used in this subsection—¿ For purposes of this subsection, the following definitions shall apply:

(A) * * *

* * * * * * *

(o) CONVERSION OF STATE SAVINGS BANKS.—(1) Subject to the

provisions of this subsection and under regulations of the Director,

the Director may authorize the conversion of a State-chartered savings bank øthat is a Bank Insurance Fund member¿ into a Federal

savings bank, if such conversion is not in contravention of State

law, and provide for the organization, incorporation, operation, examination, and regulation of such institution.

(2)(A) Any Federal savings bank chartered pursuant to this subsection shall continue to be øa Bank Insurance Fund member until

such time as it changes its status to a Savings Association Insurance Fund member¿ insured by the Deposit Insurance Fund.

* * * * * * *

115

(t) CAPITAL STANDARDS.— (1) * * *

* * * * * * *

(5) SEPARATE CAPITALIZATION REQUIRED FOR CERTAIN SUBSIDIARIES.—

(A) * * *

* * * * * * *

(D) TRANSITION RULE.—

(i) * * *

* * * * * * *

(iii) AGENCY DISCRETION TO PRESCRIBE GREATER PER- CENTAGE.—Subject to clauses (iv), (v), and (vi), the Director may prescribe by order, with respect to a particular qualified savings association, an applicable percentage greater than that provided in clause (ii) if the

Director determines, in the Director’s sole discretion,

that the use of the greater percentage, under the

circumstances— (I) would not constitute an unsafe or unsound

practice;

(II) would not increase the risk to the øaffected

deposit insurance fund¿ Deposit Insurance Fund;

and

* * * * * * *

(7) EXEMPTION FROM CERTAIN SANCTIONS.— (A) * * *

* * * * * * *

(C) STANDARDS FOR APPROVAL OR DISAPPROVAL.—

(i) APPROVAL.—The Director may approve an application for an exemption if the Director determines

that—

(I) such exemption would pose no significant

risk to the øaffected deposit insurance fund¿ Deposit Insurance Fund;

* * * * * * *

(v) REPORTS OF CONDITION.— (1) * * *

(2) PUBLIC DISCLOSURE.— (A) Reports required under paragraph (1) and all information contained therein shall be available to the public

upon request, unless the Director determines— (i) that a particular item or classification of information should not be made public in order to protect the

safety or soundness of the institution concerned or institutions concerned, øthe Savings Association Insurance Fund¿ or the Deposit Insurance Fund; or

* * * * * * *

SEC. 10. REGULATION OF HOLDING COMPANIES.

(a) * * *

* * * * * * *

116

(c) HOLDING COMPANY ACTIVITIES.— (1) * * *

* * * * * * *

(6) SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES

AFFECTED BY 1987 AMENDMENTS.— (A) * * *

* * * * * * *

(D) ORDER BY DIRECTOR TO TERMINATE SUBPARAGRAPH

(B) ACTIVITY.—Any activity described in subparagraph (B)

may also be terminated by the Director, after opportunity

for hearing, if the Director determines, having due regard

for the purposes of this øtitle¿ Act, that such action is necessary to prevent conflicts of interest or unsound practices

or is in the public interest.

* * * * * * *

(e) ACQUISITIONS.— (1) IN GENERAL.—It shall be unlawful for— (A) * * *

(B) any other company, without the prior written approval of the Director, directly or indirectly, or through one

or more subsidiaries or through one or more transactions,

to acquire the control of one or more savings associations,

except that such approval shall not be required in connection with the control of a savings association, (i) acquired

by devise under the terms of a will creating a trust which

is excluded from the definition of ‘‘savings and loan holding company’’ under subsection (a) of this section, (ii) acquired in connection with a reorganization in which a person or group of persons, having had control of a savings

association for more than 3 years, vests control of that association in a newly formed holding company subject to the

control of the same person or group of persons, or (iii) acquired by a bank holding company that is registered

under, and subject to, the Bank Holding Company Act of

1956, or any company controlled by such bank holding

company. The Director shall approve an acquisition of a

savings association under this subparagraph unless the Director finds the financial and managerial resources and future prospects of the company and association involved to

be such that the acquisition would be detrimental to the

association or the insurance risk of the øSavings Association Insurance Fund or Bank Insurance Fund¿ Deposit Insurance Fund, and shall render a decision within 90 days

after submission to the Director of the complete record on

the application.

* * * * * * *

(2) FACTORS TO BE CONSIDERED.—The Director shall not approve any acquisition under subparagraph (A)(i) or (A)(ii), or of

more than one savings association under subparagraph (B) of

paragraph (1) of this subsection, any acquisition of stock in

connection with a qualified stock issuance, any acquisition

under paragraph (4)(A), or any transaction under section 13(k)

of the Federal Deposit Insurance Act, except in accordance

117

with this paragraph. In every case, the Director shall take into

consideration the financial and managerial resources and future prospects of the company and association involved, the effect of the acquisition on the association, the insurance risk to

the øSavings Association Insurance Fund or the Bank Insurance Fund¿ Deposit Insurance Fund, and the convenience and

needs of the community to be served, and shall render a decision within 90 days after submission to the Director of the

complete record on the application. Consideration of the managerial resources of a company or savings association shall include consideration of the competence, experience, and integrity of the officers, directors, and principal shareholders of the

company or association. Before approving any such acquisition,

except a transaction under section 13(k) of the Federal Deposit

Insurance Act, the Director shall request from the Attorney

General and consider any report rendered within 30 days on

the competitive factors involved. The Director shall not approve any proposed acquisition— (A) * * *

* * * * * * *

(4) ACQUISITIONS BY CERTAIN INDIVIDUALS.—

(A) * * *

(B) TREATMENT OF CERTAIN HOLDING COMPANIES.—If any

individual referred to in subparagraph (A) controls more

than 1 savings and loan holding company or more than 1

savings association, any savings and loan holding company

controlled by such individual shall be subject to the activities limitations contained in subsection (c) to the same extent such limitations apply to multiple savings and loan

holding companies, unless all or all but 1 of the savings associations (including any institution deemed to be a savings association under subsection ø(1)¿ (l) of this section)

controlled directly or indirectly by such individual was acquired pursuant to an acquisition described in subclause

(I) or (II) of subsection (c)(3)(B)(i).

* * * * * * *

(g) ADMINISTRATION AND ENFORCEMENT.—

(1) * * *

* * * * * * *

(3) PROCEEDINGS.—(A) In any proceeding under subsection

(a)(2)(D) or under paragraph (5) of this øsection¿ subsection,

the Director may administer oaths and affirmations, take or

cause to be taken depositions, and issue subpenas. The Director may make regulations with respect to any such proceedings. The attendance of witnesses and the production of

documents provided for in this paragraph may be required

from any place in any State or in any territory at any designated place where such proceeding is being conducted. Any

party to such proceedings may apply to the United States District Court for the District of Columbia, or the United States

district court for the judicial district or the United States court

in any territory in which such proceeding is being conducted,

or where the witness resides or carries on business, for enforceVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00117 Fmt 6659 Sfmt 9001 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
118

ment of any subpena issued pursuant to this paragraph, and

such courts shall have jurisdiction and power to order and require compliance therewith. Witnesses subpenaed under this

section shall be paid the same fees and mileage that are paid

witnesses in the district courts of the United States.

* * * * * * *

(i) PENALTIES.—

(1) * * *

* * * * * * *

ø(5)¿ (4) NOTICE UNDER THIS SECTION AFTER SEPARATION

FROM SERVICE.—The resignation, termination of employment or

participation, or separation of an institution-affiliated party

(within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to a savings and loan holding company or subsidiary thereof (including a separation caused by

the deregistration of such a company or such a subsidiary)

shall not affect the jurisdiction and authority of the Director to

issue any notice and proceed under this section against any

such party, if such notice is served before the end of the 6-year

period beginning on the date such party ceased to be such a

party with respect to such holding company or its subsidiary

(whether such date occurs before, on, or after the date of the

enactment of this paragraph).

* * * * * * *

(m) QUALIFIED THRIFT LENDER TEST.—

(1) * * *

* * * * * * *

(3) FAILURE TO BECOME AND REMAIN A QUALIFIED THRIFT

LENDER.—

(A) * * *

* * * * * * *

ø(E) DEPOSIT INSURANCE ASSESSMENTS.—Any bank chartered as a result of the requirements of this section shall

be obligated until December 31, 1993, to pay to the Savings Association Insurance Fund the assessments assessed

on savings associations under the Federal Deposit Insurance Act. Such association shall also be assessed, on the

date of its change of status from a Savings Association Insurance Fund member, the exit fee and entrance fee provided in section 5(d) of the Federal Deposit Insurance Act.

Such institution shall not be obligated to pay the assessments assessed on banks under the Federal Deposit Insurance Act until—

ø(i) December 31, 1993, or

ø(ii) the institution’s change of status from a Savings Association Insurance Fund member to a Bank

Insurance Fund member,

whichever is later.¿

ø(F)¿ (E) EXEMPTION FOR SPECIALIZED SAVINGS ASSOCIATIONS SERVING CERTAIN MILITARY PERSONNEL.—Subparagraph (A) shall not apply to a savings association subsidiary of a savings and loan holding company if at least

119

90 percent of the customers of the savings and loan holding company and its subsidiaries and affiliates are active

or former members in the United States military services

or the widows, widowers, divorced spouses, or current or

former dependents of such members.

ø(G)¿ (F) EXEMPTION FOR CERTAIN FEDERAL SAVINGS ASSOCIATIONS.—This paragraph shall not apply to any Federal savings association in existence as a Federal savings

association on the date of enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989—

(i) that was chartered before October 15, 1982, as a

savings bank or a cooperative bank under State law;

or

(ii) that acquired its principal assets from an association that was chartered before October 15, 1982, as

a savings bank or a cooperative bank under State law.

ø(H)¿ (G) NO CIRCUMVENTION OF EXIT MORATORIUM.—

Subparagraph (A) of this paragraph shall not be construed

as permitting any insured depository institution to engage

in any conversion transaction prohibited under section 5(d)

of the Federal Deposit Insurance Act.

* * * * * * *

(7) TRANSITIONAL RULE FOR CERTAIN SAVINGS ASSOCIATIONS.—

(A) IN GENERAL.—If any Federal savings association in

existence as a Federal savings association on the date of

enactment of the Financial Institutions Reform, Recovery,

and Enforcement Act of 1989—

(i) that was chartered as a savings bank or a cooperative bank under State law before October 15, 1982; or

(ii) that acquired its principal assets from an association that was chartered before October 15, 1982, as

a savings bank or a cooperative bank under State law,

meets the requirements of subparagraph (B), such savings

association shall be treated as a qualified thrift lender

øduring period¿ during the period ending on September

30, 1995.

* * * * * * *

(o) MUTUAL HOLDING COMPANIES.—

(1) * * *

* * * * * * *

(3) NOTICE TO THE DIRECTOR; DISAPPROVAL PERIOD.—

(A) * * *

* * * * * * *

(D) RETENTION OF CAPITAL ASSETS.—In connection with

the transaction described in paragraph (1), a savings association may, subject to the approval of the Director, retain

capital assets at the holding company level to the extent

that such capital exceeds the association’s capital requireVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00119 Fmt 6659 Sfmt 9001 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
120

ment established by the Director pursuant to øsections 5

(s) and (t) of this Act¿ subsections (s) and (t) of section 5.

* * * * * * *

NATIONAL HOUSING ACT

* * * * * * *

TITLE III—NATIONAL MORTGAGE ASSOCIATIONS

* * * * * * *

CIVIL MONEY PENALTIES AGAINST ISSUERS

SEC. 317. (a) * * *

(b) VIOLATIONS FOR WHICH A PENALTY MAY BE IMPOSED.—

(1) VIOLATIONS.—The violations by an issuer or a custodian

for which the Secretary may impose a civil money penalty

under subsection (a) are the following:

(A) * * *

(B) Failure to segregate cash flow from pooled mortgages

or to deposit either principal and interest funds or escrow

funds into special accounts with a depository institution

whose accounts are insured by the National Credit Union

Administration or by the Federal Deposit Insurance Corporation through the øBank Insurance Fund for banks or

through the Savings Association Insurance Fund for savings associations¿ Deposit Insurance Fund.

* * * * * * *

TITLE V—MISCELLANEOUS

* * * * * * *

SEC. 536. CIVIL MONEY PENALTIES AGAINST MORTGAGEES, LENDERS,

AND OTHER PARTICIPANTS IN FHA PROGRAMS.

(a) * * *

(b) VIOLATIONS FOR WHICH A PENALTY MAY BE IMPOSED.—

(1) VIOLATIONS.—The Secretary may impose a civil money

penalty under subsection (a) for any knowing and material violation by a mortgagee or lender, as follows:

(A) * * *

(B) Failure of a nonsupervised mortgagee, as defined by

the Secretary—

(i) * * *

(ii) to deposit these funds in a special account with

a depository institution whose accounts are insured by

the Federal Deposit Insurance Corporation through

the øBank Insurance Fund for banks and through the

Savings Association Insurance Fund for savings associations¿ Deposit Insurance Fund, or by the National

Credit Union Administration.

* * * * * * *

121

FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND

ENFORCEMENT ACT OF 1989

* * * * * * *

TITLE IX—REGULATORY ENFORCEMENT AUTHORITY AND CRIMINAL ENHANCEMENTS

* * * * * * *

Subtitle E—Civil Penalties for Violations

Involving Financial Institutions

SEC. 951. CIVIL PENALTIES.

(a) * * *

(b) MAXIMUM AMOUNT OF PENALTY.— (1) * * *

* * * * * * *

(3) SPECIAL RULE FOR VIOLATIONS CREATING GAIN OR LOSS.—

(A) * * *

(B) As used in this paragraph, the term ‘‘person’’ includes

the Bank Insurance Fund, the Savings Association Insurance

Fund, and after the merger of such funds, the Deposit Insurance Fund, and the National Credit Union Share Insurance

Fund.

* * * * * * *

TITLE XI—REAL ESTATE APPRAISAL

REFORM AMENDMENTS

* * * * * * *

SEC. 1112. FUNCTIONS OF THE FEDERAL FINANCIAL INSTITUTIONS

REGULATORY AGENCIES RELATING TO APPRAISER

QUALIFICATIONS.

(a) * * *

* * * * * * *

(c) GAO STUDY OF APPRAISALS IN CONNECTION WITH REAL ES- TATE RELATED FINANCIAL TRANSACTIONS BELOW THE THRESHOLD

LEVEL.—

(1) GAO STUDIES.—The Comptroller General of the United

States may conduct, under such conditions as the Comptroller

General determines appropriate, studies on the adequacy and

quality of appraisals or evaluations conducted in connection

with real estate related financial transactions below the

threshold level established under subsection (b), taking into

account—

(A) * * *

(B) the possibility of losses to the øBank Insurance

Fund, the Savings Association Insurance Fund,¿ Deposit

122

Insurance Fund or the National Credit Union Share Insurance Fund;

* * * * * * *

BANK HOLDING COMPANY ACT OF 1956

* * * * * * *

DEFINITIONS

SEC. 2. (a) * * *

* * * * * * *

(j) DEFINITION OF SAVINGS ASSOCIATIONS AND RELATED TERM.— The term ‘‘savings association’’ or ‘‘insured institution’’ means— (1) any Federal savings association or Federal savings bank;

(2) any building and loan association, savings and loan association, homestead association, or cooperative bank if such association or cooperative bank is a member of the øSavings Association Insurance Fund¿ Deposit Insurance Fund; and

* * * * * * *

ACQUISITION OF BANK SHARES OR ASSETS

SEC. 3. (a) * * *

* * * * * * *

(d) INTERSTATE BANKING.— (1) APPROVALS AUTHORIZED.— (A) * * *

* * * * * * *

(D) EFFECT ON STATE CONTINGENCY LAWS.—No provision

of this subsection shall be construed as affecting the applicability of a State law that makes an acquisition of a bank

contingent upon a requirement to hold a portion of such

bank’s assets available for call by a State-sponsored housing entity established pursuant to State law, if—

(i) * * *

* * * * * * *

(iii) the Federal Deposit Insurance Corporation has

not determined that compliance with such State law

would result in an unacceptable risk to the øappropriate deposit insurance fund¿ Deposit Insurance

Fund; and

* * * * * * *

SECTION 114 OF THE GRAMM-LEACH-BLILEY ACT

SEC. 114. PRUDENTIAL SAFEGUARDS.

(a) COMPTROLLER OF THE CURRENCY.—

(1) IN GENERAL.—The Comptroller of the Currency may, by

regulation or order, impose restrictions or requirements on relationships or transactions between a national bank and a subsidiary of the national bank that the Comptroller finds are—

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(A) * * *

(B) appropriate to avoid any significant risk to the safety

and soundness of insured depository institutions or øany

Federal deposit insurance fund¿ the Deposit Insurance

Fund or other adverse effects, such as undue concentration

of resources, decreased or unfair competition, conflicts of

interests, or unsound banking practices.

* * * * * * *

(b) BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM.—

(1) * * *

(2) FINDING.—The Board of Governors of the Federal Reserve

System may exercise authority under paragraph (1) if the

Board finds that the exercise of such authority is—

(A) * * *

(B) appropriate to prevent an evasion of any provision of

law referred to in subparagraph (A) or to avoid any significant risk to the safety and soundness of depository institutions or øany Federal deposit insurance fund¿ the Deposit

Insurance Fund or other adverse effects, such as undue

concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.

* * * * * * *

(4) FOREIGN BANKS.—The Board may, by regulation or order,

impose restrictions or requirements on relationships or transactions between a branch, agency, or commercial lending company of a foreign bank in the United States and any affiliate

in the United States of such foreign bank that the Board finds

are—

(A) * * *

(B) appropriate to prevent an evasion of any provision of

law referred to in subparagraph (A) or to avoid any significant risk to the safety and soundness of depository institutions or øany Federal deposit insurance fund¿ the Deposit

Insurance Fund or other adverse effects, such as undue

concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.

(c) FEDERAL DEPOSIT INSURANCE CORPORATION.—

(1) IN GENERAL.—The Federal Deposit Insurance Corporation

may, by regulation or order, impose restrictions or requirements on relationships or transactions between a State nonmember bank (as defined in section 3 of the Federal Deposit

Insurance Act) and a subsidiary of the State nonmember bank

that the Corporation finds are—

(A) * * *

(B) appropriate to avoid any significant risk to the safety

and soundness of depository institutions or øany Federal

deposit insurance fund¿ the Deposit Insurance Fund or

other adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices.

* * * * * * *

(124)

ADDITIONAL VIEWS OF MR. LAFALCE

The federal deposit insurance system is a critically important element in our economic stability, and has served the American people well for almost 70 years. H.R. 3717 makes some important improvements to that system, and we voted to report it favorably.

Among the bill’s strong points, it would merge the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund

(SAIF); would make the system less pro-cyclical by permitting the

FDIC to charge risk-based assessments at all times and eliminating the so-called ‘‘cliff’’ of extremely high required assessments

should the fund fall below the Designated Reserve Ratio; and deals

with the ‘‘free-rider’’ problem, now and into the future. The bill also

provides the FDIC with enhanced flexibility to manage the fund.

Many of us have been calling for these reforms for the last several

years, and we are pleased to move them forward. We are also

pleased that long-standing law encouraging life-line banking would

be made operational by the amendment Congresswoman Waters

sponsored.

On the other hand, the bill also makes some potentially destabilizing changes to the system that we hope can and will be corrected as it moves to final passage.

The decision to increase the level of general insurance coverage

to $130,000 has been justified on the basis that it is simply keeping

up with inflation since 1974. However, in analyzing this rationale,

it is critical to recognize that only a small percentage of insured accounts are anywhere near $100,000 today. Treasury Secretary

O’Neill points out that ‘‘an increase in coverage would primarily

benefit high net worth individuals and do little for the great majority of savers, who have deposit balances far below the current coverage limit.’’ But to raise the general coverage level to $130,000

would, the FDIC estimates, reduce the fund balance by almost 4

basis points immediately, and more than an additional 4 basis

points in the future. While 8 basis points may not seem like much,

it would be the difference, today, between a combined fund ratio of

1.29, above today’s statutory Designated Reserve Ratio, and 1.21,

a level at which premiums would be required to be charged. Every

basis point of premiums takes money out of the banking system

and away from lending to communities.

Federal Reserve Chairman Alan Greenspan has said, ‘‘the moral

hazard associated with deposit insurance—the disconnect between

the risk to depositors and the risks taken by insured banks and

thrifts—adds to our concern about the impact of an increase in insured deposit ceilings, particularly if we cannot find a pressing

need to make this adjustment.’’ For these reasons, not only Chairman Greenspan, but also Treasury Secretary O’Neill and former

Treasury Secretary Summers oppose an increase.

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The bill’s increase in municipal deposit insurance coverage creates even greater concerns than the general coverage level increase. The bill would increase municipal deposit insurance coverage not to $130,000, but to $5,000,000 per municipality, per

bank, a level 50 times the current level of coverage. Even more

than the general coverage increase, this benefits a very limited

group—a very limited group of banks, not municipalities. This is

not a question of the safety of municipal funds except in the extremely rare case—of which the failure of Oakwood Deposit Bank

Company in Ohio was apparently one—in which a bank officer diverts the collateral backing municipal deposits. In virtually all

other cases, municipalities are protected because they are required

or encouraged to put their deposits in an investment pool run by

the state, because the state requires that municipal deposits over

the insured amount be fully collateralized, or because the state has

an insurance program, pool or some other system of protection. And

yet this proposal will, the FDIC estimates, will cause a combined

fund to fall by 4 basis points immediately.

The FDIC strongly opposes the increase in municipal coverage.

Chairman Powell has pointed out that the current collateralization

requirements for municipal deposits—which would be vitiated by

the increase in insurance coverage—‘‘prevent institutions from

treating municipal deposits as ‘hot money’ where institutions gather large amounts of deposits by paying above market rates.’’ Without this discipline, Chairman Powell points out, ‘‘participation in

this kind of funding can increase pressure on institutions to engage

in risky activities to obtain a high rate of return.’’ These problems

would have been exacerbated had the Committee adopted a proposal to require the FDIC to offer optional unlimited insurance coverage of municipal deposits. The increase in municipal deposit insurance coverage is a provision that not only benefits only a very

few, but will cost everyone potential premium increases and has

the potential to seriously raise the level of risk in the banking system. It must be removed as the bill moves forward.

If the municipal deposit insurance coverage increase is not removed, it will be important to resolve a competitive equity issue

unique to New York state. New York is the only state in which

commercial banks, but not thrifts, can hold municipal deposits.

The bill also includes two other deposit insurance coverage increases, indexation starting in 2005, and setting the level of coverage for individually-managed retirement accounts at twice the

general coverage level. While we support these increases, the system’s safety and soundness would be significantly enhanced by two

amendments that were not adopted.

First, it is important to recognize that an increase in the level

of deposit insurance coverage, particularly a large one, can generate an increase in systemic risk that is more than proportional

to the dollar change. This is what Chairman Powell is referring to

in his comments about the increase in municipal deposit coverage;

it is what Chairman Greenspan referred to; and it is what Secretary O’Neill was referring to when he said ‘‘raising coverage

could weaken market discipline and increase risk to the FDIC and,

ultimately, taxpayers.’’ And we have seen it before. When we inVerDate 11-MAY-2000 09:32 May 17, 2002 Jkt 099006 PO 00000 Frm 00125 Fmt 6604 Sfmt 6602 E:\HR\OC\HR467.XXX pfrm09 PsN: HR467
126

creased the coverage level from $40,000 to $100,000 in 1980, brokered deposits increased ten-fold.

The designated reserve ratio (DRR), which this bill would allow

the FDIC to set within a range, is the deposit insurance system’s

quantitative measure of systemic risk. Requiring the FDIC to raise

the DRR to take into account any increase in systemic risk arising

from any increase in coverage levels would help protect the system.

As Treasury Assistant Secretary Bair has stated: ‘‘An increase in

deposit insurance coverage may impose additional costs beyond the

reserve dilution cost * * * because of its potential to weaken market discipline and increase the level of risk to the FDIC. One way

to help offset these costs would be an upward adjustment in the

designated reserve ratio (or in the range for this ratio). This would

provide greater protection for the insurance fund and taxpayers.’’ A second amendment that would enhance the system’s soundness

in the face of coverage level increases, would set the bottom of the

range within which the FDIC could set the DRR at the current

statutory level of 1.25. Providing the FDIC with flexibility to increase the DRR to build up the fund at, for example, the end of an

up-cycle, when increased failures are expected, is a good idea. However, there is no reason to allow the FDIC to set the DRR at a level

lower than this Congress deemed correct at the height of the thrift

and banking crises—at a time when the thrift fund had been run

through and the bank fund was in real danger of having the same

thing happen.

Finally, we also have concerns about the nature of the credit and

dividend system created by the bill. In particular, the requirement

that when the fund ratio reaches 1.35, 50% of premiums must be

rebated, even if the FDIC has set the DRR above 1.35, makes little

sense. We are also concerned that the requirement that both premiums and income must be dividended down to the DRR once the

fund reaches 1.4, reduces the FDIC’s flexibility and could in fact

encourage the FDIC to set the DRR higher than immediately needed out of concern that no cushion would be available once the fund

reaches 1.4.

In summary, H.R. 3717 as reported out of the Financial Services

Committee, does a lot to improve the deposit insurance system.

However, it also has provisions that, if not significantly modified,

could destabilize the system. The bill has a long way to go before

becoming law. We will work to make certain these changes are

made.

JOHN J. LAFALCE.

(127)

ADDITIONAL VIEWS OF MS. WATERS

Deposit Insurance has served America well for over 65 years. It

has maintained public confidence in our banking system throughout times of prosperity and times that weren’t so good. The bill we

reported out is designed to maintain and strengthen today’s system

for tomorrow’s consumers so that we can ensure that we have a Deposit Insurance System that will serve us well throughout the new

millenium.

This legislation merges the Bank Insurance Fund (BIF) and the

Savings Association Insurance Fund (SAIF) into one deposit insurance fund. It also grants the FDIC increased flexibility to manage

the fund, particularly in replacing the ‘‘hard trigger’’ designated reserve ratio (DRR) with a range, which will permit the FDIC to respond to economic conditions in setting the DRR.

I am particularly pleased that the legislation includes an amendment I offered during Subcommittee consideration. This amendment represents a small but important change that will implement

a law that has been on the books since 1991. During the consideration of FDICIA, then-Congressmen Tom Ridge and Floyd Flake

sponsored legislation to provide for a discount in deposit insurance

assessment for deposits attributable to ‘‘lifeline’’ or basic banking

accounts.

However, implementation of this provision was wholly dependent

on appropriated funds which never materialized. My amendment

simply removes the requirement for appropriated funds, so that

this provision, after more than a decade on the books, can finally

be implemented. This is a modest step, but it is truly important for

millions of American families.

MAXINE WATERS.

(128)

DISSENTING VIEWS

H.R. 3717, the Federal Deposit Insurance Reform Act, expands

the federal government’s unconstitutional control over the financial

services industry and raises taxes on all financial institutions. Furthermore, this legislation could increase the possibility of future

bank failures. Therefore, I must oppose this bill.

I primarily object to the provisions in H.R. 3717 which may increase the premiums assessed on participating financial institutions. These ‘‘premiums,’’ which are actually taxes, are the premier

sources of funds for the Deposit Insurance Fund. This fund is used

to bail out banks who experience difficulties meeting their commitments to their depositors. Thus, the deposit insurance system

transfers liability for poor management decisions from those who

made the decisions, to their competitors. This system punishes

those financial institutions which follow sound practices, as they

are forced to absorb the losses of their competitors. This also compounds the moral hazard problem created whenever government

socializes business losses.

In the event of a severe banking crisis, Congress will likely

transfer funds from the general revenue into the Deposit Insurance

Fund, which could make all taxpayers liable for the mistakes of a

few. Of course, such a bailout would require separate authorization

from Congress, but can anyone imagine Congress saying ‘‘No’’ to

banking lobbyists pleading for relief from the costs of bailing out

their weaker competitors?

Government subsidies lead to government control, as regulations

are imposed on the recipients of the subsidies in order to address

the moral hazard problem. This is certainly the case in banking,

which is one of the most heavily regulated industries in America.

However, as George Kaufman, the John Smith Professor of Banking and Finance at Loyola University in Chicago, and co-chair of

the Shadow Financial Regulatory Committee, pointed out in a

study for the CATO Institute, the FDIC’s history of poor management exacerbated the banking crisis of the eighties and nineties.

Professor Kaufman properly identifies a key reason for the FDIC’s

poor track record in protecting individual depositors: regulators

have incentives to downplay or even cover-up problems in the financial system such as banking failures. Banking failures are black

marks on the regulators’ records. In addition, regulators may be

subject to political pressure to delay imposing sanctions on failing

institutions, thus increasing the magnitude of the loss.

Immediately after a problem in the banking industry comes to

light, the media and Congress will inevitably blame it on regulators

who were ‘‘asleep at the switch.’’ Yet, most politicians continue to

believe that giving the very regulators whose incompetence (or

worst) either caused or contributed to the problem will somehow

prevent future crises!

129

The presence of deposit insurance and government regulations

removes incentives for individuals to act on their own to protect

their deposits or even inquire as to the health of their financial institutions. After all, why should individuals be concerned with the

health of their financial institutions when the federal government

is insuring banks following sound practices and has insured their

deposits?

Finally, I would remind my colleagues that the federal deposit

insurance program lacks constitutional authority. Congress’ only

mandate in the area of money, and banking is to maintain the

value of the money. Unfortunately, Congress abdicated its responsibility over monetary policy with the passage of the Federal Reserve

Act of 1913, which allows the federal government to erode the

value of the currency at the will of the central bank. Congress’ embrace of fiat money is directly responsible for the instability in the

banking system that created the justification for deposit insurance.

In conclusion, H.R. 3717 imposes new taxes on financial institutions, forces sound institutions to pay for the mistakes of their

reckless competitors, increases the chances of taxpayers being

forced to bail out unsound financial institutions, reduces individual

depositors’ incentives to take action to protect their deposits, and

exceeds Congress’s constitutional authority. I therefore urge my

colleagues to reject this bill. Instead of extending this federal program, Congress should work to prevent the crises which justify

government programs like deposit insurance, by fulfilling our constitutional responsibility to pursue sound monetary policies.

RON PAUL.

Æ